TheEvilDetector
Member
- Joined
- Jul 3, 2007
- Messages
- 3,716
http://www.marketwatch.com/news/story/company-defaults-heading-toward-highest/story.aspx?guid={3EF6574D-E70A-49CC-85DD-C7ED1B488EE7}
"Company defaults to reach most since 1980s
By Deborah Levine, MarketWatch
Last update: 5:25 p.m. EDT Sept. 25, 2008
NEW YORK (MarketWatch) -- More companies may default on debt following this economic crisis than in any since 1981, Standard & Poor's predicted.
More than 23% of non-financial companies with speculative-grade debt may default on their debt between 2008 and 2010, with consumer products, entertainment and retail companies among the sectors hit the worst.
"As the financial landscape adapts to changes unseen since the Great Depression of the 1930s, the heat will eventually spread among non-financials and add significantly to cumulative default pressure on a much bigger scale than has materialized to date," analysts led by managing director Diane Vazza wrote in a research report Thursday.
Below-investment grade bonds, also known as junk bonds, are rated BB or lower by Standard & Poor's.
The firm forecasts about 4.9% of speculative grade companies will default by July 2009.
"We expect default pressure to continue well past the anticipated trough in the economic cycle," Vazza said.
That's been true in past recessions or even slowdowns in the economy, measured by gross domestic product, she said in an interview.
"For companies that are most frail from a credit perspective, a slowdown in GDP puts a squeeze on profits for companies whose margin of error is already razor thin," she said.
The consumer squeeze
Companies reliant on consumer spending will be worst hit as people lose jobs, incomes slip, and the value of homes and investments declines, making individuals more reticent to spend, the report said. The fact that this downturn is being precipitated by a credit crunch is especially bad because it points to more regulation and risk aversion among investors, meaning it will be even harder for companies to raise the capital they need, Standard & Poor's said.
The latest spate of anxiety surrounding exposure to bad mortgage-related assets, even though centered on financial-related companies such as American International Group and Goldman Sachs, has pushed up borrowing costs for all companies.
The cost that speculative-grade companies pay on their debt has risen to 8.53 percentage points above comparable Treasury bonds. That's near the peak reached mid-month, which was the highest since 2002.
Companies that pay more than 10 percentage points above Treasurys with the most debt outstanding include General Motors , Ford Motor Credit and Rite Aid , according to Standard & Poor's.
U.S. investment-grade credit spreads widened yesterday to 3.14 percentage points, the widest spread seen in more than five years, Standard & Poor's said. End of Story
Deborah Levine is a MarketWatch reporter, based in New York."
--
The time to stock up on food and other essential items is NOW not later.
Get Gold Bullion, Fiat is going nowhere but down.
"Company defaults to reach most since 1980s
By Deborah Levine, MarketWatch
Last update: 5:25 p.m. EDT Sept. 25, 2008
NEW YORK (MarketWatch) -- More companies may default on debt following this economic crisis than in any since 1981, Standard & Poor's predicted.
More than 23% of non-financial companies with speculative-grade debt may default on their debt between 2008 and 2010, with consumer products, entertainment and retail companies among the sectors hit the worst.
"As the financial landscape adapts to changes unseen since the Great Depression of the 1930s, the heat will eventually spread among non-financials and add significantly to cumulative default pressure on a much bigger scale than has materialized to date," analysts led by managing director Diane Vazza wrote in a research report Thursday.
Below-investment grade bonds, also known as junk bonds, are rated BB or lower by Standard & Poor's.
The firm forecasts about 4.9% of speculative grade companies will default by July 2009.
"We expect default pressure to continue well past the anticipated trough in the economic cycle," Vazza said.
That's been true in past recessions or even slowdowns in the economy, measured by gross domestic product, she said in an interview.
"For companies that are most frail from a credit perspective, a slowdown in GDP puts a squeeze on profits for companies whose margin of error is already razor thin," she said.
The consumer squeeze
Companies reliant on consumer spending will be worst hit as people lose jobs, incomes slip, and the value of homes and investments declines, making individuals more reticent to spend, the report said. The fact that this downturn is being precipitated by a credit crunch is especially bad because it points to more regulation and risk aversion among investors, meaning it will be even harder for companies to raise the capital they need, Standard & Poor's said.
The latest spate of anxiety surrounding exposure to bad mortgage-related assets, even though centered on financial-related companies such as American International Group and Goldman Sachs, has pushed up borrowing costs for all companies.
The cost that speculative-grade companies pay on their debt has risen to 8.53 percentage points above comparable Treasury bonds. That's near the peak reached mid-month, which was the highest since 2002.
Companies that pay more than 10 percentage points above Treasurys with the most debt outstanding include General Motors , Ford Motor Credit and Rite Aid , according to Standard & Poor's.
U.S. investment-grade credit spreads widened yesterday to 3.14 percentage points, the widest spread seen in more than five years, Standard & Poor's said. End of Story
Deborah Levine is a MarketWatch reporter, based in New York."
--
The time to stock up on food and other essential items is NOW not later.
Get Gold Bullion, Fiat is going nowhere but down.
Last edited:
