HONG KONG: The default rate among Moody's rated non-financial corporates in the Asia-Pacific ex-Japan will drop sharply in 2010, continuing a trend that began at the beginning of this year, the ratings agency said on Monday, June 14.
"The speculative grade default rate is expected to fall to about 3.5% by end-2010 from 17% in 2009, based on Moody's Credit Transition Model (CTM)," Clara Lau, a Moody's group credit officer, said in a statement.
"The projection is in line with the global default rate that is forecast to fall to 2.4% by end-2010 from 13% at end-2009. This scenario incorporates Moody's base case assumption of continued economic recovery and generally stable credit spreads through 2010," she said.
Moody's on Monday released a report, authored by Lau, on the default rate estimate for rated Asia-Pacific non-financial corporates this year.
"The sharp expected decline in the default rate for Asia-Pacific reflects a significantly better credit market environment and progressively improving economic conditions in the region," she said.
Lau said the situation was in turn reflected in two key assumptions ' a materially lower high-yield spread forecast and declining unemployment rates.
"Furthermore, a better rating mix for 2010, reflecting a stabilising credit trend, is contributing to the lower estimated default rates. The average rating for the rated high-yield issuers is B1, a notch higher than last year.
"Further contributing to the lower default rate is the overall increased accessibility by the region's speculative-grade companies to the bank and capital markets," Lau said.
Moody's said non-financial corporate rated defaults for the region surged to a record 11 cases last year with the volume of defaulted debt at about US$3.5 billion (RM11.45 billion), up from US$100 million in 2008 and a complete absence of defaults during the 2004-2007 period.
"The speculative grade default rate is expected to fall to about 3.5% by end-2010 from 17% in 2009, based on Moody's Credit Transition Model (CTM)," Clara Lau, a Moody's group credit officer, said in a statement.
"The projection is in line with the global default rate that is forecast to fall to 2.4% by end-2010 from 13% at end-2009. This scenario incorporates Moody's base case assumption of continued economic recovery and generally stable credit spreads through 2010," she said.
Moody's on Monday released a report, authored by Lau, on the default rate estimate for rated Asia-Pacific non-financial corporates this year.
"The sharp expected decline in the default rate for Asia-Pacific reflects a significantly better credit market environment and progressively improving economic conditions in the region," she said.
Lau said the situation was in turn reflected in two key assumptions ' a materially lower high-yield spread forecast and declining unemployment rates.
"Furthermore, a better rating mix for 2010, reflecting a stabilising credit trend, is contributing to the lower estimated default rates. The average rating for the rated high-yield issuers is B1, a notch higher than last year.
"Further contributing to the lower default rate is the overall increased accessibility by the region's speculative-grade companies to the bank and capital markets," Lau said.
Moody's said non-financial corporate rated defaults for the region surged to a record 11 cases last year with the volume of defaulted debt at about US$3.5 billion (RM11.45 billion), up from US$100 million in 2008 and a complete absence of defaults during the 2004-2007 period.
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