Kamakura also provided an update on troubled firms underlying its index.”On February 3, Kamakura reported that Royal Bank of Scotland was among therated companies with the largest one month jumps in short term defaultrisk,” said Warren Sherman, Kamakura President and Chief Operating Officer.”On February 26, the bank agreed to a deal which could raise the U.K.government’s ownership to 95 percent. This month, among rated publiccompanies, the companies showing the sharpest rise in short term defaultrisk were Chemtura Corporation, Arvinmeritor Inc., Belo Corporation,Alcatel-Lucent, and Office Depot Inc. In February, the percentage of theglobal corporate universe with default probabilities between 1% and 5%increased by 0.2% to 13.3%. The percentage of companies with defaultprobabilities between 5% and 10% was up 0.1% to 4.3% of the universe inFebruary. The percentage of the universe with default probabilitiesbetween 10 and 20% was down for the second month in a row, dropping 0.2% to2.8% of the universe. The percentage of companies with defaultprobabilities over 20% was down 0.1% to 2.7% of the total universe inFebruary, compared with a peak of 3.3% in December.”
The Kamakura troubled company index is a global index covering 30countries. The index uses the annualized one month default probabilityproduced by the best performing credit model of the Kamakura RiskInformation Services default and correlation service. The model used is thefourth generation Jarrow-Chava reduced form default probability, a formulathat bases default predictions on a sophisticated combination of financialratios, stock price history, and macro-economic factors. The countriescurrently covered by the index include Australia, Austria, Belgium, Brazil,Canada, Denmark, Finland, France, Germany, Hong Kong, India, Ireland,Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, the Netherlands, NewZealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden,Switzerland, Taiwan, United Kingdom, and the United States.
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