...Investment-Grade Defaults Are Rare: Corporate finance issuer defaults from investment- grade (IG) categories are rare. The five-year average cumulative default rate is 1.17% between 1990 and 2013 (based on the number of defaulted issuers). In 2000¡2013, there were 89 defaults by corporate issuers that had investment grade-ratings within five years of default. Of these, 85% were in the `BBB' category within five years prior to default, while 13 were rated in the `A' category at the end of the year prior to default. Asset Bubbles a Major Factor: Defaults are clustered within industries during recessions or industry-specific stress events. 67% of defaults occurred during the recessions of 2001 and 2009, which were preceded by a rapid collapse in equity prices principally in the tech, telecom and utility sectors and residential mortgages, respectively. Liquidity declined dramatically in these assets, negatively impacting issuers' ability to restructure capital. Contagion Accelerates Defaults:...
