Kamakura Index Shows Improvement in Corporate Credit Quality

The Kamakura Corporation recently reported that its troubled company index finished January at 8.42%, representing a decrease of 1.23 from the month prior. On a year-over-year basis, the index decreased 5.29%, indicating an overall improvement in credit quality. The index measures the percentage of 38,000 public firms in 68 countries that have an annualized one-month default risk over 1%. Declining credit quality is indicated with an increase in the index, while a decrease means improving credit quality.

The percentage of corporations with default probabilities ranging between 1% and 5% was 6.88% at the end of January, a decrease of .85% from the month prior. Those with default probabilities from 5% to 10% were 1.09%, a decrease of .28%. The index went from 9.65% on Jan. 2 to 8.39% on Jan. 30. Volatility has been muted over the past several months, Kamakura said.

Among the 10 riskiest firms in January, six were from the United States, three were from Canada and one was from Great Britain. There were three defaults during the month among those rated. With a one-year default probability of 31.95%, Vanguard Natural Resources remained the riskiest firm, Kamakura said. Since 1990, the average index value has been 14.77%.

– Adam Fusco, editorial associate

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