Bangkok--27 Nov--Standard & Poor's Newly rated issuer growth slowed by 20% to a rate of 30 new firms a month in September, according to an article published today by Standard & Poor's. The report, titled "U.S. Ratings Distribution: Slower Growth May Alter Ratings Landscape (Premium)," says the slowdown in new speculative-grade entrants and fairly stable ratings means that there has been very little impact in the ratings distribution during the last quarter. "The share of speculative-grade firms increased to 51.17% of the rated U.S. parent and subsidiary population from 50.72% in the third quarter," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "However, weaker corporate profits and the potential for sluggish economic growth raises default risks. Moreover, slower organic growth may reignite M&A among higher grade credits, many of which have fairly large cash balances. Stock repurchases and special dividends may continue to pose risks for creditors, as firms with lagging stock prices and limited near-term organic growth potential choose to reward equity and dilute debt service ability." Broad-based measures of credit market performance—e.g., downgrade ratios, potential bond downgrades, and default rates—are still in relatively benign territory, at least from a historical perspective. However, there is still plenty of risk in the aggregate, given the ratings profile of the U.S. corporate bond market, the amount of leverage at the lowest rated firms, current market demand and supply conditions, and the maturity of the credit cycle. With 27% of 'CCC' and below rated firms and 11% of 'B-' firms transitioning to default within a year, based on the historical experience between 1981 and 2006, the glut of firms at the 'B' rating level poses significant default risk. As the economy and corporate profit growth slows, firms rated 'B' and below will come under more pressure to meet their obligations. Ms. Vazza added, "Cyclical sectors will be riskier with slower economic growth, and better positioned sectors will likely focus on equity returns. In both cases, creditors are at risk for continued deterioration in aggregate credit quality in the coming quarters." The report is available to RatingsDirect subscribers who have upgraded their package to include the Global Fixed Income Research add-on. RatingsDirect is 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 with the Global Fixed Income Research add-on, please contact your local Standard & Poor's representative or [email protected] for further information. Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. Members of the media may request a copy of this report by contacting the media representative provided. Media Contact: Mimi Barker, New York (1) 212-438-5054, [email protected] Analyst Contact: Diane Vazza, New York (1) 212-438-2760