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We are pleased to share with you the eighth edition of our bi-annual Distance to Default (D2D) publication. We provide our insights into the changing state of corporate health across all ASX sectors, following the end of the reporting season for the 6 months to June 2020. We have also conducted our D2D analysis as at December 2020 and observed an increase to the average D2D score between June and December 2020 from 1.05 to 1.59. Despite the increase the average D2D score is approximately 17 percent below the average D2D score observed in December 2019 of 1.88 and indicates there remains further recovery required to restore financial health of the ASX to pre-COVID levels.

Distance to Default – Movements across ASX to December 2020

Sector insights

Consistent with our last report, our analysis indicates that the Financial and Real Estate sectors continue to display the highest D2D scores (furthest from default), with the Materials and Energy sectors displaying the lowest D2D scores.

A few sectors, including Real Estate and HealthCare, witnessed high volatility over the last 6 months due to the impact of COVID-19. Below are some key insights into the sectors:

Real estate

  • Mandatory code of conduct was introduced that required landlords to both defer and waive rents for eligible tenants.
  • Volume of property assets coming to the market slowed with pent up demand for good assets increasing the competition for assets.
  • Rent negotiations are well advanced.


  • As the world raced to develop a COVID-19 vaccine, global healthcare systems have come under considerable strain.
  • Significant funds will be pumped into the healthcare sector to ensure it is not vulnerable in the future.
  • With a vaccine now being approved, the sector is shifting its focus to the manufacture, distribution and rollout program.


Distance to Default: Key movements in D2D scores by industry group


The Distance to Default metric is an indicator of financial health and is used to assess a company’s ‘distance-to-default.’ The analysis has been prepared using the Moody’s Kealhofer, McQuown and Vasicek (KMV) D2D formula, and relies on source data from the Capital IQ database.

The metric takes into account financial information and market data. The closer to zero, the more likely a company is to default. In contrast, the further a company is from zero, the less likely it is to default. In this analysis, released every 6 months, we analyse the D2D score movements of ASX-listed companies (following the reporting season of full year and half-year results) to draw insights into corporate health across the Australian economy.

Full report

Read our analysis of the D2D score movements of ASX-listed companies:


Meet the team

Please contact us if you would like us to present our insights to your team.

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