- Automakers' Woes Drive Up Distress Ratio, Article Says
     NEW YORK July 25, 2008--After declining for the past three months,
the Standard & Poor's distress ratio has shot up to 23.5% in July from
13.7% last month, said an article published to-day. (Distressed credits are
speculative-grade-rated issues that have option-adjusted spreads of more
than 1,000 basis points [bps] relative to Treasuries.) The article, which
is titled "U.S. Distressed Debt Monitor: Detroit's Dilemmas Propel Distress
(Premium)," says that this is the largest month-over-month increase in the
distress ratio, expanding just under 10% since last month.
     "This increase puts the distress ratio at its highest level since
March 2003," noted Diane Vazza, head of Standard & Poor's Global Fixed
Income Research Group. "It runs alongside the recent rise in
speculative-grade spreads, which were at 763 bps on July 15 from 626 bps a
month earlier."
     By debt volume, the finance companies and media and entertainment
sectors take the lead, each accounting for $45.9 billion (28.8%) of the
total. When looking at the distress ratio based on outstanding debt,
however, the finance company sector is at a stratospheric high of 81.7%.
This means that nearly 82% of the speculative-grade debt in this sector is
attributable to companies trading at distressed levels. It is important to
note that 90% of the distressed issues in this sector are from GMAC LLC and
Ford Motor Credit Co.
     The automotive sector saw the largest month-over-month increase as a
proportion of all distressed credits, expanding 10.5% to constitute 14% of
all distressed issues outstanding, up from only 3.4% of the total last
month. This is primarily the result of 26 issues attributed to Ford Motor
Co. and General Motors Corp. entering this month's distressed list.
     RatingsDirect is the real-time Web-based source for Standard & Poor's
credit ratings, research, and risk analysis, at The
standard version of this article is part of our standard Global Fixed
Income Research content. The premium version contains expanded analysis of
the article's most significant points, typically broken out by sector and
region. Also in the premium version are in-depth charts and tables, the
underlying data of which are available for download. Ratings information
can also be found on Standard & Poor s public Web site at; under Credit Ratings in the left navigation bar,
select Find a Rating, then Credit Ratings Search. Members of the media may
request a copy of this report by contacting the media representative
     Media Contact:
     Mimi Barker, New York (1) 212-438-5054,
     Analyst Contacts:
     Diane Vazza, New York (1) 212-438-2760
     Standard & Poor's, a division of The McGraw-Hill Companies, is the
world's foremost provider of financial market intelligence, including
independent credit ratings, indices, risk evaluation, investment research
and data. With approximately 8,500 employees, including wholly owned
affiliates, located in 23 countries and markets, Standard & Poor's is an
essential part of the world's financial infrastructure and has played a
leading role for more than 140 years in providing investors with the
independent benchmarks they need to feel more confident about their
investment and financial decisions. For more information, visit
(c)2008 Market News Publishing Inc. All rights reserved.
Toronto:(416)366-8881 Vancouver:(604)689-1101 Fax:(604)689-1106

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry