Sunday, August 10, 2008

Deflation Watch: Corporate Defaults to Rise Sharply

Financial Times: Corporate Debt Default 'Could Reach 10%'
The global default rate is expected to climb to 6.3 per cent over the next 12 months and it could reach 10 per cent should the US sink into a protracted recession, Moody’s Investors Service said on Thursday.

“The storm is gathering for default rates moving up,” said Kenneth Emery, Moody’s director of corporate default research.

Fellow rating agency Standard & Poor’s also warns that credit conditions are deteriorating. “We have long been proponents of the view that the credit euphoria of the prior boom years beginning with 2003 would necessitate a shake-out and purge,” S&P said in a recent report.

“This would result in substantially higher downgrades and defaults, concentrated in the US, but not without repercussions in other parts of the world.”

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