CORPORATESSECTOR IN-DEPTH 2 NOVEMBER 2015ANALYST CONTACTSGlenn Levine Assc Dir-Sr Research Analyst 250 Greenwich Street glenn.levine@moodys.comIrina Baron Asst Dir-Research Associate irina.baron@moodys.comXian Li 212-553-1404Senior Research Analyst xian.li@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.EDF Case StudyAiling UK Division Increases Default Risk at Sahaviriya Steel Industries Sahaviriya Steel Industries (SSI) is a Thailand-based steelmaker and the largest steel sheet producer in Southeast Asia. However, it has come under financial strain in recent months, and its Expected Default Frequency (EDF') has been steadily increasing since December 2014 as the companys financial risk, as measured by its market leverage, has risen. Earlier this month, SSI submitted an application to a local Thai court to begin debt restructuring. This followed the $1.4 billion default on loans and suspension of operations by SSI UK, the companys UK subsidiary, in early-October. SSIs one-year EDF measure currently sits at 13.01% which is near its October 2 peak and corresponds to an implied rating of Caa3, putting it well below investment grade.FIGURE 1. SSIS ONE-YEAR EDF MEASURE VS EDF DISTRIBUTION OF ITS PEER INDUSTRY GROUP (%)The trend in a companys EDF metric, alongside its relative movement against its peer industry group, can provide an early warning of default risk. Along with SSIs one-year EDF measure, Figure 1 shows the median, 25th, 75th, and 90th percentile EDFs for the firms industry peer group: the Southeast Asia Materials and Fabrication Group. The rise in theMOODY'S ANALYTICS CORPORATES2 2 NOVEMBER 2015 EDF CASE STUDY : AILING UK DIVISION INCREASES DEFAULT RISK AT SAHAVIRIYA STEEL INDUSTRIEScompanys EDF above the groups 75th percentile in October 2011 confirmed that credit risk was increasing, while the subs...
