Maybe they are confusing Blackstone with Blackwater? The latter would surely blow your head off.

I am only as good as my sources, which in this case was Nouriel Roubini.

Roubini has cited Ed Altman with enthusiasm and deems him to be a world expert (Altman has written papers for the BIS on the implications of Basel II, for instance, and has modeled detailed debt ratings. Altman used to run a ratings service that he sold to Standard & Poors).

I realize Roubini was NOT necessarily referring to rated corporate debt, which by definition is what Moody's would publish. It is possible Roubini failed to clarify two different notions from Altman, or maysimply been referring to junk bonds. One would initially think the latter, since per the revised post, Roubini had contrasted the 15% default rate with a historic average of defaults of 3.8%, which per Altman, is the historical default rate for junk bonds, not corporate bonds as a whole. However, I see various sources saying that the peak default rate in the last recession was over 8%, inconsistent with Roubini’s statement that the peak default rate exceeded 15%. However, while the common stated factoid is “over 8%,” Fitch reported that the peak junk bond default rate in the 2001 recession (not all that deep, mind you) was 12.9% But that isn’t “over 15%” by any stretch. Similarly, the commonly reported peak default rate for junk in 1990 was 12%

I found this quote from Altman to be interesting. Even public debt that is not rated is much weaker in rating-equivalent terms than rated debt, so its inclusion (if Roubini were to have done that) would push the historical default rate higher. For instance, from paper from the BIS:

Figure 1 does show that unrated (NR) institutional, publicly filed loans had a cumulative default rate over the 1996-2000 (Q3) period that was higher than BB but lower than B rated loans. And, the default rate was higher than the average
leveraged (“junk”) loan. This data is interesting since there was a significant number of non-rated loans (276) compared to all leveraged loans issued (542) in the five year period 1995-1999.

Since the context of Roubini’s remarks was how banks and financial intermediaries would suffer in the recession, it is possible he used a broader data set.

Note Altman has also forecast that junk bond defaults could exceed 16% this cycle.

And so do Blackstone…..