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Distressed exchanges largely led this week’s default charge with five out of seven issuers having
their ratings revised to ‘SD’ as a result. Distressed exchanges have surged this year, with the
current tally of 60 issuers at 4x the full-year 2008 total and 15x the count of four issuers in 2007.
For more information on distressed exchanges, see “Global Credit Comment : Bondholders
Get Buzzed (Premium),” published May 1, 2009, on RatingsDirect.
The remaining two defaults this week were a result of missed interest payments, which currently
is the top reason for default this year at 67 issuers. Bankruptcy filings have also surged with 52
issuers so far this year that have filed for bankruptcy-protection, which has surpassed the full-year
2008 total of 49 bankruptcy-related defaults. The sharp increase in corporate bankruptcies brings
with it significant difficulties to private equity investors, particularly for those whose buyout
activities in the past several years placed much of their risks squarely in the speculative-grade
domain. Indeed, more than half of the defaulters this year either had or continue to have private
equity involvement, which presents both challenges and opportunities to private equity investors
during restructuring and reorganization. For more information, see “Global Credit Comment:
Exposure To Deteriorating Assets Increases Risks To Private Equity (Premium),” published
May 29, 2009.
Of the global corporate defaulters so far this year, 40% of issues with available recovery ratings
had recovery ratings of ‘6’ (indicating our expectation for negligible recovery of 0%-10%), 17%
of issues had recovery ratings of ‘5’ (modest recovery prospects of 10%-30%), 12% had recovery
ratings of ‘4’ (average recovery prospects of 30%-50%), and 10% had recovery ratings of ‘3’
(meaningful recovery prospects of 50%-70%). And for the remaining two rating categories, 12%
of issues had recovery ratings of ‘2’ (substantial recovery prospects of 70%-90%) and 9% of
issues had recovery ratings of ‘1’ (very high recovery prospects of 90%-100%). For more details
on recovery, see "Bank Loan Ratings (BLRs) And Recovery Ratings (Monthly List),"
published July 13, 2009, on RatingsDirect.
The precipitous increase in defaults reflects a pronounced decline in economic fundamentals and
earnings prospects, as well as the continued unfavorable environment to the lowest rungs of the
ratings latter, effectively halting lending to low-rated speculative-grade borrowers. A large
number of defaults likely will be concentrated in the first two or three quarters of 2009 as a result
of these factors, coupled with distressed exchange offers. Four other factors make the current
environment more conducive to defaults: deep recessionary conditions in the U.S., a record-high
proportion of issuers with speculative-grade ratings, the highest volume of low-rated issuance
since 2003, and the seasoning of much of the debt rated 'B-' or lower issued in the past several
years.
Because of these factors, our current 12-month-trailing U.S. corporate speculative-grade default
rate forecast is 13.9% by mid-2010, with a pessimistic scenario of 18% and an optimistic scenario
of 11.4%.
For more information and analysis, please see the following reports available on RatingsDirect:
YTD - Year To Date; MTD - Month To Date. Data as of Aug. 6, 2009. 12-Month Trailing Default
Rates from June 30, 2008 to June 30, 2009. Other Developed region includes Australia, Canada,
Japan, and New Zealand. Default counts may include confidentially-rated issuers.
Source : Standard & Poor's Global Fixed Income Research; Standard & Poor's CreditPro®.
Table 2. Global Corporate Defaults This Week
Date Parent Company Country Sector/Subsector To From
Aug. 3, 2009 Unisys Corp. United States High Tech SD CC
Aug. 3, 2009 Alfa-Bank Ukraine (OJSC Alfa-Bank.) Ukraine Bank SD CC
Aug. 4, 2009 China Glass Holdings Ltd. China FP / BM SD CC
Aug. 6, 2009 Accuride Corp. United States Auto D CCC
Aug. 6, 2009 Haights Cross Communications Inc. United States Media&Ent D CC
Aug. 6, 2009 Commercial Vehicle Group Inc. United States Auto SD CCC+
Aug. 6, 2009 Peach Holdings Inc. United States FinCo SD CC
Data as of July 30, 2009. Source : Standard & Poor's Global Fixed Income Research; Standard
& Poor's CreditPro®.
100 Apr. 27, 2009 Syncora Guarantee Inc. (Syncora Holdings U.S. FinCo R CC Regulatory Supervision
Ltd.)
127 May. 18, 2009 Mandra Forestry Finance Ltd. British Virgin Islands FP / BM D CC Missed Interest Payment
128 May. 18, 2009 Confidential China Home/RE SD CC Distressed Exchange
129 May. 19, 2009 Caraustar Industries Inc. U.S. FP / BM D CC Missed Interest Payment
130 May. 19, 2009 Majestic Holdco, LLC U.S. Media&Ent D C Missed Interest Payment
131 May. 19, 2009 Barzel Industries Inc. U.S. M,M,&S SD CCC+ Missed Interest Payment
132 May. 19, 2009 Confidential Russia M,M,&S D CCC -
133 May. 19, 2009 Lazy Days' R.V. Center Inc. U.S. Auto SD CC Missed Interest Payment
134 May. 20, 2009 ION Media Networks Inc. U.S. Media&Ent D CC Chapter 11
135 May. 21, 2009 Dana Holding Corp. U.S. Auto SD CC Distressed Exchange
136 May. 21, 2009 Georgia Gulf Corp. U.S. C,P,&ES D CC Missed Interest Payment
137 May. 22, 2009 Berry Plastics Group Inc. U.S. C,P,&ES SD CC Distressed Exchange
138 May. 28, 2009 Metaldyne Corp. U.S. Auto D CCC- Chapter 11
139 May. 28, 2009 Visteon Corp. U.S. Auto D CCC Chapter 11
140 May. 29, 2009 Canwest Limited Partnership Canada Media&Ent D CCC Missed Interest and Principal Payment
141 Jun. 1, 2009 General Motors Corp. U.S. Auto D CC Chapter 11
142 Jun. 1, 2009 Imcopa Importacao, Exportacao E Industria De Brazil ConProd D CCC- Missed Interest Payment
Oleos S.A.
143 Jun. 1, 2009 Confidential Brazil Home/RE D CCC -
144 Jun. 1, 2009 Genmar Holdings Inc. U.S. Media&Ent D NR Chapter 11
145 Jun. 2, 2009 Lear Corp. U.S. Auto D CCC+ Missed Interest Payment
146 Jun. 2, 2009 Newport Television Holdings LLC U.S. Media&Ent SD B- Distressed Exchange
147 Jun. 2, 2009 Saad Group Saudi Arabia Financial Institutions D BBB+ Payment Suspension
148 Jun. 5, 2009 Confidential U.S. High Tech SD B -
149 Jun. 5, 2009 Hawker Beechcraft Inc. U.S. Aero&Def SD CC Distressed Exchange
150 Jun. 5, 2009 Travelport Holdings Ltd. U.S. Transportation SD B- Distressed Exchange