Bangkok--11 Oct--Standard & Poor's
The number of fallen angels—issuers that were downgraded to speculative grade ('BB+' and lower) from investment grade ('BBB-' and higher)—continued to grow, with 38 fallen angels recorded this year through Oct. 6, 2006, on rated debt worth US$56.91 (?44.89) billion, according to a report published today by Standard & Poor's Ratings Services. This is an increase of four from last month's report.
According to the article, titled "Global Potential Fallen Angels," 41 entities globally are at risk of becoming fallen angels, with rated debt totaling US$77.6 (?61.22) billion. This is one less than last month and three fewer than in October 2005.
"Fallen angels have overtaken rising stars by a margin of 17 entities in the year to date, which is a reversal of the pattern seen in full years 2004 and 2005," observed Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group.
The sectors most vulnerable to generating fallen angels by count are utility, media and entertainment, insurance, telecommunications, consumer products, retail and restaurants and health care.
The movements in the credit derivatives market corroborate the perception of higher risk, with most names on the potential fallen angel list displaying noticeably higher CDS premiums than in the benchmark indices. Note that the reference Dow Jones CDX investment grade index (CDX.NA.IG) was trading at 40 basis points (bps) as of Oct. 4, lower than the majority of these names.
Of the 41 potential fallen angels, 16 are members of major Standard & Poor's equity-based indices, including 11 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.
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