U.S. CORP CREDIT QUALITY WEAKENS

[Anonymous]

Improvement in U.S. Corporate Credit Quality Weakens

The number of troubled companies in the U.S. remained unchanged in February compared to January, ending a steady 18-month trend of improving credit quality, according to Kamakura Corp. Kamakura, a provider of risk management information, processing and software, rated 11.5% of public companies in the “high risk” category at the end of February, down only 0.2% from a month earlier. Kamakura defines “high risk” if its default probability over the next year is more than one percent. Analysis showed that 5.6% of the North American universe of public companies had an annual probability of default between 1% and 5% on February 29, the same as in January. Companies with default probabilities between 5% and 10% were 1.7% of the North American universe and the companies in the 10-20% range were another 1.2% of the universe, Kamakura says. Kamakura’s analysis shows that 3% of North American corporations were in the very high risk category, defined as companies with default probabilities between 20-100%. This is a decrease of 0.2% over January’s figures. “This is the first significant pause we have had in improving corporate credit quality in the last 18- months,” said Dr. Donald R. van Deventer, chairman and chief executive officer of Kamakura. “Over the next few months, it will become clear whether we have reached the peak in the corporate credit quality with this month’s figures. Clearly, a cautious approach to credit extension looks prudent if this is indeed a plateau in corporate credit quality.”

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March 11, 2004 at 10:39 AM