S&P says two global corporate defaults recorded in week ended July 9

By Caroline Salls

Pittsburgh, July 10 - Standard & Poor's said two global corporate issuers defaulted in the week ended July 9, bringing the 2009 year-to-date tally to 178 issuers, according to an S&P report.

S&P said the year-to-date count is more than four times the 42 defaults seen at this time in 2008.

S&P said this week's defaulters were CCS Medical, Inc. and a confidential defaulter based in the United States.

By region, the year-to-date default tallies now stand at 128 issuers in the United States, eight issuers in Europe, 30 issuers in the emerging markets and 12 issuers in the other-developed region, which includes Australia, Canada, Japan and New Zealand.

This week's defaults resulted from a distressed exchange, increasing that tally to 50 this year, and a bankruptcy filing, bringing that total to 49 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:

• 42% of issues with available recovery ratings had recovery ratings of 6, indicating the ratings agency's expectation for negligible recovery of 0% to 10%;

• 15% 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%;

• 10% 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

• 8% of issues had recovery ratings of 1, or very high recovery prospects of 90% to 100%.

S&P said the precipitous increase in defaults reflects a pronounced decline in economic fundamentals and earnings prospects, as well as the continued credit freeze, effectively halting lending to speculative-grade borrowers. The agency said its current 12-month-trailing U.S. corporate speculative-grade default rate forecast is 14.3% by the end of first-quarter 2010, with a pessimistic scenario of 18.5% and an optimistic scenario of 11.5%.

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