Bangkok--2 Mar--Standard & Poor's
The U.S. ratings mix slipped deeper into speculative-grade territory in the final quarter of 2006, according to an article published today by Standard & Poor's. The article, which is titled "U.S. Ratings Distribution: Expanding High-Yield Clout," says that as of Dec. 31, 2006, the speculative-grade share of Standard & Poor's Ratings Services' parent- and subsidiary-level issuers was 49.3%. This is up from the previous record high of 48.8% on Sept. 30, 2006.
"The growing high-yield clout marks an unbroken string of quarterly gains since the fourth quarter of 2001, when the share was 38.1%," noted Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. Low long-term interest rates and investor receptivity to high-yield issuance continues to encourage more speculative-grade firms to tap financial markets directly, as evidenced by the influx of first-time issuers. Also, stiff global competition--coupled with strong shareholder focus--is driving firms toward more aggressive financial strategies, which often requires settling for a lower credit rating.
At year end 2006, the overall median issuer rating barely hung on to 'BBB-' status, with only 50.7% of issuers falling into the upper 50 percentile range, down from 51.3% at the end of the third quarter. In contrast, the median rating was 'BBB+' at the end of 1996 and 'A-' in 1992. The year ended with 13.1% of financial issuers and 62.1% of nonfinancial issuers with speculative-grade ratings, up from 12.5% and 61.3% respectively at the end of the third quarter. In contrast, the European high-yield share is only 17.2%, split 30.8% for nonfinancial firms and only 2.5% for financial entities.
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
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760