Bloomberg News

Distress Ratio More Than Doubles to 13.2% in August, S&P Says

September 01, 2011

Sept. 1 (Bloomberg) -- Speculative-grade issues in the U.S. that are trading at distressed levels more than doubled in August to the highest levels since 2009 amid a slowdown in the economy.

The distress ratio surged to 13.2 percent as of Aug. 15, compared to 6.1 percent the previous month, according to a Standard & Poor’s report today.

Bond spreads widened 26 percent month over month, to 694 basis points, the report said. The number of companies trading with spreads of 1,000 basis points and above rose to 139 from 69 in July.

“The last time we saw such a high level was in November 2009, when 140 companies had distressed issues,” Diane Vazza, head of global fixed-income research at S&P, said in the report.

The default rate, which lags behind the distress ratio, decreased to 2.1 percent as of July 31, from 2.25 percent at the end of June.

S&P defines distressed credits as those graded lower than BBB- and that have option-adjusted spreads of more than 1,000 basis points. A basis point is 0.01 percentage point.

--Editors: Faris Khan, Pierre Paulden

To contact the reporter on this story: Krista Giovacco in New York at kgiovacco1@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net


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