Bangkok--12 Mar--Standard & Poor's
Globally, 82 entities, with rated debt totaling US$209.13 (?166.43) billion, are listed as potential fallen angels, a new 18-year high, said an article published today by Standard & Poor's.
This surpasses the previous record reached last month of 75 potential fallen angels, defined as entities rated 'BBB-' with either a negative outlook or ratings on CreditWatch with negative implications, according to the article, titled "Global Potential Fallen Angels (Premium)."
By comparison, 2008 averaged 47 potential fallen angels each month, increasing steadily since the second quarter of 2007.
Sectors poised to lead fallen-angel incidence include nonwater utilities with 10 entities, followed by consumer products and banks with nine entities each, and media and entertainment and homebuilders/real estate companies with six entities each. By debt volume, the line-up among potential fallen angels is led by finance companies, followed by the automotive and retail and restaurants sectors.
Globally, 19 entities moved to speculative-grade territory thus far this year, with rated debt worth US$89.96 (?71.59) billion.
"Fallen-angel activity generally increases during periods of weak real GDP growth and declines when GDP is strong," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "This inverse correlation is not surprising because companies' aggressive leverage at the peak of the economic cycle makes them vulnerable to potential credit downgrades when economic conditions deteriorate, resulting in an increase in fallen angels in and around troughs in the economic cycle."
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