- U.S. Default Rate Increases For The Sixth Consecutive Month,
- Article Says
     NEW YORK July 22, 2008--Through July 14, 2008, 42 companies have
defaulted, affecting debt worth $33.6 billion, said an article published
yesterday by Standard & Poor's. The article, which is titled "Global Bond
Markets' Weakest Links And Monthly Default Rates (Premium)," said this
already surpassed the 22 defaults recorded in all of 2007 and 30 defaults
in 2006. Of the 41 defaults, 40 are domiciled in the U.S., and one is from
Canada. The U.S. also leads in the number of weakest linksentities that are
closest to the default thresholdwith 118 (81%) of the 145 entities.
     "Through the first half of 2008, defaults have increased significantly
in the U.S. but remain scarce elsewhere," noted Diane Vazza, head of
Standard & Poor's Global Fixed Income Research Group. The 12-month trailing
global corporate speculative-grade bond default rate declined marginally to
1.44% in June from 1.45% in May, remaining below its long-term (1981-2007)
average of 4.35% for 53 consecutive months. The U.S. speculative-grade
default rate continued to increase, reaching 1.92% in June from 1.89% in
May and a 25-year low of 0.97% at the end of 2007. The Europe default rate
declined to zero, as there have been no publicly rated defaults in the last
12 months. The emerging markets default rate held steady at 0.17% for the
fourth consecutive month.
     "Our most recent mean baseline U.S. speculative-grade default rate
forecast is 4.7%, a sharp increase from a 25-year low of 0.97% recorded at
the end of 2007," Ms. Vazza added. "We also simulate the default-rate
impact under two alternative economic scenarios, with one worse than the
baseline and one better, both of which have an estimated 20% chance of
occurring." The pessimistic scenario yields a mean 12-month default rate of
8.5%, nearly double the long-term average of 4.4% but still below the peak
in 2001-2002. The optimistic scenario yields an average default rate of
3.7%, below the long-term average. We are in the process of revisiting our
default forecasts and expect to release a report on it in the coming weeks.
     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
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760
     Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP),
is the world's foremost provider of financial market intelligence,
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