The Distance to Default (D2D) score serves as a useful metric for benchmarking company performance across different industries, irrespective of company size.
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 fifth 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 2018. In this report we dive into the largest movers by industry sectors, and analyse the proportion of companies consistently displaying low D2D scores (otherwise known as ‘D2D Zombies’). We also take a look at the financial services sector and provide some high level commentary on the major findings, recommendations and future outlook of the sector in light of the recent Banking and Financial Services Royal Commission. The sector is experiencing a period of adjustment as it seeks to rebuild trust and restore investor confidence.
We hope you find this fifth edition of KPMG Restructuring Services’ Distance to default publication useful in providing meaningful trends in corporate health across the ASX.
© 2020 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Liability limited by a scheme approved under Professional Standards Legislation.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.