Thursday, May 08, 2008

Bankruptcies And Defaults Gather Pace

And the "official" recession hasn´t even started yet......

Und das obwohl die "offizielle" Rezession noch nicht einmal begonnen hat.......

Bankruptcies and defaults gather pace FT
The number of companies defaulting on their junk-rated debt and filing for bankruptcy in North America is running at its fastest pace in five years amid the slowing economy and contraction in credit markets.

So far this year, 28 “entities” have defaulted, according to Standard & Poor’s. The defaulted debt of the one Canadian and 27 US companies totals $18.4bn and exceeds the 17 defaults in the US for all of last year

As economic conditions deteriorated...and volatility in the financial markets protracted, corporate casualties began to emerge at a rate unseen in years,” said Diane Vazza, head of S&P’s Global Fixed Income Research Group. “The surge of defaults in the early months of 2008 is the first leg of an extended period of high default occurrences that will characterise the rest of 2008 and 2009.”
> and much much longer......
> und wohl noch wesentlich länger......

S&P said the pace of US defaults in the first five months of the year is the fastest since 2003.

The US is leading the global default rate for companies, said Ken Emery, senior vice-president at Moody’s.

The global default rate for speculative-grade companies rose to 1.7 per cent in April, up from 1.5 per cent in March and a multi-decade low of less than 1 per cent last year, said Moody’s.

Meanwhile, in the US the default rate rose from 1.8 per cent in March to 2.1 per cent in April. Moody’s expects the global default rate to reach 4.98 per cent by the end of the year, with defaults in the US reaching 5.7 per cent. In Europe the default rate is currently 0.7 per cent.
> I assume that we no way near the peak........ Especially when you look at the following table..... The market share of junk in 2007 was even more depressing.....
> Bin mir ziemlich sicher das die aktuellen Zahlen den USA nicht das Ende der Fahnenstange sind.... Das gilt besonders dann wenn man sich die nachfolgende Tablle ansieht...... Für das Jahr 2007 sah das ganze sogar noch depresseiver in Sachen Junkmarktanteil aus......
This week the latest Federal Reserve Senior Loan Officer survey highlighted tougher lending conditions from banks to lower-rated corporate borrowers. In spite of the recent rally in credit markets, the number of junk-rated companies trading at highly elevated levels remains well above normal.

“This increases the risks to the weakest links, entities rated B minus or lower,” said S&P. Weak links, which are three times more likely to default than the rest of the speculative grade market, rose to 101 entities in April. This was compared with 78 at the end of 2007 and a 10-year low of 64 in July.

“If the recession is deeper and longer than expected and lending constraints worsen more markedly, the default rate could be significantly more pronounced and severe, possibly reaching 8.5 per cent,” said S&P. Such a rate would reflect 136 defaults.

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