Press Release

Kamakura Reports Slight Improvement in Corporate Credit Quality in March
Kamakura Troubled Company Index Decreases 0.39% to 8.15%

NEW YORK, April 3, 2017: Kamakura Corporation reported Monday that the Kamakura troubled company index ended March at 8.15%, a decrease of 0.39% from the end of February. The index reflects the percentage of the Kamakura 38,000 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 March, the percentage of the global corporate universe with default probabilities between 1% and 5% was 6.66%, a decrease of 0.30% from the prior month; the percentage of the universe with default probabilities between 5% and 10% was 1.03%, a decrease of 0.08% from the prior month; the percentage between 10% and 20% was 0.38%, up 0.01%; while the percentage of companies with default probabilities over 20% was 0.08%, a decrease of 0.02% from the previous month. The index ranged from 7.88% on March 15 to 8.39% on March 24. Volatility continued to be low on a relative basis.

At 8.15%, the troubled company index was at the 81st percentile of historical credit quality (with 100 being best all time) over the period from January 1990 to the present. Among the ten riskiest rated firms in March, five were from the United States, two from Great Britain and one each from France, Greece and Spain. During the month, there were eighteen defaults in the coverage universe with four from Brazil, three from Russia, two each from Australia, Great Britain and the United States. The two American defaults were discount retailers Gordman’s (NASDAQ: GMAN) and HHGregg (OTCMKTS: HGG). Walter Investment Management Group (NYSE: WAC) became the riskiest rated firm with a one-year KDP of 15.02% up 6.54% over the past month.

Martin Zorn, President and Chief Operating Officer for Kamakura Corporation, said Monday, “Over the past year we have discussed the cautionary signals displayed in the Kamakura term structure of default probabilities. The risks were clearly identified in a recent blog by our founder, Dr. van Deventer – ‘New Video: The Expected Default Rate For Rated Firms In The Next Decade Is Higher Than In September 2008’. The cumulative default rate as of the end of the month as well as the expected number of defaults can be seen in the chart below. We call your attention to the dramatic expansion in the expected defaults for the five and seven year time horizon. This expansion is especially significant given research by Stifel, Nicolaus & Company (Stifel Credit Weekly: March 20, 2017) reporting significant new issuance of high-grade debt in the 5-7 year tenor both in 2016 and 2017. Given the risk and issuance in this tenor we have produced the list of riskiest firms as measured by the 7-year cumulative default probability. One of the risk management lessons learned during my tenure at the Winston-Salem based Wachovia was that excellent credit management was earned through portfolio management and the early identification of problems. The term structure of default is a critical tool in the early identification of potential future problems.”


The Kamakura troubled company index measures the percentage of 38,000 public firms in 68 countries that have annualized 1 month default risk over one percent. The average index value since January, 1990 is 14.73%. Beginning in November 2015, the Kamakura index has used the annualized one month default probability produced by the KRIS version 6.0 Jarrow-Chava reduced form default probability model, a formula that bases default predictions on a sophisticated combination of financial ratios, stock price history, and macro-economic factors. The KRIS version 6.0 models were developed using a data base of more than 2.2 million observations and more than 2,600 corporate failures. A complete technical guide is provided to subscribers which includes full model test results and parameters. The KRIS service also includes a wide array of other default probability models that can be seamlessly loaded into Kamakura’s state of the art enterprise risk management software engine Kamakura Risk Manager. Models available include the non-public firm default model, the commercial real estate model, the U.S. bank model, and the sovereign model. Related data includes credit default swap trading volume by reference name, market implied credit spreads, and prices on all traded corporate bonds traded in the United States market. Macro factor parameter subscriptions include Heath, Jarrow and Morton term structure models for government securities in the United States, Germany, the United Kingdom, Canada, Spain, Sweden, Australia, Japan, Thailand and Singapore. All parameters are derived in a no arbitrage manner consistent with the seminal papers by Heath, Jarrow and Morton and Amin and Jarrow. A KRIS Macro Factor Scenario Service subscription includes both risk neutral and “real world” empirical scenarios for interest rates and macro factors.

The version 6.0 model was estimated over the period from 1990 to May, 2014, which includes the insights of the entirety of the recent credit crisis. The 68 countries currently covered by the index are Argentina, Australia, Austria, Bahrain, Bangladesh, Belgium, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Cyprus, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Hungary, Hong Kong, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Kuwait, Luxembourg, Malaysia, Malta, Mexico, Nigeria, the Netherlands, New Zealand, Norway, Oman, Pakistan, Peru, the Philippines, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, the United Arab Emirates, the United Kingdom, the United States, and Viet Nam.

To follow the troubled company index and other risk commentary by Kamakura on a daily basis, please follow
Kamakura CEO Dr. Donald van Deventer (
Kamakura President Martin Zorn (
Kamakura Principal Risk Officer Suresh Sankaran (
and Kamakura’s official twitter account (

About Kamakura Corporation
Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura was named to the World Finance 100 by the Editor and readers of World Finance magazine in 2012 and 2016. In 2010, Kamakura was the only vendor to win 2 Credit Magazine innovation awards. Kamakura Risk Manager, first sold commercially in 1993 and now in version 8.1, is the first enterprise risk management system with users focused on credit risk, asset and liability management, market risk, stress testing, liquidity risk, counterparty credit risk, and capital allocation from a single software solution. The KRIS public firm default service was launched in 2002. The KRIS sovereign default service, the world’s first, was launched in 2008, and the KRIS non-public firm default service was offered beginning in 2011. Kamakura added its U.S. Bank default probability service in 2014. Kamakura has served more than 330 clients ranging in size from $1.5 billion to $1.6 trillion in assets. Kamakura’s risk management products are currently used in 43 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, the Ukraine, Eastern Europe, the Middle East, Africa, South America, Australia, Japan, China, Korea, India and many other countries in Asia.

Kamakura has world-wide alliances with Fiserv ( and SCSK Corporation ( making Kamakura products available in almost every major city around the globe.

For more information contact
Kamakura Corporation
2222 Kalakaua Avenue, Suite 1400, Honolulu, Hawaii 96815
Telephone: 1-808-791-9888
Twiter: @Kamakuraco
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