Bangkok--4 Nov--Standard & Poor's
The consumer products, media and entertainment, and retail/restaurants sectors remained most susceptible to economic and credit-market turbulence as of Oct. 30, 2008, said an article published today by Standard & Poor's.
These sectors consistently have the highest levels of risk among our lists of distressed companies (defined as speculative-grade-rated companies with securities trading in excess of 1,000 basis points above U.S. Treasuries), weakest links (companies rated 'B-' or lower with either a negative outlook or ratings on CreditWatch with negative implications), and potential bond downgrades (investment-grade or speculative-grade-rated companies that have either a negative outlook or ratings on CreditWatch with negative implications).
We identified 303 companies across these sectors on the basis of the three criteria described above, according to the article, titled "Stress In Corporate America: Frightening Environment For Consumer-Reliant Sectors (Premium)."
In the month of October, the number of defaults continued to rise as the aftermath of the September collapses continued to haunt the stressed sectors. Consumer spending for discretionary purposes remained inhibited in the wake of rising unemployment, combined with businesses facing restricted access to funding in the credit markets.
"Consumer spending accounts for 70% of U.S. GDP, and we expect consumer spending to rise only 1% in 2008, compared with an observed growth rate of 2.8% in 2007," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Consumer products companies have had to face cost pressures, particularly rising energy and commodities prices in recent months, though they should experience a reprieve if the current declines in commodity prices continue."
Of the 303 companies in these three sectors, 14 companies are on all three lists, while 58 are on more than one list. This indicates the underlying vulnerability of these entities that could be exposed in the coming quarters.
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