Kamakura Reports Significant Decline in Corporate Credit Quality during December Kamakura Troubled Company Index Increases 1.31% to 6.42%
President and COO
1-808-791-9888, extension 8700
NEW YORK, January 5, 2015: Kamakura Corporation reported Monday that the Kamakura troubled company index ended the month of December at 6.42%, an increase of 1.31% from the end of November. The index reflects the percentage of the Kamakura 34,000 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 December, the percentage of the global corporate universe with default probabilities between 1% and 5% was 5.03%, up 0.92% from November; the percentage of the universe with default probabilities between 5% and 10% was 0.95%, up 0.27%; the percentage between 10% and 20% was 0.31%, up 0.6%; while the percentage of companies with default probabilities over 20% was 0.13%, up 0.06 from the previous month.
At 6.42%, the troubled company index tumbled to the 82.6 percentile of historical credit quality (with 100 being best all time) over the period from January 1990 to the present. Among the ten riskiest firms in December, three were from the United States, two from Russia, and one each from Brazil, Canada, Greece, Mongolia and United Arab Emirates. The riskiest company on the list this month is RadioShack (RSH), followed by BPZ Resources Inc. (BPZ). Every firm on the list saw an increase in its default probability over the month and half of the firms were in the natural resource and extraction industries.
Martin Zorn, President and COO for Kamakura Corporation, said Monday “In 2014 we saw markets and central banks begin moving in different directions. The Federal Reserve has been preparing the market for rate increases while the European Central Bank is moving towards further easing. Japan took dramatic steps to weaken the yen while oil prices and the ruble tumbled. It does not seem that long ago that that the investment assumption was that America was slowing and emerging markets were the future. We have been warning about credit risks signs embedded in our term default probabilities while this month we saw the signals emerge in the movement of the troubled company index. Borrowing the sentiment of our CEO, Dr. van Deventer, 2015 could be a very dangerous year. The theme is be very careful and understand how a changing environment can help or hurt you. It’s no time to go double or nothing ”
The Kamakura troubled company index measures the percentage of more than 34,000 public firms in 61 countries that have annualized 1 month default risk over one percent. The average index value since January, 1990 is 11.60%. Since November, 2010, the Kamakura index has used the annualized one month default probability produced by the KRIS version 5.0 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 version 5.0 model was estimated over the period from 1990 to 2008, and includes the insights of the worst part of the recent credit crisis. The 61 countries currently covered by the index are Argentina, Australia, Austria, Bahrain, Bangladesh, Belgium, Brazil, Canada, Chile, China, Colombia, Cyprus, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Hong Kong, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Kuwait, Luxembourg, Malaysia, Malta, Mexico, the Netherlands, New Zealand, Norway, Oman, Pakistan, Peru, the Philippines, Poland, Portugal, Qatar, Russia, Saudi Arabia, 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 (www.twitter.com/dvandeventer),
Kamakura President Martin Zorn (www.twitter.com/riskmgrhi), and
Kamakura’s official twitter account (www.twitter.com/KamakuraCo).
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. 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 (www.fiserv.com) and SCSK Corporation ( http://www.scsk.jp/index_en.html) making Kamakura products available in almost every major city around the globe.
For more information contact
2222 Kalakaua Avenue, Suite 1400,
Honolulu, Hawaii 96815
Web site: www.kamakuraco.com