Kamakura Corporation announced Tuesday that the Kamakura index of troubled public companies deteriorated slightly in August, rising 0.22% to 9.85%. The reversal was rare, in that the index has improved in 13 of the past 16 months. Kamakura’s index had reached a recent peak of 24.3% in March, 2009. Kamakura defines a troubled company as a company whose short term annualized default probability is in excess of 1%.

Credit conditions in August were better than credit conditions in 70.5 percent of the months since the index’s initiation in January 1990. The index is 3.74 percentage points better than the index’s historical average of 13.59%.  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 more than 29,400 companies in 33 countries. 

In August, the percentage of the global corporate universe with default probabilities between 1% and 5% was 6.65%, an increase of 10 basis points. The percentage of companies with default probabilities between 5% and 10% was 1.52%, an increase of 2 basis points.  The percentage of the universe with default probabilities between 10 and 20% was 0.98% of the universe, up 7 basis points, while the percentage of companies with default probabilities over 20% was 0.70% of the total universe in August, an increase of 3 basis points. 

David Boldon, Washington DC representative for Kamakura Corporation, said Friday, “This month showed a larger group of public firms with deteriorating short term default probabilities. Catalyst Paper of Canada led the way with a 21.56% increase in 1 month default risk during the month of August.”