SOURCE: Kamakura Corporation

Kamakura Corporation

December 01, 2009 10:00 ET

Kamakura Reports First Deterioration in Corporate Credit Quality in 8 Months

Troubled Company Index Rises to 11.45%

NEW YORK, NY--(Marketwire - December 1, 2009) - Kamakura Corporation announced Tuesday that the Kamakura index of troubled public companies increased in November for the first time in the last 8 months. The index jumped from 10.68% in October to 11.45% in November. Kamakura's index had reached a peak of 24.3% in March. Kamakura defines a troubled company as a company whose short term default probability is in excess of 1%. Even after the increase, credit conditions are now better than credit conditions in 58.5 percent of the months since the index's initiation in January 1990, and 2.25 percentage points better than the index's historical average of 13.7%. The all-time low in the index was 5.4%, recorded in April and May, 2006, while the all-time high in the index was 28.0%, recorded in September 2001. The index is based on default probabilities for almost 27,000 companies in 30 countries. To follow the troubled company index and other risk commentary by Kamakura on a daily basis, see

In November, the percentage of the global corporate universe with default probabilities between 1% and 5% decreased by 0.26 percentage points to 7.63%. The percentage of companies with default probabilities between 5% and 10% was up 0.24 percentage points to 1.85%. The percentage of the universe with default probabilities between 10 and 20% was up 0.08 percentage points to 1.09% of the universe, while the percentage of companies with default probabilities over 20% was up by 0.17 percentage points to 0.88% of the total universe in November.

Kamakura's President Warren A. Sherman said Tuesday, "It is too early to tell whether the strong recent improvements in credit quality we've seen recently have come to an end. The increase in the troubled company index in November was a significant one that we are updating daily at the request of clients on The rated firms showing the largest increase in short run default risk in November included YRC Worldwide, U.S. Concrete, Ambac Financial Group, Bank of Ireland, Allied Irish Banks, and Citadel Broadcasting. Ambac and Citadel Broadcasting also were among the biggest increases in credit risk last month also, along with CIT which defaulted the next day after the index was reported."

The Kamakura index uses the annualized one month default probability produced by the best performing credit model of the Kamakura Risk Information Services default and correlation service. The model used is the fourth generation Jarrow-Chava reduced form default probability, a formula that bases default predictions on a sophisticated combination of financial ratios, stock price history, and macro-economic factors. The countries currently covered by the index include Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Hong Kong, India, Ireland, Israel, Italy, Japan, Luxemburg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.

Kamakura CEO Dr. Donald R. van Deventer and other members of Kamakura senior management also maintain an active blog on key risk management issues. Recent blog entries include the following stories:

--  Basic Building Blocks of Yield Curve Smoothing, Part 1
--  Comments on Risk Management at the Structured Credit Investor Third
    Annual Conference, New York, November 4, 2009
--  Basic Building Blocks of Yield Curve Smoothing, Part 2: A Menu of
--  Over-Rated: Measuring the Gap between Actual and Implied Ratings
--  Basic Building Blocks of Yield Curve Smoothing, Part 3: Stepwise
    Constant Yields and Forwards versus Nelson-Siegel
--  Basic Building Blocks of Yield Curve Smoothing, Part 4: Linear Yields
    and Forwards versus Nelson-Siegel
--  Basic Building Blocks of Yield Curve Smoothing, Part 5: Linear Forward
    Rates and Related Yields versus Nelson-Siegel

About Kamakura Corporation

Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura has been a provider of daily default probabilities and default correlations for listed companies since November 2002. Kamakura announced the KRIS Sovereign Default Probability Service on May 19, 2008. Kamakura launched its web-based credit portfolio management service KRIS-cpm in April 2007. Kamakura is also the first company in the world to develop and install a fully integrated enterprise risk management system that analyzes credit risk, market risk, asset and liability management, transfer pricing, and capital allocation. The Kamakura Risk Manager system, now in version 7.0, was first offered commercially in 1993 and has been continually enhanced since then. Kamakura has served more than 200 clients ranging in size from $3 billion in assets to $1.6 trillion in assets. Kamakura's risk management products are currently used in 32 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, the Ukraine, Eastern Europe, the Middle East, Africa, Australia, Japan, China, Korea and many other countries in Asia.

Kamakura has world-wide distribution alliances with Fiserv (, Unisys (, and Zylog Systems ( making Kamakura products available in almost every major city around the globe.

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