SOURCE: Kamakura Corporation

June 04, 2007 10:00 ET

Kamakura Reports Third Consecutive Monthly Decline in Global Credit Quality

HONOLULU, HI--(Marketwire - June 4, 2007) - Kamakura Corporation announced today that its monthly global index of troubled companies increased for the third consecutive month in May, reaching 7.1% the global public company universe. This represents a 0.5% increase from the 6.6% level in April and a 1.3% rise from the recent low point of 5.8% reached in February. The index's 17-year low point was 5.4% in March-May 2006. The 17-year high in the index was 28%, reached in September 2001, the worst part of the last recession. May 2007 global credit quality was better than 88.4% of the monthly periods since January 1990, down from a 94.2% ranking last month. The average value of the index has been 13.6% over the last 17 years. Kamakura defines a troubled company as a company whose default probability is in excess of 1%. The index now covers more than 18,500 public companies in 29 countries using the fourth generation version of Kamakura's advanced credit models.

"Credit quality in May remained strong by historical standards but the deterioration in credit quality since February is significant," said Warren Sherman, Kamakura President and Chief Operating Officer. "As we said in last month's commentary, a substantial decline in credit quality is much more likely than an improvement from current levels. In May, the number of companies with default probabilities between 1% and 5% was 5.0% of the global public company universe, up 0.3% from April. Companies with default probabilities between 5 and 10% were up by 0.1% to 1.1% of the universe. The percentage of companies with default probabilities between 10% and 20% remained unchanged in May at 0.6% of the universe. The number of global companies with default probabilities over 20% rose 0.1%, totaling 0.4% of the universe at the end of May."

Beginning in January 2006, Kamakura has moved to a global index covering 29 countries using 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, the Netherlands, New Zealand, Norway, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, and the United States.

Kamakura is offering free trials of its KRIS default probability, default correlation, and collateralized debt obligation pricing service to qualified institutions. For more information on Kamakura's free trial offer please contact Kamakura at More information can also be found on the Kamakura Corporation web site and in a chapter from "The Basel Handbook: A Guide for Financial Practitioners," second edition, (Michael Ong, Editor) by Kamakura's Donald R. van Deventer, Li Li, and Xiaoming Wang (available on

About Kamakura Corporation

Founded in 1990, 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 launched its collateralized debt obligation (CDO) pricing service KRIS-CDO 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. Kamakura has served more than 160 clients ranging in size from $3 billion in assets to $1.6 trillion in assets. Kamakura's risk management products are currently used in 23 countries, including the United States, Canada, Germany, the Netherlands, France, Switzerland, the United Kingdom, Eastern Europe, the Middle East, Africa, Australia, Japan, China, Korea and many other countries in Asia.

Kamakura's research effort is led by Professor Robert Jarrow, who was named Financial Engineer of the Year in 1997 by the International Association of Financial Engineers. Professor Jarrow and Kamakura founder Dr. Donald R. van Deventer were both named to the 50 member RISK Hall of Fame in December 2002. Kamakura management has published more than 100 publications on credit risk, market risk, and asset and liability management. Kamakura has world-wide distribution alliances with IPS-Sendero ( and Unisys (, making Kamakura products available in almost every major city around the globe.

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