Kamakura Reports Decline in Corporate Credit Quality in April
Kamakura Troubled Company Index Increases 0.53% to 7.63% in April
NEW YORK, May 1, 2012: Kamakura Corporation reported Tuesday that the Kamakura index of troubled public companies rose, increasing 0.53% to 7.63% in April. The rise in the index reflects a decline in corporate credit quality, which has deteriorated in nine of the last twelve months. The index hit an intra-month high of 8.0% on April 10 while having an intra-month low of 7.2% on April 2. There was an increase in volatility in the index during April compared to the prior month with an upward bias throughout the month. At the 7.63% level, corporate credit quality is at the 69th percentile (with 100 being best all time credit quality) over the period from 1990 to the present. In December 2010, by contrast, the index was at the 99th percentile of credit quality and last month it was at the 78th percentile. Irish Life and Permanent had the world’s highest one-month default risk among rated companies, with a default probability of 25.21%. Tokyo Electric Power Co was ranked second with a default probability of 18.35%.
In April, the percentage of the global corporate universe with default probabilities between 1% and 5% was 6.13%, an increase of 44 basis points. The percentage of companies with default probabilities between 5% and 10% was 1.02%, an increase of 9 basis points. The percentage of the universe with default probabilities between 10% and 20% was 0.39% of the universe, an increase of 3 basis points, while the percentage of companies with default probabilities over 20% was 0.09% of the total universe in January, a decrease of 3 basis points.
Martin Zorn, Chief Administrative Officer for Kamakura Corporation, said Tuesday, “We saw an increase in volatility in the index with a bias towards higher default probabilities over the past month. Eight of the ten riskiest firms experienced increases in default probability over that time. Four of the riskiest firms were from United States, two were from Ireland, two were from Russia, and one each from Greece and Russia. While European names dominate the twenty riskiest firms in the index the jump in US firms in the top ten continues to demonstrate that credit stress is company specific and bears monitoring”.
The Kamakura troubled company index measures the percentage of almost 30,000 public firms in 37 countries that have annualized 1 month default risk over one percent. Kamakura’s index had reached a recent peak of 25.57% in November 2008. The average index value since January 1990 is 12.25%. 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, so it includes the insights of the worst part of the recent credit crisis. The countries currently covered by the index include Australia, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany, Greece, Hong Kong, India, Indonesia, Ireland, Israel, Italy, Japan, Luxemburg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Poland, Russia, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, United Kingdom, and the United States.
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 Chief Administrative Officer 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, including one with distribution partner Thomson Reuters. Kamakura Risk Manager, first sold commercially in 1993 and now in version 8.0, 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. KRIS default probabilities are displayed for 4,000 corporates and sovereigns via the Reuters 3000 Xtra service and the Thomson Reuters Eikon service. Kamakura has served more than 220 clients ranging in size from $1.5 billion in assets to $1.6 trillion in assets. Kamakura’s risk management products are currently used in 32 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 distribution alliances with Fiserv (www.fiserv.com), SCSK Corporation (http://www.scsk.jp/index_en.html), Unisys (www.unisys.com), and Zylog Systems (www.zylog.co.in) making Kamakura products available in almost every major city around the globe.
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