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Credit quality improves slightly in March - Kamakura
April 2, 2013 / 4:01 PM / 4 years ago

Credit quality improves slightly in March - Kamakura

April 2 (IFR) - Credit research firm Kamakura Corporation said its index of troubled public companies decreased by 0.44% to 7.43% for the month of March, the first monthly improvement in its corporate credit measure since November.

But with Cyprus bringing the eurozone debt crisis back into the spotlight, the company warned that default risk could increase going forward.

The Kamakura index measures the percentage of more than 30,000 public firms in 37 countries that have a default probability over 1%.

As of March 28, the percentage of global companies in the index with default probabilities between 1% and 5% was 6.06%. The percentage with default probabilities between 5% and 10% was 0.86%, while the percentage between 10% and 20% was 0.38%. For default probabilities over 20%, it was 0.13%.

“March closed with all eyes focused on the eurozone as a result of the debt crisis in Cyprus,” said Kamakura chief administrative officer Martin Zorn. “This renewed focus on eurozone debt and, moreover, uninsured depositors (is) reflected in the number of European financial companies having large increases in their default probabilities.”

While the index showed month to month improvement, it remains likely that risk will increase moving forward, said Zorn.

Among the ten riskiest firms on the Kamakura index, two are from Italy and one each from Brazil, Germany, Greece, Ireland, Mexico, Russia, Spain and the United States.

Telecom Italia has the world’s highest one-month default risk among rated companies, with an annualized default probability of 33.87%, according to Kamakura.

Central European Distribution Corp had the highest default probability of any rated firm in the United States at 10.04%.

Separately, the Standard & Poor’s corporate default rate edged higher in March to 2.4% from 2.3% in February.

The default rate increased steadily during the first nine months of 2012 - peaking at 2.96% in September 2012 - before declining during the next five months and reaching 2.3% in February 2013.

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