Global Corporate Default Update (March 29 - April 4, 2012)
|Publication date: 05-Apr-2012 17:24:57 GMT|
U.S. business jet manufacturer Hawker Beechcraft Inc. failed to make the scheduled interest payment on its secured credit facility due on March 30, 2012. Subsequently, Standard & Poor's Ratings Services lowered its corporate credit rating on the issuer to 'SD' (selective default) and the issue rating on the credit facility to 'D'. Hawker Beechcraft later filed an 8-K with the SEC, stating that it did not make interest payments on its unsecured and subordinated notes as well, and we subsequently lowered the corporate credit rating to 'D' and issue ratings on the affected securities to 'D'. This raises the 2012 global default tally to 26. Of the total defaulters, 16 were based in the U.S., five in the emerging markets, three in Europe, and two in the other developed region (Australia, Canada, Japan, and New Zealand). In comparison, last year, only six issuers--four based in the U.S., one in Europe, and one in New Zealand--defaulted during the same period (through April 4).
So far this year, missed payments accounted for 10 defaults, bankruptcy filings accounted for five, distressed exchanges were responsible for four, and four defaulters were confidential. Of the remaining defaults, one was the result of a notice of acceleration by the issuer's lender, one was due to the company's placement under regulatory supervision, and the last was due to a judicial organization filing. In 2011, 21 issuers defaulted because of missed interest or principal payments, and 13 because of bankruptcy filings--both of which were among the top reasons for defaults in 2010. Distressed exchanges--another top reason for default in 2010--followed with 11 defaults in 2011. Of the remaining defaults, two issuers failed to finalize refinancing on bank loans, and two were subject to regulatory action, one had its banking license revoked by its country's central bank, one was appointed a receiver, and two were confidential.
|Global Corporate Default Summary|
|Region||12-month-trailing speculative-grade default rate (%)||2012*||Full-year 2011||Full-year 2010||Weakest links|
|Note: The 12-month-trailing default rates are from Feb. 28, 2011-Feb. 29, 2012, and are preliminary and subject to change. *Data as of April 4, 2012. Other developed region includes Australia, Canada, Japan, and New Zealand. Default counts may include confidentially rated issuers. Sources: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro®.|
Standard & Poor's expects the U.S. corporate trailing 12-month speculative-grade default rate to increase to 3.3% by December 2012 from 1.98% as of December 2011. Our baseline projection is still lower than the long-term (1981-2011) average of 4.5%. A total of 51 issuers would need to default in the 12 months ending December 2012 to reach this projection. Five U.S. speculative-grade companies defaulted as of Jan. 31, 2012, bringing the default rate up to an estimated 2.4%. In 2011, 29 speculative-grade issuers defaulted during the 12 months ended December 2011--12 of which defaulted in the fourth quarter.
In addition to our baseline projection, we forecast the default rate in our optimistic and pessimistic scenarios. Our optimistic default rate forecast assumes that the U.S. economy and financial markets perform better than expected. As a result, we would expect the default rate to be just below the current level at 1.8% by December 2012 (or 28 defaults during the 12-month period). On the other hand, a financial collapse and a deep recession in Europe could lead to another recession in the U.S. Under this pessimistic scenario, we would expect the default rate to be 5.3% (or 81 defaults during the 12-month period). We base our forecasts on quantitative and qualitative factors that we consider, including, but not limited to, Standard & Poor's proprietary default model for the U.S. corporate speculative-grade bond market. We update our outlook for the U.S. issuer-based corporate speculative-grade default rate each quarter after analyzing the latest economic data and expectation. For more details, see "The U.S. Corporate Default Rate Is Forecasted To Rise To 3.3% In 2012," published Feb. 2, 2012.
|Global Corporate Defaults This Week|
|4/2/2012||Hawker Beechcraft Inc.||U.S.||Aerospace and Defense||SD||CC|
|Data as of April 4, 2012. Sources: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro®.|
|Global Corporate Defaults In 2012|
|1/4/2012||Coach America Holdings Inc.||U.S.||Transportation||D||CCC||Chapter 11|
|1/6/2012||Vertrue LLC||U.S.||Media and entertainment||D||CCC+||Missed interest payment|
|1/10/2012||Buffets Inc.||U.S.||Retail and restaurants||D||CCC||Missed interest payment|
|1/17/2012||Hanley Wood LLC||U.S.||Media and entertainment||SD||CCC-||Subpar recapitalization|
|1/19/2012||Eastman Kodak Co.||U.S.||High technology||D||CCC-||Chapter 11|
|1/19/2012||Yell Group PLC||U.K.||Media and entertainment||SD||CC||Distressed exchange|
|1/25/2012||Confidential||U.S.||Retail and restaurants||SD||CC||Confidential|
|1/25/2012||Petroplus Holdings AG||Switzerland||Oil and gas exploration and production||D||CC||Notice of acceleration|
|1/26/2012||Republic Mortgage Insurance Co.||U.S.||Insurance||R||CC||Regulatory supervision|
|1/27/2012||Confidential||Israel||Retail and restaurants||D||CC||Confidential|
|1/31/2012||China Medical Technologies Inc.||China||Health care||SD||B+||Missed interest payment|
|2/2/2012||Jobson Medical Information LLC||U.S.||Media and entertainment||D||NR||Chapter 11|
|2/6/2012||Tensar Corp. (The)||U.S.||Forest products and building materials||SD||CCC||Missed amortization payment|
|2/6/2012||Global Aviation Holdings Inc.||U.S.||Transportation||D||CCC-||Chapter 11|
|2/10/2012||PT Berlian Laju Tanker Tbk.||Indonesia||Transportation||D||CC||Nonpayment of leases|
|2/13/2012||DirectBuy Holdings Inc.||U.S.||Retail and restaurants||D||CC||Missed interest payment|
|2/16/2012||Reichhold Industries Inc.||U.S.||Chemicals, packaging, and environmental services||D||CCC+||Missed interest payment|
|2/22/2012||ERC Ireland Preferred Equity Ltd.||Ireland||Telecommunications||SD||CC||Missed coupon payment|
|2/27/2012||Elpida Memory, Inc.||Japan||High technology||D||NR||Insolvency|
|3/1/2012||Centrais Eletricas do Pará||Brazil||Utility||D||CCC+||Judicial reorganization filing|
|3/2/2012||Circus and Eldorado Joint Venture||U.S.||Media and entertainment||D||CCC-||Missed principal payment|
|3/7/2012||Mohegan Tribal Gaming Authority||U.S.||Media and entertainment||SD||CC||Distressed exchange|
|3/21/2012||Confidential||Canada||Aerospace and defense||D||B||Confidential|
|3/23/2012||Dex One Corporation||U.S.||Media and entertainment||SD||CC||Subpar repurchase|
|4/2/2012||Hawker Beechcraft Inc.||U.S.||Aerospace and defense||SD||CC||Missed interest payment|
|Data as of April 4, 2012. Sources: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro®.|
More analysis and statistics are available in our annual corporate default studies, published on RatingsDirect:
- 2011 Annual Global Corporate Default Study And Rating Transitions
- 2011 Default Synopses
- 2011 Annual U.S. Corporate Default Study And Rating Transitions
- 2011 Annual European Corporate Default Study And Rating Transitions
- 2010 Annual Asian Corporate Default Study And Rating Transitions
- Credit Trends: Stressed Sectors In Corporate America: The Three Most Troubled Sectors Are Showing Signs Of Improvements, April 4, 2012
- Distressed Debt Monitor: The U.S. Distress Ratio Falls To 10.8% In March, March 28, 2012
- Global Weakest Links And Default Rates: An Uptick In Weakest Links, March 22, 2012
- The U.S. Corporate Default Rate Declined Slightly In February To An Estimated 2.33%, March 2, 2012
- Ratings Distribution In Emerging And Developed Markets, Including The U.S. And Europe, As Of Fourth-Quarter 2011, Feb. 7, 2012
- Recovery Study (U.S.): Piecing Together The Performance Of Defaulted Instruments After The Recent Credit Cycle, Dec. 1, 2011
- Quarterly Global Corporate Default Update And Rating Transitions, Nov. 9, 2011
- U.S. Corporate Default Rate Expected To Rise To 3.1% By September 2012, Nov. 8, 2011
- How Distressed Exchanges Affect Default Rates And Ratings Performance, Sept. 26, 2011
- 'Til Debt Do Us Part: A Study Of Serial Defaulters, Nov. 10, 2010
- Global Credit Comment: Corporate Credit Ratings Effectively Measure Default Probability, Sept. 21, 2009
- The Devil Is In The Details: Understanding The Variation In Corporate Default Rates And Rating Transitions, July 14, 2009
|Global Fixed Income Research:||Diane Vazza, Managing Director, New York (1) 212-438-2760;|
|Sudeep Kesh, Associate Director, New York (1) 212-438-7982;|
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