Bangkok--19 Jan--Standard & Poor's
Global corporate credit quality reversed its trend of deterioration in the fourth quarter of 2006, with upgrades ending marginally higher than downgrades, according to an article published today by Standard & Poor's. The article, which is titled "Global Corporate And Sovereign Rating Actions: Fourth-Quarter 2006," says that of the 245 corporate rating actions in the fourth quarter, 123 were upgrades, while 122 were downgrades. This resulted in a downgrade ratio of 50% compared with 57% in the final quarter of 2005. The last time upgrades exceeded downgrades was in the third quarter of 2005.
For the full-year 2006, credit quality was broadly in line with the trend witnessed in 2005, with downgrades exceeding upgrades. The downgrade ratio for the full year was 53%, marginally higher than 52% in 2005. In 2006, 435 upgrades and 504 downgrades were recorded on rated debt worth $1.8 billion and $1.2 billion respectively, compared with 464 upgrades and 516 downgrades a year earlier.
In 2007, we expect credit quality to deteriorate moderately, with downgrades and defaults ticking up as the year progresses. "This year will differentiate itself from 2006 as the year when the credit markets see a clearer bifurcation between the haves and the have-nots," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Whereas strong cash balances and greater financial flexibility will provide higher rated and more diversified companies with a cushion to withstand the economic deceleration, lower rated borrowers will be more challenged in a slower growth environment. This tends to expose the frailties of the weakest segments of the credit market." In contrast with 2006, greater credit quality differentiation will emerge by rating tier, with negative pressures brewing among low -rated corporate borrowers that have dominated the borrowing pipeline.
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