Kamakura Reports 9th Improvement in Corporate Credit Quality in Last 10 Months

Kamakura Corporation announced Tuesday that the Kamakura index of troubled public companies improved in January for the ninth time in the last ten months. The index declined from 11.07% in December to 10.23% in January. Kamakura’s index had reached a peak of 24.3% in March, 2009. Kamakura defines a troubled company as a company whose short term default probability is in excess of 1%. Credit conditions are now better than credit conditions in 68.2 percent of the months since the index’s initiation in January 1990, and the index is 3.50 percentage points better than the index’s historical average of 13.73%.  The all-time low in the index was 5.40%, recorded on May 11, 2006, while the all-time high in the index was 28.0%, recorded on September 28, 2001. The index is based on default probabilities for almost 27,000 companies in 30 countries.  Both the index and daily updates on default probabilities for all 27,000 companies are now available starting from 8 a.m. in London and 3 a.m. in New York.

In January, the percentage of the global corporate universe with default probabilities between 1% and 5% decreased by 0.39 percentage points to 6.95%. The percentage of companies with default probabilities between 5% and 10% was down 0.25 percentage points to 1.55%.  The percentage of the universe with default probabilities between 10 and 20% was down 0.04 percentage points to 1.00% of the universe, while the percentage of companies with default probabilities over 20% was down significantly, decreasing 0.16 percentage points to 0.73% of the total universe in December. 

Kamakura’s President Warren A. Sherman said Tuesday, “The rated firms showing the largest increase in 1 month default risk in January included Blockbuster Inc., UBS AG, and Petroplus Holdings AG.  Japan Airlines, which was one of the companies showing the largest default probability increase in December, filed for bankruptcy on January 18.