Bangkok--25 Dec--Standard & Poor's
The demise of the number of entities rated 'AAA' is a long, unfolding process, said an article published today by Standard & Poor's. The article, which is titled "A Look At The U.S. Nonfinancial 'AAA' Ranks Through The Decades (Premium)," says the overarching reasons for the shrinking of this elite group over the years have been investors' increased tolerance for risk and the shift of companies from adopting historically conservative financial policies to placing greater emphasis on shareholder returns.
"Investors' heightened risk appetite is evident in the growing number of entities tapping the capital markets throughout the ratings spectrum, including the speculative-grade portion, though obviously activity in that area has dropped off sharply in recent months," noted Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Moreover, incremental financial risk may be necessary for a firm to achieve its overall goals and needs."
There are only six U.S. nonfinancial entities left rated 'AAA' by Standard & Poor's Ratings Services, which is less than 0.3% of the entire U.S. nonfinancial population of 2,276 companies. The number of entities rated 'AAA' has declined dramatically from more than 60 (5% of the population) in the early 1980s.
By definition, obligors assigned Standard & Poor's highest rating have an extremely strong capacity to meet their financial commitments. Strong industry fundamentals, combined with conservative financial policy, have been the hallmark of entities rated 'AAA'. These companies are distinguished by factors such as steady demand, an ability to maintain margins without impairing future prospects, flexibility in the timing of capital outlays, and moderate capital needs.
This article is part of our premium Global Fixed Income Research content, which is available to premium subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. 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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Mimi Barker, New York (1) 212-438-5054, [email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760
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