Press Release

Kamakura: Corporate Credit Dips Slightly in August
Kamakura Troubled Company Index Falls to 69th Percentile

NEW YORK, September 4, 2018: The Kamakura Troubled Company Index ended August at 9.21%, an increase of 0.11% from the prior month. The index reflects the percentage of 39,000 public firms that have a default probability of over 1%. An increase in the index reflects declining credit quality, while a decrease reflects improving credit quality.

At the close of August, the percentage of companies with a default probability between 1% and 5% was 7.52%—an increase of 0.03% over the previous month. The percentage with a default probability between 5% and 10% was 1.20%, an increase of 0.02%. Those with a default probability between 10% and 20% amounted to 0.40% of the total, up 0.03%, and those with a default probability of over 20% amounted to 0.09%, up 0.03% from a month earlier. Volatility remained low, with the index ranging from 8.64% on August 9 to 9.94% on August 13. For the year, the index has ranged from 7.00% on January 15 to 15.19% on February 8.


At 9.21%, the troubled company index now sits at the 69th percentile of historical credit quality as measured since 1990. Among the 10 riskiest-rated firms listed in August seven are from the United States, with one each in Australia, Great Britain, and the Netherlands. Iconix Brand Group, Inc. (ICON: NASDAQ) retook the top spot as the riskiest global company, with a one-year Kamakura Default Probability (KDP) of 30.59%. The firm posted the largest one- month increase in the one-year KDP-- 15.81 basis points-- driven by results released this month of soft revenue and weak earnings. In August, four companies in Kamakura’s coverage universe experienced default, all of them in the United States. Two were energy companies and one was an energy storage company.

The Kamakura expected cumulative default curve for all rated companies worldwide widened, with the one-year default probability increasing by 0.04% to 0.76% and the 10-year increasing by 0.27% to 12.77%. 

By Martin Zorn, President and Chief Operating Officer, Kamakura Corporation

Short-term default probabilities remain benign and at the low end of the range for the year. We saw an increase in volatility early in the year, with the one-year Kamakura default probability peaking at 15.19% on February 8 and the index displaying a narrow band over the summer. The widening in the expected cumulative default curve is interesting, especially given the 27- basis- point jump on the long end, which is worth monitoring going forward.

Global issues, including trade talk uncertainty and an expected increase in interest rates, so far have not led to a significant increase in defaults. Nor have growing problems in emerging markets such as Turkey, where inflation has reportedly reached 17.9%, the highest in 15 years. Despite these problems, corporate financial performance in general remains strong. Firm-specific variables are critical to short run default prediction but lose their explanatory power as the time horizon lengthens.

It is always interesting to “follow the money.” According to data from EPFR, inflows into equities were the largest they’ve been in three months, with net additions of $7.6 billion. Bonds received an additional $0.6 billion. Global patterns are interesting as well. This month saw $0.2 billion withdrawn from Europe, continuing a 25-week trend which has seen approximately $57 billion in outflows. Inflows in U.S. equities were the greatest in 11 weeks, with the largest amounts flowing into technology and healthcare. The largest outflows were from financials, energy, and real estate.

In the bond market, we saw inflows into both investment- grade and high- yield sectors. Bank loan funds remain attractive and received inflows in 26 of the past 27 weeks. Bank of America commentary observes that investors are preparing for a deflationary market, buying deflation winners such as technology and healthcare and redeeming inflation winners such as financials and energy.

Over the next month we will focus on the credit conditions of these sectors and will publish results as measured by our expected cumulative default probabilities.

About the Troubled Company Index
The Kamakura troubled company index measures the percentage of 39,000 public firms in 68 countries that have an annualized one- month default risk of over one percent. The average index value since January, 1990 is 14.43%. Since November, 2015, the Kamakura index has used the annualized one-month default probability produced by the KRIS version 6.0 Jarrow-Chava reduced form default probability model, a formula that bases default predictions on a sophisticated combination of financial ratios, stock price history, and macro-economic factors.

The version 6.0 model was estimated over the period from 1990 to May 2014 and includes the insights of the entirety of the recent credit crisis. The 69 countries currently covered by the index are: Argentina, Australia, Austria, Bahrain, Bangladesh, Belgium, Belize, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Hungary, Hong Kong, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Jordan, Kuwait, Luxembourg, Malaysia, Malta, Mexico, Nigeria, the Netherlands, New Zealand, Norway, Oman, Pakistan, Peru, the Philippines, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, the United Arab Emirates, the UK, the U.S., and Vietnam.

To follow the troubled company index and other risk commentary by Kamakura on a daily basis, please follow:

Kamakura CEO Dr. Donald van Deventer (
Kamakura President Martin Zorn ( and
Kamakura’s official twitter account (

About Kamakura Corporation

Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing, and software. Kamakura was recognized as a category leader in the Chartis Report,Technology Solutions for Credit Risk 2.0 2018. Kamakura was named to the World Finance 100 by the editor and readers of World Finance magazine in 2017, 2016 and 2012. In 2010, Kamakura was the only vendor to win two Credit Magazine innovation awards. Kamakura Risk Manager, first sold commercially in 1993 and now in version 10.0.3, is the first enterprise risk management system for users focused on credit risk, asset and liability management, market risk, stress testing, liquidity risk, counterparty credit risk, and capital allocation from a single software solution. The KRIS public firm default service was launched in 2002. The KRIS sovereign default service, the world’s first, was launched in 2008, and the KRIS non-public firm default service was offered beginning in 2011. Kamakura added its U.S. Bank default probability service in 2014.

Kamakura has served more than 330 clients with assets ranging in size from $1.5 billion to $3.0 trillion. Its risk management products are currently used in 47 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, Ukraine, South Africa, Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam, and many other countries in Asia, Europe and the Middle East.

To follow risk commentary by Kamakura on a daily basis, please follow:

Kamakura CEO Dr. Donald van Deventer (
Kamakura President Martin Zorn ( and
Kamakura’s official twitter account (

For more information, please contact:
Kamakura Corporation
2222 Kalakaua Avenue, Suite 1400, Honolulu, Hawaii 96815
Telephone: 1-808-791-9888
Facsimile: 1-808-791-9898
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