Bangkok--3 Mar--Standard & Poor's
Standard & Poor's Ratings Services today published the 2010 update to its U.S. public finance default and rating transition study, "U.S. Public Finance Defaults And Rating Transition Data: 2010 Update." The data suggest to us the following:
Cumulative average default rates continue to maintain a rank ordering commensurate with the rating category;
USPF ratings tend to be more stable in higher rating categories; and
Overall, the USPF sector remains significantly stable in nature and of sound credit quality, although defaults have occurred across all sectors.
As a general proposition, for the years relevant to our study, unenhanced debt (i.e., debt obligations not supported by financial guarantees, structuring techniques, multiple-party features, or other external credit support) rated by Standard & Poor's has shown significant credit stability throughout a broad range of events, including a changed economic environment, federal government mandates, tax reform measures, and any number of influences on general credit.
Three USPF (non-housing) issues defaulted in 2010, compared to an annual mean of 1.68 and a median of one default since 1986. All three defaulted issues in 2010 held speculative grade ratings prior to defaulting. The defaulted issues were obligations of issuers in the transportation, health care, and utilities subsectors (one of each). In contrast to 2009, when there were three, there were no defaults of rated housing sector issues in 2010. Since 1986, the median annual number of defaults of housing entities is one. We believe a contributing factor to the absence of a significant number of defaults in 2010, as in other years, is the generally resilient nature of the sector overall.
From a rating transition perspective, upgrades exceeded downgrades in 2010, but to a lesser degree than in 2008 and 2009. Upgrades resulting primarily from previously announced criteria changes tapered off significantly in the second half of 2010. The absolute number of rating downgrades for 2010, at 451, represented more than a threefold increase over 2008. We believe this reflects the consequences of the recession and reinforces the idea that, despite a continuation of the trend of more upgrades than downgrades, we believe that credit pressures are present and will likely continue into 2011, as the slow recovery and the legacy of the recent recession continue to slow the upward credit quality momentum seen in recent years.
The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
Ana Sandoval, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Gabriel Petek, CFA, San Francisco (1) 415-371-5042
Steven J Murphy, New York (1) 212-438-2066
Adam Watson, Chicago (1) 312-233-7044