Location: New York
Author: Warren Sherman
Date: Monday, May 4, 2009
Kamakura Corporation reported Monday that the Kamakura index of troubled public companies showed dramatic improvement in April after reaching its worst point in the current recession in March. The Kamakura global index of troubled companies decreased by 2.2% to 22.1% of the public company universe.
The 2.2% decline in the index is the 12th largest decline in the 229 month history of the troubled company index. Kamakura defines a troubled company as a company whose short term default probability is in excess of 1%. The all-time high in the index was 28.0%, recorded in September 2001. Credit conditions are now worse than credit conditions in 89.9% of the months since the index’s initiation in January 1990. The all-time low in the index was 5.4%, recorded in April and May, 2006. The index is based on expanded coverage of more than 24,000 companies in 30 countries, an increase of more than 300 firms since the previous month.
Kamakura reported that the expanded corporate coverage had no significant impact on the level of the index. The increase in coverage this month is predominately made up of German, Austrian and Swiss public firms.
Commenting on the troubled company index, Kamakura’s President Warren A. Sherman noted, "In August 2008 Kamakura cited R. H. Donnelley as showing one of the sharpest increases in default risk that month. The firm defaulted in April,” said Mr. Sherman. "This month, among rated public companies, the firms showing the sharpest rise in short term default risk were Seat Pagine Gialle spa in Italy, Dune Energy Inc., Barzel Industries, and Citadel Broadcasting Corp. In April, the percentage of the global corporate universe with default probabilities between 1% and 5% decreased by 0.4% to 13.4%. The percentage of companies with default probabilities between 5% and 10% was down sharply by 0.9% to 3.6% of the universe in April. The percentage of the universe with default probabilities between 10 and 20% was down 0.2% to 2.7% of the universe. The percentage of companies with default probabilities over 20% was down by a significant 0.6% to 2.5% of the total universe in April."
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