Kamakura Corporation’s Troubled Company Index, which tracks companies carrying a default probability that exceeds 1%, jumped 3.23% in one month through the end of January to settle at 13.71%. At one point mid-month, the index appeared to track as high as 16.83%, easily a record for the index in the last five years, according to Kamakura statistics.
“The Troubled Company Index has been steadily signaling increased risk since hitting an intra-year low last April,” said Kamakura President/CEO Martin Zorn. “One month into the New Year, we see continued weakening of global economic conditions; 21% of global GDP is covered by a central bank. In the current environment, risk managers must use multi-factor models with robust stress analysis. Single-factor or even three-factor models could fail analysts.”
Though matters outside of the United States are weighing heavily on the overall Kamakura reading, the 10 riskiest companies in January are all based domestically, with nine of them operating in the natural resources/energy sector. The only exception is Cumulus Media Inc., which carries the largest Kamakura Default Probability (54.6%) of the 36,000 public firms tracked. The company with the largest probability in December, concert festival-focused event promoter SFX Entertainment, filed for bankruptcy protection early this week.
- Brian Shappell, CBA, CICP, NACM managing editor