Kamakura Reports Near-Record Improvement in Global Credit Quality in May: Troubled Companies Decline to 18.8% of All Firms

NEW YORK, June 1, 2009:  Kamakura Corporation announced Monday that the Kamakura index of troubled public companies made a second consecutive dramatic improvement in May after reaching its worst point, 24.3%, in the current recession in March. The Kamakura global index of troubled companies decreased by 3.3% to 18.8% of the public company universe. The 3.3% drop in the index is the 4th largest decline in the 230 month history of the troubled company index. The largest one month decline was a 4.1% drop in January 2003. Kamakura defines a troubled company as a company whose short term default probability is in excess of 1%. The all-time high in the index was 28.0%, recorded in September 2001. Credit conditions are now better than credit conditions in 23.5% of the months since the index’s initiation in January 1990.  In March, by contrast, credit conditions were better than only 3.6% of the monthly periods since 1990. The all-time low in the index was 5.4%, recorded in April and May 2006.  The index is based on expanded coverage of more than 26,500 companies in 30 countries, an increase of more than 2500 firms since the previous month.  In spite of the increase in coverage, the absolute number of firms in the “over 20%” default probability category declined by 85 firms.  To follow the troubled company index and other risk commentary by Kamakura on a daily basis, see www.twitter.com/dvandeventer.

Kamakura’s President, Warren A. Sherman, said Monday, "In November of last year, we identified Thomson of France as showing one of the largest increases in default risk in our public company universe,” said Mr. Sherman. "Thomson defaulted selectively in May. Also in May, the rated public companies showing the sharpest rise in short term default risk were Spanish Broadcasting System, Advanta, Eastman Kodak, Pioneer Corp (Japan), and Radio One Inc. General Motors ranked as the seventh largest increase in risk.  In May, the percentage of the global corporate universe with default probabilities between 1% and 5% decreased by 1.4% to 12.0%. The percentage of companies with default probabilities between 5% and 10% was down 0.6% to 3.0% of the universe in May.  The percentage of the universe with default probabilities between 10 and 20% was down 0.7% to 2.0% of the universe.  The percentage of companies with default probabilities over 20% was down by a very significant 0.7% to 1.8% of the total universe in May."

The Kamakura index uses the annualized one month default probability produced by the best performing credit model of the Kamakura Risk Information Services default and correlation service. The model used is the fourth generation Jarrow-Chava reduced form default probability, a formula that bases default predictions on a sophisticated combination of financial ratios, stock price history, and macro-economic factors. The countries currently covered by the index include Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Hong Kong, India, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.

Kamakura CEO Dr. Donald R. van Deventer and other members of Kamakura senior management are now maintaining an active blog on key risk management issues.  Recent blog entries include the following stories:

• “Brother, Can You Spare a Dime: Calculating Economic Capital”
• “Optimal Balance Sheet Strategy: An Appreciation of Robert C. Merton’s ‘Optimal Investment Strategies for University Endowment Funds’”
• “The Politics of Hedging Risk”
• “Risk Management Strategies for Individual Investors”
• “A Ratings Neutral Investment Policy”
• “Brother, Can You Spare a Dime or a Dollar? VAR versus the Put Option for Capital Allocation”
• “The Wizard Speaks on Ethics and ‘A Ratings Neutral Investment Policy’”
• “Risk Management and the Credit Crisis: Great Quotations”
• “FAQ: What about Correlated Explanatory Variables in a Default Model?  Isn’t Multi-collinearity a Problem?”  

About Kamakura Corporation

Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura has been a provider of daily default probabilities and default correlations for listed companies since November 2002. Kamakura announced the KRIS Sovereign Default Probability Service on May 19, 2008. Kamakura launched its collateralized debt obligation (CDO) pricing service KRIS-CDO in April 2007. Kamakura is also the first company in the world to develop and install a fully integrated enterprise risk management system that analyzes credit risk, market risk, asset and liability management, transfer pricing, and capital allocation. The Kamakura Risk Manager system, now in version 7.0, was first offered commercially in 1993 and has been continually enhanced since then. Kamakura has served more than 195 clients ranging in size from $3 billion in assets to $1.6 trillion in assets. Kamakura’s risk management products are currently used in 31 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, Eastern Europe, the Middle East, Africa, Australia, Japan, China, Korea and many other countries in Asia.

Kamakura has world-wide distribution alliances with Fiserv, Unisys, and Zylog Systems making Kamakura products available in almost every major city around the globe.

For more information contact

Kamakura Corporation
2222 Kalakaua Avenue, 14th Floor, Honolulu, Hawaii 96815
Telephone: 1-808-791-9888
Facsimile: 1-808-791-9898
Information: info@kamakuraco.com
Web site: www.kamakuraco.com