The Kamakura index of troubled public companies improved in April for the 12th time in the last 13 months. The index declined from 9.69% in March to 9.46% in April. Kamakura’s index had reached a recent peak of 24.3% in March 2009.
Kamakura defines a troubled company as a company whose short-term default probability is in excess of 1%. Credit conditions are now better than credit conditions in 74% of the months since the index’s initiation in January 1990, and the index is 4.23 percentage points better than the index’s historical average of 13.69%. The all-time low in the index was 5.40%, recorded on 11 May 2006, while the all-time high in the index was 28.0%, recorded on 28 September 2001. The index is based on default probabilities for more than 29,200 companies in 32 countries.
In April, the percentage of the global corporate universe with default probabilities between 1% and 5% decreased by 0.08 percentage points to 6.50%. The percentage of companies with default probabilities between 5% and 10% was down 0.07 percentage points to 1.42%. The percentage of the universe with default probabilities between 10 and 20% was down 0.04 percentage points to 0.86% of the universe, while the percentage of companies with default probabilities over 20% was also down, decreasing 0.04 percentage points to 0.68% of the total universe in April.
Kamakura’s president Warren Sherman said: “The rated firms showing the largest increase in one month default risk in April included National Bank of Greece, Bank of Ireland, and SAS of Sweden. Over the entire KRIS portfolio of 29,200 firms, however, the trend in default probabilities was strongly down again this month.”
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