Author: Irina Korablev & Yu(Lucy) Jiang Date: April 25, 2012
Upon the conclusion of an exchange of EUR 177 billion of Greece’s sovereign debt on March 9, 2012, ISDA declared that the exchange constituted a credit event under the terms of its credit default swaps. The 5-Year Sovereign EDF for Greece shows the long and accelerating road to default.Author: Irina Makarova and David HamiltonDate: March 23, 2012
WYG does not have any credit risk measures like bond or CDS spreads available, and it is not rated by Moody’s Investors Service. However, the public EDF measure is able to capture and quantify changes in the company’s risk of default. Author: Irina MakarovaDate: March 7, 2012
LinkedIn is an unrated company, and does not have any traded bonds or CDS. However, we can calculate probabilities of default for the company using Moody’s Analytics’ public EDFTM model, which utilizes equity prices and liability information. Author: Irina Makarova and David T. HamiltonDate: March 7, 2012
Clearwire’s one-year EDFTM (Expected Default Frequency) metric worsened by 567% over the past year, from 2.64% to 17.61% as of February 22.Author: Robert Eckerstrom Date: February 27, 2012
Following news reports that Diamond Foods made unaccounted payments to its walnut growers in late September 2011, investors raised questions about the validity of Diamond Foods’ earnings reports of USD 680 million and USD 966 million in 2010 and 2011, respectively. The company is being sued by shareholders who claim that the payments may have been used to shift costs from one fiscal year to the other with the intent of artificially inflating its earnings and boosting its stock price.Author: Irina Makarova and David T. HamiltonDate: February 22, 2012
Olympus Corporation is a Japan-based manufacturer of optics, photography and reprography products. In early November 2011, the company admitted a cover-up over nearly two decades of investment losses and the use of several acquisitions to hide the losses. Olympus will hold an extraordinary shareholders meeting on April 20, and by mid-March a new management will be selected to decide on the future direction of the company.Author: Irina Makarova Date: February 17, 2012
Although the financial problems of Petroplus Holdings were well known by investors, the public EDF measure captured and quantified the sudden changes in the company’s risk of default.Author: Irina Makarova Date: February 2, 2012
Kodak’s one-year EDFTM (Expected Default Frequency) metric began to show signs of significant distress for the company in 2009, with the trend accelerating rapidly in 2010 and early 2011. Moreover the company’s EDF has underperformed its industry average, highlighting the idiosyncratic problems at Kodak since the beginning of 2010.Author: Robert Eckerstrom Date: January 19, 2012
The trend of Sears Holdings’ pubic EDF measures indicates that the company has been experiencing increasing financial strain and rising risk of default. The company’s public EDF measure has been underperforming its industry sector since 2008, and its EDF measure currently stands above the 90th percentile of its industry, signaling a relatively high risk of default compared to its peers.Author: Irina Makarova Date: January 12, 2012
On November 29, 2011, American filed for Chapter 11 bankruptcy protection with $4 billion in cash, with the intent of financing its restructuring process without external assistance. Author: Irina Makarova and David Hamilton Date: December 8, 2011
MF Global Holdings’ bankruptcy in October 2011 was unexpected by many investors. However, its public EDF measure signaled that the company was relatively risky versus its industry peers, and gave advance warning of increasing default risk several months in advance of its bankruptcy filing.Author: Irina Makarova Date: December 1, 2011
On July 1, 2011, Carrefour spun-off its Spanish-based discount retailer DIA. Shareholders received one share of DIA for each share of Carrefour. On July 5 Carrefour’s share price dropped to reflect the spinoff. The EDF™ (expected default frequency) measure jumped from 0.16 to 0.22. However, when the EDF value on July 5 reflected the change in market capitalization from the drop in equity price, the liabilities for Carrefour still included the liabilities of DIA.Author: Daniel P. CokerDate: July 25, 2011
Nokia’s one-year EDFTM (Expected Default Frequency) metric worsened (rose) by 223% over the past four months, from 0.46% on February 11 to 1.49% on June 8. Notably, it increased from 0.78% to 1.49% in the first week of June alone, after the company announced on May 31 that it had lowered management projections for revenues, earnings, and cash flow for the quarter and discontinued giving full year projections.Author: Robert EckerstromDate: June 16, 2011
The recent recession, following on the gradual credit deterioration of the major US automotive companies over the prior ten years, proved too much for GM and Chrysler, both of which filed for bankruptcy in the second quarter of 2009. Although Ford came close, it escaped the same fate, and its fortunes have clearly improved since then. Moody’s has increased Ford’s senior unsecured rating by seven notches, from Ca with a negative outlook in the summer of 2009 to Ba3 with a positive outlook today.Author: Jerry H. Tempelman, CFADate: March 9, 2011
Sears Holdings’ one-year EDFTM metric has improved to 2.0% in the course of January. Notably, it declined from 2.4% on January 10, the day before the company published updated management projections for revenues, earnings and cash flow for the quarter and full year that would end on January 29.Author: Jerry H. Tempelman, CFADate: February 2, 2011