Bangkok--1 Aug--Standard & Poor's
The number of entities poised to benefit from potential upgrades reached 378 in July, according to a report published today by Standard & Poor's Ratings Services. The report, which is titled "Upgrade Potential Across Credit Grades And Sectors," says that this is a record high since the inception of this report in May 2003 and 12 more than last month.
"Financials were well placed for potential upgrades," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "Banks displayed the highest percentage of issuers listed with a positive bias." Within nonfinancials, high technology, chemical packaging and environmental services, and the oil and gas sectors appeared especially well placed.
"The surge in potential bond upgrades for the third month in a row attests to the continued strength and benevolence in momentum at this late stage of the credit cycle," Ms. Vazza added. Credit market conditions remain salutary, notwithstanding expectations that the roster of issuers expected to benefit from potential upgrades will gradually diminish as factors supportive of potential upgrade momentum weaken from peak levels. Risks emanate from wider credit spreads, which have already expanded from recent lows, and are expected to creep upward in the next 12 months as markets re-price risk. Furthermore, a rising appetite for debt-financed mergers and acquisitions could constrain credit-quality improvement. After having focused on balance-sheet conservatism during the last several years, companies appear ready to break from the parsimony that characterized corporate behavior during the recent cycle. Furthermore, corporate profitability is expected to diminish relative to prior years as input costs increase and earnings decelerate.
The report is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit research and analysis system, at www.ratingsdirect.com . If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to [email protected] . The report is also available at www.sandp.com/gfir , listed under Global Fixed Income Research. If you have not previously registered with the site, you will need to do so to access this material. Registration requires minimal information and is free. Members of the media may request a copy of this report by contacting the media representative name provided.
Media Contact:
Mimi Barker, New York (1) 212-438-5054, [email protected]
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760