Bangkok--18 Apr--Standard & Poor's
Credit ratings have been falling for more than two decades as U.S. nonfinancial corporate issuers' financial policies have evolved to take advantage of greater availability of debt--especially when the cost of debt is low.
According to a report that Standard & Poor's Ratings Services published yesterday, titled "U.S. Corporates' Financial Policies Have Often Left Companies Poorly Positioned To Deal With Recessions," this has left issuers more vulnerable during economic downturns.
The credit crunch that began in July 2007 and the 2008-2009 recession that followed highlighted the risks of relying on ready access to low-cost financing. According to the report, the impact of the combination of higher leverage and recessions can be seen in the rise from pre-recession levels in the rating agency's downgrade-to-upgrade ratio among nonfinancial corporate entities, as well as the number of defaults, during and after the 2001 and 2008-2009 recessions.
"It didn't take long after the economic downturn of 2000-2002 for companies to return to more aggressive, higher-risk financial strategies, and we are witnessing a similar phenomenon today," said Standard & Poor's credit analyst Diane Shand.
The article is the latest in a series of reports titled "Reshuffling The Debt," which Standard & Poor's launched at the beginning of this year. The series rekindles the "Leveraging Of America" series of articles that the rating agency published in 2007, which commented on the large increases in nonfinancial corporate issuers' debt leverage shortly before the Great Recession began. "Reshuffling The Debt" investigates the leveraging trends of these entities now that we are in the wake of the recession.
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:
Mimi Barker, New York (1) 212.438.5054,
[email protected]
Analyst Contacts:
Diane Shand, New York (1) 212-438-7860