Paris -- January 18, 2010 -- During its 14th Country Risk Conference in Paris, Coface announced 22 upgrades in country ratings. Since the second half of 2009, Coface has noted a net reduction in payment defaults. Payment defaults were up 19% in the first half of 2009 and declined 40% during the second half of the year. For 2010, Coface forecasts a very fragile recovery in developed countries, due to the threat of various bubbles.

End of the first "globalization crisis"

This credit crisis has lasted two years, similar to previous crises and as Coface predicted at the beginning of 2008 when it recorded the initial increase in company payment defaults. This has been the most violent credit crisis in the past 60 years. The differential in world growth between the beginning and end of the crisis was 6.1 points. Strong geographic disparities were evident, with Eastern Europe and Russia most affected (10.2 and 16.2 points respectively). Compared to previous crises, the magnitude of the shock is explained by the increasing globalization of economies. The confidence shock spread everywhere following the Lehman Brothers' bankruptcy, seizing both finance and industry in all regions of the world. Even in countries not characterized by debt bubbles, the record contraction in world trade had a brutal impact on companies.

The decrease in payment defaults clearly indicates that the credit crisis as such is over. This correlates with the end of the recession in most major industrialized countries at the end of the third quarter of 2009. After having implemented several waves of rating downgrades throughout the crisis, Coface has eased the rating outlooks for all industrialized countries. Exceptions include the United Kingdom, Italy and the "PIGS" (Portugal, Ireland, Greece and Spain), which remain rated A3, some still under negative watch.

The strength of emerging countries rebalances world growth. The decoupling of emerging countries and developed countries has finally occurred, but in a specific and new way. As stakeholders in the world economy, emerging countries could not escape being affected -- where companies were too heavily indebted, the growth contraction brought on credit crises (i.e.: significant increases in payment defaults). But in most cases, the emerging countries managed this crisis independently. They demonstrated their ability to learn from previous crises and to rely on solid fundamentals, which allowed them to implement recovery policies.

Yes to recovery, but look out for bubbles

If the end of the credit crisis is confirmed, the 2010 recovery in industrialized countries is of high risk because of threatening bubbles:

• The bubble in public debt is especially dangerous. It is not so much the risk of sovereign defaults that is feared, but rather the need to quickly implement budget restriction policies that are detrimental to growth and therefore to companies.

• The overcapacities in China have to be monitored. After strong credit growth that supported Chinese companies, the authorities have decided to restrict the credit supply in overcapacity sectors. This "go and stop" policy, typical of China, could destabilize fragile companies.

• The asset price bubble (stock markets) can also affect the economy. Sharp stock market volatility can be expected in industrialized countries due to optimism in the financial markets that is out of sync with the real economy's recovery.

The bursting of these bubbles is likely to generate new negative shocks for companies ("W" recovery scenario). A relapse would affect companies, many of which are now quite weakened after two years of low activity. However, Coface leans towards a soft "L-shaped" recovery scenario without a relapse in economic activity. For 2010, we foresee world growth of 2.7%, comprised of 1.4% in industrialized countries and 5.3% in emerging countries.

"The fifth credit crisis recorded by Coface was distinguished by the magnitude of the shock but not by its duration, since like all previous crises it ended after two years. The end of the crisis, marked by the decline in payment defaults, does not signal the elimination of all risks. Indeed, bubbles, the source of all of the observed crises, reform at an incredible speed," explains François David, Coface Chairman, "but the economy is in an upturn phase and we, Coface, are already working with our customers on the recovery, especially in Asia where it is well under way."

Country Ratings Changes

Coface country ratings indicate the average level of risk presented by a country's companies on their commercial transactions. The ratings do not assess sovereign debt.

About Coface

Coface's mission is to facilitate global business-to-business trade by offering its 130,000 customers four business lines to fully or partly outsource trade relationship management and to finance and protect their receivables: credit insurance, factoring, ratings and business information and receivables management. Due to the worldwide local service delivered by 7,000 staff in 65 countries, over 45% of the world's 500 largest corporate groups are already customers of Coface. Coface is a subsidiary of Natixis whose share capital (Tier 1) was 13.4 billion euros at the end of June 2009.

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Sue Hinton

VP Marketing

Coface North America

1350 Broadway, Suite 2000

New York, NY 10018

Tel: 212-389-6484 | Fax: 917-322-0433

E-mail: sue_hinton@coface.com | Website: http://www.coface-usa.com

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