SOURCE: Kamakura Corporation

 

Click here for details

NEW YORK, NY--(Marketwire - January 6, 2009) - Kamakura Corporation announced Tuesday that the Kamakura index of troubled public companies showed strongly deteriorating global credit quality in December, the 16th decline in credit quality in the last 17 months. The Kamakura global index of troubled companies increased to 24.0% of the public company universe from 22.6% of the universe in November. Kamakura defines a troubled company as a company whose short term default probability is in excess of 1%. The all-time high in the index was 28%, recorded in September 2001. Kamakura Corporation labeled the current economic contraction a recession in an April 1, 2008 press release, a full 8 months prior to the National Bureau of Economic Research, which took similar action on December 1. The Kamakura definition of recession is an economy where the troubled company index shows a higher degree of corporate distress than the 13.5% average for the Kamakura index since January 1990.

At the current 24.0% level, the index shows that credit conditions are better than only 4.0% of the monthly periods since the start of the index in January 1990. The all-time low in the index was 5.4%, recorded in April and May 2006. The index covers more than 21,000 public companies in 30 countries using the fourth generation version of Kamakura's advanced credit models. The data behind the Kamakura credit models was recently featured in the December Journal of Finance in an article "In Search of Distress Risk" by John Y. Campbell, Kamakura senior research fellow Jens Hilscher, and Jan Szilagyi.

"On September 3, Kamakura reported that Chesapeake Corporation and Tronox were among the rated companies with the largest one month jumps in short term default risk," said Warren Sherman, Kamakura President and Chief Operating Officer. "Chesapeake Corporation filed for bankruptcy December 30 and Tronox's credit rating was dropped to D earlier this month. On November 3, Anglo Irish Bank and Bank of Ireland were named by Kamakura as showing the sharpest rises in default probabilities among rated companies. Both were rescued by the Irish government on December 22. This month, among rated public companies, the companies showing the sharpest rise in short term default risk were U.S. Shipping Partners LP, Rotech Healthcare, and YRC Worldwide. In December, the percentage of the global corporate universe with default probabilities between 1% and 5% decreased by 0.1% to 13.2%. The percentage of companies with default probabilities between 5% and 10% was up 0.2% to 4.4% of the universe in December. The percentage of the universe with default probabilities between 10 and 20% rose 0.3% to 3.1% of the universe. The percentage of companies with default probabilities over 20% was up a very sharp 1.0% to 3.3% of the total universe in December."

The Kamakura troubled company index is a global index covering 30 countries. The index uses the annualized one month default probability produced by the best performing credit model of the Kamakura Risk Information Services default and correlation service. The model used is the fourth generation Jarrow-Chava reduced form default probability, a formula that bases default predictions on a sophisticated combination of financial ratios, stock price history, and macro-economic factors. The countries currently covered by the index include Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Hong Kong, India, Ireland, Israel, Italy, Japan, Luxemburg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.

About Kamakura Corporation

Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura has been a provider of daily default probabilities and default correlations for listed companies since November 2002. Kamakura announced the KRIS Sovereign Default Probability Service on May 19, 2008. Kamakura launched its collateralized debt obligation (CDO) pricing service KRIS-CDO in April 2007. Kamakura is also the first company in the world to develop and install a fully integrated enterprise risk management system that analyzes credit risk, market risk, asset and liability management, transfer pricing, and capital allocation. The Kamakura Risk Manager system, now in version 7.0, was first offered commercially in 1993 and has been continually enhanced since then. Kamakura has served more than 185 clients ranging in size from $3 billion in assets to $1.6 trillion in assets. Kamakura's risk management products are currently used in 27 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, Eastern Europe, the Middle East, Africa, Australia, Japan, China, Korea and many other countries in Asia.

Kamakura has world-wide distribution alliances with Fiserv/IPS-Sendero (www.fiservips-sendero.com), Unisys (www.unisys.com), and Zylog Systems (www.zylog.co.in) making Kamakura products available in almost every major city around the globe.