Kamakura Troubled Company Index Shows Sharp Decline in Credit Quality in JanuaryLocation: New York Kamakura's index had reached a recent peak of 22.25% in January, 2009. Credit conditions at the end of January were better than credit conditions in 93.8% of the months since the index's initiation in January 1990. This result is surprising to many. What should not be a surprise is the fact that companies in the "troubled category" are almost exclusively financial institutions or housing related firms, rather than a broad cross section of the economy. The average index value since January 1990 is 12.61%. The all-time high in the index was 27.41%, recorded on October 31, 2001. To follow the troubled company index and other risk commentary by Kamakura on a daily basis, see www.twitter.com/dvandeventer. For a detailed comparison of Versions 5.0 and 4.1 of the index, please see this recent blog entry: In January, the percentage of the global corporate universe with default probabilities between 1% and 5% was 4.77%, an increase of 88 basis points. The percentage of companies with default probabilities between 5% and 10% was 0.83%, an increase of 43 basis points. The percentage of the universe with default probabilities between 10% and 20% was 0.27% of the universe, up 14 basis points, while the percentage of companies with default probabilities over 20% was 0.07% of the total universe in December, an increase of 4 basis points. Martin Zorn, Chief Administrative Officer for Kamakura Corporation, said Wednesday, "Among the 2,099 firms in the KRIS corporate universe with legacy ratings, 9 firms showed increases in 1 month annualized default risk of more than one percent. Four of the firms were in Italy and two were Irish firms. The seasonal increase in the troubled company index was also accompanied by an index increase of 18 basis points on a seasonally adjusted basis."
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