The U.S. Corporate Default Rate Held Fairly Steady In March At An Estimated 2.38%
|Publication date: 02-Apr-2012 21:45:26 GMT|
Standard & Poor's estimated 12-month-trailing speculative-grade corporate default rate in the U.S. was essentially flat in March 2012 at 2.38%, from 2.42% in February and 2.43% in January. One entity defaulted in March, which brings the total number of defaults for the year to 14 (including entities that were not rated at the time of default). The highlights from last month are:
- The only entity that defaulted in March was U.S.-based directory publisher and marketing servicer Dex One Corp. Standard & Poor's Ratings Services downgraded Dex One to 'SD' on March 23 after the company completed a repurchase of term debt below par value.
- The U.S. 12-month-trailing speculative-grade default rate is estimated at 2.38% in March. In comparison, the default rate for 2011 was 1.98%.
- Corporate spreads continued to decline slightly in March from the previous month, but the decline appears to be tapering off. The U.S. speculative-grade spread fell to 623 basis points (bps) at the end of March, and the investment-grade spread declined to 196 bps. Nonetheless, the speculative-grade spread was as low as 594 bps in March 19 before rising back to the current level (see chart 1).
|U.S. Corporate Speculative-Grade Defaults In 2012|
|Date of default||Entity||Sector|
|1/4/2012||Coach America Holdings Inc.||Transportation|
|1/6/2012||Vertrue LLC||High technology|
|1/10/2012||Buffets Inc.||Consumer products|
|1/17/2012||Hanley Wood LLC||Media and entertainment|
|1/19/2012||Eastman Kodak Co.||Consumer products|
|1/19/2012||Yell Group PLC||Media and entertainment|
|1/26/2012||Republic Mortgage Insurance Co.||Insurance|
|2/2/2012||Jobson Medical Information LLC||Media and entertainment|
|2/6/2012||Global Aviation Holdings Inc.||Transportation|
|2/6/2012||Tensar Corp. (The)||Natural resources|
|2/13/2012||DirectBuy Holdings Inc.||Consumer products|
|2/16/2012||Reichhold Industries Inc.||Chemicals and packaging|
|3/23/2012||Dex One Corporation||Leisure time/media|
|Data as of March 31, 2012. Includes entities that were not rated at the time of default. Source: Standard & Poor’s Global Fixed Income Research.|
- With the decline in spreads, Standard & Poor's distress ratio--defined as the proportion of speculative-grade-rated issues that have option-adjusted spreads of more than 1,000 bps relative to U.S. Treasuries--also fell. The distress ratio was 10.8% in March, down from 13.2% in February and 15.3% in January.
- New issuance activity remained strong in March. A total of 58 new speculative-grade deals worth over $24 billion came to market during the month, bringing the first-quarter 2012 total to 139 deals worth more than $67 billion. By comparison, 10 deals, worth $3 billion, came to market in December.
- Investment-grade new issuance activity was also robust. In March, 95 deals ($64 billion) came to market. The total for the first quarter of 2012 is 273 deals worth about $184 billion. In December 2011, only 38 deals ($25 billion) came to market.
- In March, Standard & Poor's Ratings Services upgraded 37 companies with total debt of about $82 billion, and it downgraded 26 companies with debt of about $31 billion. The resulting downgrade ratio by count in March was 0.7, down from 1.28 in February and 0.82 in January. During the last five months of 2011, downgrades outnumbered upgrades. The downgrades-to-upgrades ratio was 2.40 for December and 0.97 for 2011.
|U.S. Corporate New Issuance|
|--Dollar amount (bil. $)--||--Issue count--|
|*Through March 31. Sources: Thomson Financial and Standard & Poor’s Global Fixed Income Research.|
|U.S. Corporate Bond Rating Actions--Investment Grade And Speculative Grade|
|Upgrades (bil. $)||799.4||157.3|
|Downgrades (bil. $)||1,862.5||96.9|
|*Through March 31. Source: Standard & Poor’s Global Fixed Income Research.|
- Global Corporate Default Update (March 22-28, 2012), March 29, 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 Is Forecasted To Rise To 3.3% In 2012, Feb. 2, 2012
- Most Of The Global Defaulters In 2011 Were Weakest Links, Jan. 20, 2012
|Global Fixed Income Research:||Diane Vazza, Managing Director, New York (1) 212-438-2760;|
|Jacinto Torres, Director, New York (1) 212-438-3243;|
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