{"id":47128,"date":"2018-01-19T17:05:26","date_gmt":"2018-01-19T22:05:26","guid":{"rendered":"https:\/\/www.bloomberg.com\/professional\/insights\/trading\/assessing-firms-credit-default-risk-supply-chain-impacts\/"},"modified":"2024-03-28T10:54:50","modified_gmt":"2024-03-28T14:54:50","slug":"assessing-firms-credit-default-risk-supply-chain-impacts","status":"publish","type":[3762],"link":"https:\/\/www.bloomberg.com\/professional\/insights\/trading\/assessing-firms-credit-default-risk-supply-chain-impacts\/","title":{"rendered":"Assessing a firm\u2019s credit default risk and supply chain impacts"},"content":{"rendered":"<div  class=\"bbg-row-container\">\n    <style>section[data-anchor=row-69fe8a6072806]::before {\n\t\t\t\tbackground-color: #eeeeee;\n\t\t\t}<\/style>\n    <section class=\"bbg-row bg--custom-color  bg--eeeeee text--black bbg-row--full-bg-bleed\" data-anchor='row-69fe8a6072806'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8 bbg-column--valign-bottom\"\n    style=\"\"\n    >\n    <p>    <ul class=\"bbg-categories_list\">\n                    <li>\n                <a href=\"https:\/\/www.bloomberg.com\/professional\/insights\/category\/trading\/\" rel=\"category tag\">\n                    Trading\n                <\/a>\n            <\/li>\n            <\/ul>\n<div\n    class=\"bbg-spacer\"\n        style=\"height: 24px !important\"\n    >\n<\/div>    <h1 class=\"bbg-metadata bbg-metadata--title\">Assessing a firm\u2019s credit default risk and supply chain impacts<\/h1>\n<\/p>\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-compact row-padding--bottom-none bbg-row--full-bg-bleed\" data-anchor='row-69fe8a60784fc'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    <p><div\n    class=\"bbg-spacer\"\n        style=\"height: 40px !important\"\n    >\n<\/div>    <p class=\"bbg-metadata bbg-metadata--date\">January 19, 2018<\/p>\n<\/p>\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black bbg-row--full-bg-bleed\" data-anchor='row-69fe8a6079f95'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    <p><div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><em>This article is by David Croen, Enterprise Data, Risk and Entities at Bloomberg LP.<\/em><\/p>\n\n<\/div>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><strong>Background<\/strong><\/p>\n<p>Carillion PLC, the UK\u2019s largest construction firm, entered into compulsory liquidation on 15 Jan 2018, after banks and the government declined to provide further support, triggering the UK\u2019s largest corporate failure in a decade. The firm had over 43,000 employees (20,000+ in the UK), more than GBP 1.6bn in debts (generally valued at less than 5% of face value now) and a pension deficit of GBP 587mm.<\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"473\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-1.png\" class=\"bbg-single-image__image attachment-large\" alt=\"\" title=\"\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-1.png 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-1.png 100w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-1.png 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-1.png 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-1.png 874w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p>What lessons could be learned? For example, could this development have been anticipated? Also, how could Carillion\u2019s supply chain be affected?<\/p>\n<p><strong>The issue<\/strong><\/p>\n<p>The collapse will have implications throughout the UK, as Carillion is one of the largest managers of military facilities, has over 450 government contracts for hospitals, schools and courts, and has taken on GBP 1.4bn in critical work for the UK\u2019s new HS2 railway line (Keir Group PLC will assume this work).\u00a0 The collapse could also impact as many as 30,000 subcontractors to which Carillion owes payments.<\/p>\n<p>How could Bloomberg\u2019s analytics be used to measure the risks of default and to evaluate the supply chain and completive impacts of the default?<\/p>\n<p>The Bloomberg Default Risk (<a href=\"https:\/\/bloom.bg\/1Pa0SIc\">DRSK &lt;GO&gt;<\/a>) function on the terminal which assesses the probability of default, shows that by July 13, 2017, there was a 4.85% probability of Carillion\u2019s default. The firm scored as the second weakest high yield risk band, HY5, after announcing disappointing earnings and the first of three profit warnings.\u00a0 Default Risk data, which is available on both the terminal and via Enterprise Data, also shows a rapid increase in default probability as the share price decreased, and flagged the issue in July 2017.<\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"325\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-2.png\" class=\"bbg-single-image__image attachment-large\" alt=\"\" title=\"\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-2.png 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-2.png 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-2.png 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-2.png 1776w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p>The following table shows the current probability of default and risk band for Carillion, selected competitors, suppliers, lenders, according to Bloomberg\u2019s Default Risk product, as well as the equity price change from June 30, 2017 to present, and as reported, the UK Government is monitoring Interserve.<\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"490\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-6.jpg\" class=\"bbg-single-image__image attachment-large\" alt=\"\" title=\"\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-6.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-6.jpg 100w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-6.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-6.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-6.jpg 1026w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><strong>Monitoring exposure and risk<\/strong><\/p>\n<p>Portfolio and risk managers can monitor Carillion\u2019s relationships to evaluate supplier exposures and potential for losses to financial and commercial counterparties.\u00a0 Investors in Carillion or in competing firms, and even contractors and customers, could use Bloomberg\u2019s supply chain analytics to evaluate the potential knock-on effects from the Carillion default. The Bloomberg Supply Chain function (<a href=\"https:\/\/bloom.bg\/1T17Gxa\">SPLC &lt;GO&gt;<\/a>) on the terminal, provides a list of Carillion\u2019s suppliers and clients. As could be anticipated, a number of the company\u2019s commercial partners experienced an increase in price volatility in the days following Carillion\u2019s collapse.<\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:1024px\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"800\" height=\"586\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-4.png\" class=\"bbg-single-image__image attachment-large\" alt=\"\" title=\"Graph 4\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-4.png 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-4.png 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-4.png 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/Graph-4.png 1058w\" sizes=\"auto, (max-width: 800px) 100vw, 800px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><em>For more information on this or other functionality on the Bloomberg Professional Service, <a href=\"https:\/\/www.bloomberg.com\/professional\/request-demo\/\">request a demo<\/a> with a Bloomberg sales representative. Existing subscribers can press &lt;HELP HELP&gt; on their Bloomberg keyboard.<\/em><\/p>\n\n<\/div>\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <style>section[data-anchor=row-69fe8a6088f4c]::before {\n\t\t\t\tbackground-color: #eeeeee;\n\t\t\t}<\/style>\n    <section class=\"bbg-row bg--custom-color  bg--eeeeee text--black bbg-row--full-bg-bleed\" data-anchor='row-69fe8a6088f4c'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <div\n    class=\"bbg-column\"\n    style=\"\"\n    >\n    <div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2>Recommended for you<\/h2>\n\n<\/div>\n<div\n    class=\"bbg-spacer\"\n        style=\"height: 24px !important\"\n    >\n<\/div><script>\n    window.feed = window.feed || {};\n    window.feed['69fe8a608bf19'] = 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default?<\/p>\n","protected":false},"author":1598,"featured_media":27225,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"template-article.php","format":"standard","meta":{"_yoast_wpseo_primary_category":"","footnotes":""},"categories":[444],"tags":[445],"series":[],"class_list":["post-47128","post","type-post","status-publish","format-standard","hentry","category-trading","tag-sales-and-trading","type-article"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.11 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Assessing a firm\u2019s credit default risk and supply chain impacts | Insights | Bloomberg Professional Services<\/title>\n<meta name=\"description\" content=\"How can portfolio and risk managers measure the risks of default and to evaluate the supply chain and completive impacts of a company&#039;s default?\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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