Kamakura Reports Slight Improvement in Corporate Credit Quality in March

Kamakura Corporation reported Monday that the Kamakura index of troubled public companies ended the month of March at 7.43%, a decrease of 0.44% since the end of February.  The index reflects the percentage of the Kamakura 30,000 public firm universe that has a default probability over 1%. An increase in the index reflects deteriorating credit quality.  The index hit an intra-month low of 7.03% on March 15 and an intra-month high of 7.80% on March 4. The index improved during the first half of the month before deteriorating over the last half.

As of March 28 the percentage of the global corporate universe with default probabilities between 1% and 5% was 6.06%, the percentage of the universe with default probabilities between 5% and 10% was 0.86%, while the percentage between 10% and 20% was 0.38% and the percentage of companies with default probabilities over 20% was 0.13%.

At 7.43%, the troubled company index is at the 71st percentile of historical credit quality (with 100 being best all time) over the period from January, 1990 to the present.  Telecom Italia has the world’s highest one-month default risk among rated companies with an annualized default probability of 33.87%. Central European Distribution Corp. (CEDC) had the highest default probability of any rated firm in the United States at 10.04%.  Among the top ten riskiest firms, there were two from Italy and one each from Brazil, Germany, Greece, Ireland, Mexico, Russia, Spain and the United States.

Martin Zorn, Chief Administrative Officer for Kamakura Corporation, said Monday, “March closed with all eyes focused on the Eurozone as a result of the debt crisis in Cyprus.  This renewed focus on Eurozone debt and moreover uninsured depositors are reflected in the number of European financial companies having large increases in their default probabilities.  While the index showed month to month improvement it remains likely that risk will continue to increase as we move forward.”

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