DBRS Releases Updated Corporate Default Study with Rating Transitions

DBRS has today released its second corporate rating transition study, which has been combined with the fourth annual update of the corporate bond default study, initially published in April 2005. This year’s study captures the ratings history of all DBRS-rated public corporate bond issuers from inception in 1976 through January 1, 2008, and covers multiple credit cycles. The rating transition rates represent the stability of each DBRS credit rating category and are provided for one-, two- and three-year time horizons. The results demonstrate a positive relationship between the quality and stability of credit ratings.

“DBRS ratings are an effective measure of default prediction. In particular, as the credit quality of the corporate obligor deteriorates, as indicated by the DBRS rating, the statistical probability of default increases,” says Claire Mezzanotte, Managing Director, Credit Policy. “Therefore, DBRS ratings exhibit a rank-order relationship with respect to historical default experience.”

From a default perspective, two DBRS-rated corporate issuers defaulted in 2007. “In addition, rating downgrades were more numerous in 2007, reflecting weaker economic conditions and more challenging credit markets,” adds Ms. Mezzanotte.

DBRS has also published the “DBRS Structured Finance 2007 Rating Transition Study,” which is available by selecting the link below.