TEXT-S&P: U.S. distress ratio stays at 10.6 pct in October
Nov 12 - Barack Obama's re-election removed one of the biggest uncertainties hovering over the U.S. in 2012. Following the election, the focus has shifted entirely to the upcoming fiscal cliff. In the meantime, spreads remain below their one-year moving averages and the distress ratio stayed unchanged at 10.6% in October, according to a Standard & Poor's report published today titled "Distressed Debt Monitor: The U.S. Distress Ratio Stays Unchanged At 10.6% In October." The ratio was also significantly lower than the October 2011 level of 19.3%. Standard & Poor's distress ratio is the number of distressed securities divided by the total number of speculative-grade-rated issues. Distressed credits are speculative-grade-rated issues that have option-adjusted spreads of more than 1,000 basis points (bps) relative to U.S. Treasuries. "The ratio is now at its lowest level since July 2011, when the sovereign crisis in Europe led to investor worries and a spike in U.S. speculative-grade spreads," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. In October, the number of distressed corporate entities decreased slightly. As of October 15, 125 companies had issues trading with spreads of 1,000 bps and higher--down from 128 in September. The number of affected issues increased slightly to 174 from 172. Distressed issues are the weakest of the speculative-grade population. Therefore, their recovery prospects are low. Currently, among the distressed issues with available recovery ratings, a vast majority have recovery ratings of '5' or '6', indicating only negligible to modest recovery in the event of default. Of the 125 companies on this month's distressed list, 46% had either negative rating outlooks or ratings on CreditWatch with negative implications. The rating outlooks on 51% of the companies were stable, and 1% were positive. Standard & Poor's rates 56% of the companies 'B-' or lower. The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to firstname.lastname@example.org. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
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