"Greater Risk Means More Defaults in 1999".

• Position: Standard and Poor's, Ratings Performance 1999 - Brief Article

Standard & Poor's, Ratings Performance 1999: Stability & Transition, February 2000.

This article shows that corporate defaults have increased markedly since the 1990s. From a decade low of 18 defaults in 1996 (within S&P's database of 8,693 companies holding long-term ratings), 103 companies defaulted in 1999. Moreover, the default ratio--defaulting companies as a percentage of issuers in all rating categories (AAA and below)--has increased since 1996, as well. The default ratio now stands at 2.15 percent. Unlike other years in which defaults surged, the current trend is not due to an economic downturn. Instead, many brand new companies have not been well capitalized from early-on and have subsequently failed as commercial enterprises. The second major finding is that ratings correlate strongly with default risk. The default rate of the average...