Bangkok--24 Jan--Standard & Poor's
The number of entities at risk of downgrades reached 650 in mid-January 2007, 10 fewer than the number reported in December and five fewer than the average of the last 12 months according to an article published by Standard & Poor's today. The report, which is titled, "Downgrade Potential Across Credit Grades And Sectors," says of these 650 companies at risk for downgrades globally, 61% have speculative-grade ratings, with those rated 'B+' most vulnerable to downgrades at 114 companies (18% of the total). U.S.-based issuers accounted for 81% of the total speculative-grade issuer base.
"The media and entertainment, automotive, consumer products, and telecommunications sectors have the highest ratio of issuers with a negative, thus these sectors are most vulnerable to credit-quality deterioration," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Among industrial issuers listed with a negative bias, integrated oil and gas companies appear least vulnerable, with no issuers listed with a negative bias as of late last week."
Many of the entities at risk of downgrades are in the consumer discretionary domain, where momentum is expected to decelerate. Examples of this domain include the aforementioned sectors along with high technology and retail/restaurants.
These sectors will feel increased pressure as a result of greater consumer indebtedness, growing uncertainty about the housing outlook, and high energy prices.
Ms. Vazza notes further that, "Globally, the sectors most vulnerable to downgrades are automotive, media and entertainment, consumer products, telecommunications, and health care, and in each case, the percentage of entities listed with a negative bias in proportion to the total number of ratings in the sector is higher than 25. It is also interesting that the current negative bias exceeds the long-term average in all of these sectors."
Timely and ongoing surveillance of issuers at risk of downgrades can provide value to investors in their sectoral credit-allocation process as well as in hedging against potential capital losses arising from a downgrade. Indeed, in many of these sectors at risk of potential downgrades, the proportion of issuers listed with a negative bias (i.e., negative outlook or ratings on CreditWatch with negative implications) is currently at more elevated levels than had historically been recorded, highlighting the risks to credit quality.
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