November 12, 2012 / 8:16 PM / 5 years ago

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

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 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 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 
Members of the media may request a copy of this report by contacting the media 
representative provided.
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