Default Rates Up Sharply In 1H, S&P Says
S&P said its mean baseline for US speculative grade default forecast is unchanged at 4.7%, up from 0.97% late last year.
June 23, 2008
Thirty-three companies defaulted in the first six months of 2008, surpassing the 22 defaults seen in 2007 and 30 defaults of 2006, according to a report by Standard & Poor's which expects 74 US companies to default over the next 12 months.
S&P said in its report that of the 33 companies to default, 32 are based in the US. The credit rating agency said businesses close to defaulting total 140, and of those, 117 are based in the US. S&P included only companies that it rates.
S&P said its mean baseline for US speculative grade default forecast is unchanged at 4.7%, up from 0.97% late last year. To get to that 4.7% default rate, 74 companies have to default in the next 12 months.
"Continued financial market volatility, tightening credit conditions, protracted housing correction, dollar weakness, and the impact of high energy prices contribute to substantial variability in the default forecast," according to S&P, which added that a "material risk" remains that defaults would be more pronounced and severe if the recession is deeper and longer than expected.
The weakest industries include media and entertainment, consumer products and retail/restaurants, according to the credit rating agency.
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