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Global Credit Research - 22 Mar 2012
New York, March 22, 2012 -- Despite concerns surrounding global economic growth and euro area sovereign
debt, there is no sign of an imminent default wave for US corporates,
said Moody's Investors Service in its latest edition of the Moody's
B3 Negative and Lower Corporate Ratings List.
"Although worries about European sovereign debt and the US economic
recovery remain, the list remains stable at 176 companies,"
said David Keisman, a Moody's Senior Vice President and author
of the report. "If we were to see a broad decline in corporate
quality, then that would mean a sharp increase in the number of
companies on the list, but that has not materialized."
The list of US non-financial companies rated B3 negative and lower
includes a core group of companies with weak business fundamentals,
high leverage and elevated risk of default. Companies are removed
from the B3 Negative and Lower List if they default, have their
ratings withdrawn, or receive a rating upgrade to B3 stable or higher.
Companies join the list upon a rating downgrade to B3 negative or lower.
Even when high-yield issuance stalled and spreads widened last
August, Moody's saw no signs of a corporate default wave.
The report notes that Moody's baseline forecast calls for a US speculative-grade
default rate of 2.6% in February 2013 compared with 2.2%
currently, below the long-term average of 4.6%.
There was a slight uptick in companies removed from the list through default,
although default activity remains far below levels that suggest broad-based
credit stress, says Moody's. Fifteen companies were
removed from the list through default in the three months ended March
1, compared with 10 in the prior three-month period.
Other Moody's proprietary indicators support the view that there
is no sign of a big shift in corporate credit quality on the horizon.
Moody's Liquidity-Stress Index (LSI) held at 4.1%
through mid-March, unchanged from January and February and
just above the record-low 3.9% posted from June through
August 2011. The index, which increases when speculative-grade
liquidity appears to decrease, continues to signal that liquidity
levels are healthy for high-yield companies. Additionally,
Moody's Covenant-Stress Index (MCSI) declined slightly in
February, reflecting increased headroom under corporate covenants.
The index, which decreases when covenant cushion appears to increase,
slid to 2.7% from 2.9% in January.
For more information, please see the full report "Corporate
Default Rates Hold Steady Despite Broader Market Volatility" on
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Senior Vice President
250 Greenwich Street
New York, NY 10007
MD-US and Amer Corporate Fin
Corporate Finance Group
Moody's: US Corporate Default Rates Hold Steady Despite Broader Market Volatility
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
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