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
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
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
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