S&P: Worst Case? Default Rates Hit Nearly 25%.(Market Buzz)

Publication: High Yield Report

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Byline: Editorial Staff

Based on their estimates of a worst-case scenario, the three-year cumulative default rate among speculative-grade nonfinancial companies will rise to 23.2% between 2008 and 2010, Standard & Poor's analysts said last week. This would be the worst rate on record since 1981. If the estimate is realized, 353 subinvestment-grade nonfinancial firms could default between 2008 and 2010, with potentially more than 200 of these defaults materializing in the second half of 2009 and in 2010, according to S&P. Consumer-sensitive sectors-such as consumer products, retail, restaurants, and media and entertainment-will be among the worst hit, in line with what happened in 1990 and 1991. This S&P estimate is drawn from observation and analytical judgment about past peaks in the default cycle over three-year periods, the analysts said, and is separate from the one-year forecast...

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