S&P: Worst Case? Default Rate Reaches Nearly 25%
September 25, 2008
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 today. This would be the worst on record since 1981.
If this 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 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 they update on a quarterly basis.
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