Standard & Poor’s have already informed us that with 28 defaults logged, 2008 has already surpassed last year’s total in terms of corporate woe. And with 27 default hailing from the US, and one from Canada, it is thus far an entirely north American affair.
The outlook stateside is also not good, according to S&P’s latest update. The US leads the pack in terms of “weakest links” - entities that are closest to the default threshold - with 107 entities or 82 per cent of the total.
The 12-month trailing speculative default rate (right) stands at 1.29 per cent, well below its 1981 to 2007 average of 4.35 per cent. The uptick in the green US line though, now at 1.64 per cent, is notable.
S&P’s baseline forecast now sees that rate a year from now at 4.7 per cent in the US. That though assumes that US companies continue to default at about the same rate that they have on average in the first four months of the year.
An acceleration in the rate of defaults and we move towards the pessimistic forecast of 8.5 per cent in 12 months time.
The latest global sick-list contained three supposedly recession-proof gaming operators, in what was a leisure and consumer heavy roll call. Those who enjoyed the fruits of the debt-financed consumer boom are now facing leaner times.
The outlook from S&P backs this up. Their current list of weakest links is the highest in five years. And it is dominated by the media and entertainment, consumer products and retail sectors.
Related links
Gillian Tett: A new wave of grime lurks - FT
The bust after the boom - FT Alphaville
