Kamakura Reports Another Decline in Corporate Credit Quality in February

Kamakura Corporation reported today that the Kamakura index of troubled public companies ended the month of February at 7.87%, an increase of 1.03% since the end of January.  The index reflects the percentage of the Kamakura 31,000 public firm universe that has a default probability over 1%. An increase in the index reflects deteriorating credit quality.  The index showed a steady deterioration throughout the month.

As of February 28, the percentage of the global corporate universe with default probabilities between 1% and 5% was 6.36%, the percentage of the universe with default probabilities between 5% and 10% was 1.00%, while the percentage between 10% and 20% was 0.37% and the percentage of companies with default probabilities over 20% was 0.14%. Credit quality declined significantly across the full distribution of the index.



At 7.87%, the troubled company index is at the 64th percentile of historical credit quality (with 100 being best all time) over the period from January, 1990 to the present. This is a decline of 17 percentage points from January. Banco Popular Espanol of Spain has the world’s highest one-month default risk among rated companies with an annualized default probability of 19.93%. Rotech Healthcare Inc. had the highest default probability of any rated firm in the United States at 18.34%. Among the top ten riskiest firms, there were three from the United States, two from Italy and Brazil, and one each from Spain, Ireland and Greece.  All ten companies with the highest one-month default risk saw an increase in their KDP’s during the month.



Martin Zorn, Chief Administrative Officer for Kamakura Corporation, said Monday, “While many of the troubled credits of the last year have been in the telecom sector, February’s deterioration in credit quality was broad-based by both geography and by industry sector. The last time the troubled company index was at these levels was July 2012, in which the index reached 8.26%.  During the credit crisis, the index peaked on November 25, 2008 at a level of 25.57%.”

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