Default risk (or insolvency) is the uncertainty surrounding a company’s ability to service its debt as and when it falls due. Prior to default, there is no way to discriminate unambiguously between companies that will default and those that will not. At best, we can only make probabilistic assessments of the likelihood of default. By applying a turnaround practitioner’s lens, KPMG provide key insights to inform clients of sector default risk.
The third edition of KPMG’s bi-annual Distance to default publication focuses on the changing state of corporate health across all ASX sectors for the 6 months to December 2017.
In the report we dive into the largest movers by industry sectors, and analyse the proportion of companies consistently displaying low Distance to Default (D2D) scores (otherwise known as ‘D2D Zombies’). We also provide commentary regarding legislative changes to Ipso facto clauses that will impact all companies that enter into or amend contracts after 1 July 2018. These changes are relevant for companies managing their supply chain risk and distressed companies evaluating strategic options available to them in any restructure.
We hope you find this third edition of KPMG Restructuring Services’ Distance to default publication useful in providing meaningful trends in corporate health across the ASX.