Bangkok--12 Sep--Standard & Poor's
The number of fallen angels—issuers that were downgraded to speculative grade ('BB+' and lower) from investment grade ('BBB-' and higher)—has continued to grow, according to a report released today by Standard & Poor's Ratings Services. Through Sept. 7, 2006, 34 fallen angels were recorded on rated debt worth US$39.6 (?31.2) billion. This is an increase of two from last month's report, when one fallen angel was based in the U.S. In addition, the article, titled "Global Potential Fallen Angels," states that 42 entities globally are at risk of becoming fallen angels, with rated debt totaling US$72.6 (?56.5) billion. This is the same as last month but four fewer than in Sept. 2005.
"Fallen angels have overtaken rising stars by a margin of 13 entities in the year to date as of September 7, a reversal of the pattern seen in full years 2004 and 2005," observed Diane Vazza, Managing Director and head of Standard & Poor's Global Fixed Income Research.
The sectors most vulnerable to generating fallen angels by count are utilities, media and entertainment, insurance, telecommunications, retail and restaurants, and consumer products. Of the 42 potential fallen angels, 18 are members of major Standard & Poor's equity-based indices, including 13 from the S&P500. Based on rated debt volume, TXU Corp., a U.S.-based utility company and an S&P500 index constituent, is the largest potential fallen angel, with more than $15 billion in rated debt.
Although fallen angels are relatively rare in any single year (constituting only 2.19% of the total count of investment-grade entities each year on average from 1981-2004), the behavior of entities positioned in these threshold categories bears market significance. The cumulative share of bonds in these threshold categories to the total outstanding is substantial, both on count and dollar bases. On a relative-value basis, fallen angels are important to investors because they outperform their peers as an asset class, albeit with greater variability. Moreover, movement between these threshold categories has important market implications for the cost of borrowing among issuers.
The report is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, 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
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