Bangkok--29 Oct--Standard & Poor's
A slim majority (50.3%) of rated U.S. issuers were investment grade at the end of third-quarter 2008, said an article published today by Standard & Poor's.
Speculative-grade-rated firms account for 49.7% of the rated population in the U.S., down from 51.2% at the end of 2007. The shift stems from an increase in defaults and movements to 'NR', as well as a slowdown in the number of new entities rated speculative grade, according to the article, titled "U.S. Ratings Distribution: Credit Conditions Restrain The Growth Of New Issuers (Premium)."
Credit conditions remain challenging as banks have little ability to lend and the high-yield primary market is still restrained. Defaults are on the rise, with the 12-month speculative-grade default rate at 2.68%, up from 0.97% at the end of 2007.
Standard & Poor's expects the number of negative rating actions and defaults to continue rising, given the weak prospects for economic growth in the near future. Indeed, forward-looking credit metrics based on outlooks and ratings on CreditWatch show that the percentage of firms with a negative bias is elevated, which foretells of future downgrade pressure.
"The new ratings issuance rate has slowed in 2008 because the challenging credit environment has not been supportive of new issuers or new debt offerings," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "In the third quarter of 2008, there were only 20 new entrants to the rated population compared with 365 issuers rated through 2007. There have been 127 new issuers so far this year, and 56% of these companies are rated speculative grade."
RatingsDirect is the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. The standard version of this article is part of our standard Global Fixed Income Research content. The premium version contains expanded analysis of the article's most significant points, typically broken out by sector and region. Also in the premium version are in-depth charts and tables, the underlying data of which are available for download. 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.
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