S&P reports one global corporate default for week ended June 25

By Caroline Salls

Pittsburgh, June 26 - Standard & Poor's said one global corporate issuer defaulted in the week ended June 25, bringing the 2009 year-to-date tally to 160 issuers, according to an S&P report.

S&P said the year-to-date count is more than four times the 37 defaults seen at this time in 2008.

S&P said this week's lone defaulter was U.S.-based Affinity Group Holding, Inc., bringing the 2009 U.S. default tally to 115 issuers.

So far this year, European issuers have accounted for seven defaults and emerging markets issuers for 29 defaults. The other-developed region, which includes Australia, Canada, Japan and New Zealand, has produced nine defaults.

According to the report, the Affinity default resulted from a distressed exchange, bringing the year-to-date count to 44 distressed exchanges, nearly three times the count of 15 distressed exchange issuers recorded in all of 2008.

S&P said issuers missing payment has been the most common reason for default. In 2009, 59 issuers have defaulted because of missed payment, 52 issuers in 2008.

Other reasons for default include bankruptcy filings, which have accounted for 42 of the 160 defaults in 2009.

The ratings agency said the continued increase in corporate defaults poses risks to private equity investors, as more than half of the defaulters this year either had or continue to have private equity involvement.

Of the global corporate defaulters so far this year, S&P said:

• 43% of issues with available recovery ratings had recovery ratings of 6, indicating the ratings agency's expectation for negligible recovery of 0% to 10%;

• 16% of issues had recovery ratings of 5, for modest recovery prospects of 10% to 30%;

• 11% had recovery ratings of 4, or average recovery prospects of 30% to 50%;

• 11% had recovery ratings of 3, for meaningful recovery prospects of 50% to 70%.

• 12% of issues had recovery ratings of 2, indicating substantial recovery prospects of 70% to 90%; and

• 9% of issues had recovery ratings of 1, or very high recovery prospects of 90% to 100%.

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