Bangkok--28 Apr--Moody's
Moody's Investors Service says that the number of negative rating actions for corporate issuers in the Asia Pacific (ex-Japan) region rose to 54 in 1Q09 from 46 in 4Q08 and the negative credit outlook looks set to persist.
"The actions in 1Q09 were mainly driven by concerns that a severer-than-expected deterioration in operating and financial profiles has materially increased liquidity risk as well as the risk of covenant breaches, and will result -- in some instances -- in a sustained impairment of credit profiles over the medium term," says Clara Lau, a Moody's Senior Vice President and Group Credit Officer.
The default rate for rated issuers was 1.8% for the quarter compared to 0.9% for all of 2008.
Lau was speaking on the release of Moody's latest report -- which she authored -- on corporate credit trends in Asia Pacific (ex-Japan).
"Looking ahead, the negative credit outlook will continue as ratings with negative implications rose 8% over 1Q09 and the share of stable outlooks for Asian issuers slid to 56% of the rated corporate portfolio from 64%, " comments Lau. "Significantly the rating outlooks for automotive and auto-parts issuers and REITs have turned more negative, while that for telecommunications has become less positive," adds Lau.
"At the same time, buy backs or tender offers for debt,- some of which are in effect distressed exchanges - are on the rise and the trend is expected to continue as deeply discounted secondary market bond pricings offer strong incentives for issuers to seek opportunistic refinancing exercises or to relieve their debt burdens at discounts," says Lau.
Furthermore, companies are facing the risk of rising redemption demand, as some face convertible bonds with put options exercisable in 2010, which may materially strain their liquidity if the equity and debt markets remain subdued during 2H2009, the report says. While rated Chinese property developers are currently the most exposed to such risk, some rated Indian and Korean firms are likely to face a similar situation in 2010.
The report is entitled, 1Q09 Asia Pacific (ex-Japan) Corporate Credit Trends -- Negative Credit Trends Intensify. It can be found at
Hong Kong
Clara Lau
Senior Vice President
Corporate Finance Group
Moody's Asia Pacific Ltd.
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Sydney
Brian Cahill
Managing Director
Corporate Finance Group
Moody's Investors Service Pty Ltd
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