At The Deal's Fifth Annual Private Capital Symposium, Diane Vazza, a managing director and head of global fixed-income research at Standard & Poor's, gave a rundown of what is happening with defaults.
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"At the end of 2007, we had a record-low default rate in the U.S.," she said. "But every month since then, we've had an up-tick. In 2006 there were only 26 defaults all year, but we've already had 27 defaults in the U.S. as of last week. About half of the defaults we've had this year are private equity portfolio companies, which in some ways is not surprising due to the leveraging up of those companies."
"In terms of our economic view, we are in a recession, but a mild one. We have a optimistic default rate forecast of 3% and a pessimistic forecast of 8%," she continued. "In order to reach 8%, we'd need to reach 126 defaults, which would be a much more severe recession than what we're seeing right now."
In the wider view, Vazza said, "We have 236 companies that we consider 'stressed,' companies with negative outlooks. In terms of the bottom of the barrel, B- or lower, we have about 101 companies." - George White
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