Nearly 25% Of Junk Cos. Now Distressed
August 25, 2008
The number of speculative-grade companies now trading at distressed levels has climbed to 24.8% this month, according to Standard & Poor’s. Year to date, S&P’s distress ratio has increased nearly 19% from its December 2007 level and is at its highest level since March 2003.
By debt volume, the finance and media/entertainment sectors take the lead, accounting for 60.4% of the total. When looking at the distress ratio based on outstanding debt, the finance S&L sector is at a stratospheric high of 91.8%.
Distress in leveraged loans has also increased, with the S&P/LSTA Leveraged-Loan Index distress ratio moving to 15.1% in July from 12.7% in June. Distress within leveraged loans had been declining for the previous three months. As recently as July 2007, the percentage of leveraged loans trading at distressed levels was below 1%.
Among distressed bonds, the total number of rated companies with issues trading at distressed levels and higher is currently 187, up from 177 in July.
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