Kamakura Reports Improved Corporate Credit Quality in January

Kamakura Corporation reported Monday that the Kamakura troubled company index ended the month of January at 5.77%, a decrease of 0.30% from the prior month.  The index reflects the percentage of the Kamakura 35,000 public firm universe that has a default probability over 1.00%.  An increase in the index reflects declining credit quality while a decrease reflects improving credit quality.

As of the end of January, the percentage of the global corporate universe with default probabilities between 1% and 5% was 4.79%, down 0.32% from December. The percentage of the universe with default probabilities between 5% and 10% was 0.63%, up 0.01% from last month while the percentage between 10% and 20% was 0.26%, up 0.02%. The percentage of companies with default probabilities over 20% was 0.09%, down 0.01%.  The index hit an intra-month high of 5.89% on January 2nd, while the intra-month low of 5.26% was on January 21st.  The magnitude of change in the index during the month was 63 basis points.

At 5.77%, the troubled company index is at the 94th percentile of historical credit quality (with 100 being best all time) over the period from January 1990 to the present.  Among the ten riskiest firms in January, four were from China, four were European firms and two were from the United States.

Martin Zorn, President and COO for Kamakura Corporation, said Monday, “Overall credit conditions remain generally very good.  Benign credit conditions create an environment where lenders tend to get complacent.  On January 30th the OCC released their latest survey showing that banks’ underwriting standards continue to ease.  The trend in the list of riskiest firms over the past several months has shown a significant increase in the number of Chinese firms on the list as well as continued pressure on select European and emerging market banks.  During the month of January, Spanish gaming company Codere S.A. defaulted for the second time in 4 months. Codere S.A. was listed by Kamakura Corporation as the world's riskiest rated firm last month.”

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