Based on our estimates of a worst-case scenario, the three-year U.S. cumulative default rate between 2008 and 2010 among speculative-grade nonfinancials will rise to 23.2%, the worst on record since 1981. If realized, this estimate suggests that 353 speculative-grade rated nonfinancial firms could default between 2008 and 2010, with potentially more than 200 of these defaults materializing in the second half of 2009 and in 2010. Consumer-sensitive sectors—such as consumer products, media and entertainment, and retail and restaurants—will be among the worst hit, in line with what happened in 1990-1992. This estimate is drawn from observation and analytical judgment about past peaks in the default cycle over three-year periods; it is separate from the one-year forecast we update quarterly. Screaming
