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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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January 14, 2009 4:12 PM ET
Based on an increasingly bleak unemployment outlook, Moody’s Investors Service ratcheted up its forecast for the 2009 global default rate to 15.1%. That’s a 45% increase from the firm’s prediction just one month ago. “[The] forecast is being driven by unprecedented corporate spread levels, a record low mix of corporate credit ratings, and expectations of a 9% US unemployment rate by the end of 2009,” said the rating agency’s director of corporate default research Kenneth Emery in a research note. The global speculative-grade default rate finished 2008 at 4%, more than quadruple the closing level of 0.9% in 2007, Moody’s found. The model’s forecast increased from 10.4% in December as the U.S. Department of Labor reported last week that the unemployment rate jumped to 7.2% in December after reaching 6.8% in November. The new forecast implies approximately 300 corporate defaulters over the next 12 months, or 25 defaulters a month. A total of 104 Moody’s-rated corporate issuers defaulted during 2008, 22 of which were recorded in December, including Tribune Company and GMAC. The new year has already gotten off to a rocky start, as Nortel Networks Corp, North America’s biggest telephone equipment maker, filed for bankruptcy on Wednesday—just one day before it was due to make an interest payment of about $107 million. From a historical perspective, Moody’s said that “global economic conditions are now substantially weaker and more perilous than they were in the two previous credit cycles of 1990-91 and 2001-02.” As such, it expects that the speculative-grade default rate is likely to exceed the 12% peak it reached in 1991. Moody’s predicted that the speculative-grade default rate among U.S. companies will jump to 15.3% at the end of 2009, compared to 4.4% at the end of 2008. Not surprisingly Moody’s believes the consumer transportation sector will be the most troubled in the U.S. Just last week, the six largest automakers in the U.S. reported December sales were off more than 30% from a year earlier. The high-yield default rate in Europe is expected to rise even more sharply to 18.3%. The durable consumer goods sector there has the worst outlook, according to Moody’s.
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