Kamakura Corporation announced that the Kamakura index of troubled public companies improved in March for the eleventh time in the last 12 months. The index declined from 9.96% in February to 9.69% in March. Kamakuras index had reached a 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 72.9 percent of the months since the indexs initiation in January 1990, and the index is 4.02 percentage points better than the indexs historical average of 13.71%. The all-time low in the index was 5.40%, recorded on May 11, 2006, while the all-time high in the index was 28.0%, recorded on September 28, 2001. The index is based on default probabilities for more than 29,200 companies in 32 countries.
In March, the percentage of the global corporate universe with default probabilities between 1% and 5% decreased by 0.24 percentage points to 6.58%. The percentage of companies with default probabilities between 5% and 10% was down 0.08 percentage points to 1.49%. The percentage of the universe with default probabilities between 10 and 20% was up 0.01 percentage points to 0.90% of the universe, while the percentage of companies with default probabilities over 20% was down slightly, decreasing 0.01 percentage points to 0.72% of the total universe in March.
The rated firms showing the largest increase in 1 month default risk in March again included Blockbuster Inc., whose 1 year default probability rose 17.97% during the month, says Kamakuras President Warren A. Sherman. Other firms showing large increases were Cable & Wireless, Dynegy Inc., RRI Energy Inc., and Allied Irish Banks.
The Kamakura index uses the annualized one month default probability produced by the best performing credit model of the Kamakura Risk Information Services default and correlation service. The model used is the fourth generation Jarrow-Chava reduced form default probability, a formula that bases default predictions on a sophisticated combination of financial ratios, stock price history, and macro-economic factors. The countries currently covered by the index include Australia, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany, Hong Kong, India, Indonesia, Ireland, Israel, Italy, Japan, Luxemburg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.
D.C.