Bangkok--15 Jul--Standard & Poor's
Fallen angel incidence increased in June, with 15 issuers downgraded to speculative grade from investment grade, said an article published today by Standard & Poor's. By comparison, this is the third-highest monthly tally of fallen angels since our series began in 1987.
With the addition of two fallen angels this month, the year-to-date fallen angel tally increased to 60 issuers, affecting rated debt worth US$209.17 (...148.41) billion, according to the article, titled "Global Potential Fallen Angels (Premium)."
Fallen angels are issuers downgraded to speculative grade ('BB+' and lower) from investment grade ('BBB-' and higher), whereas rising stars move in the opposite direction.
Looking ahead, 75 issuers currently exhibit fallen angel potential, as evidenced by 'BBB-' ratings with either a negative outlook or ratings on CreditWatch with negative implications, totaling US$255.22 (?181.08) billion in rated debt.
Over the long term, fallen angel activity mirrors the broader movement in credit quality, as measured by the ratio of downgrades to total rating actions. Moreover, global fallen angel activity compares fairly well with general economic trends in the U.S. and worldwide.
"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 downgrades when economic conditions deteriorate, resulting in an increase in fallen angels in and around troughs in the economic cycle."
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 Ratings in the left navigation bar, select Find a Rating. Members of the media may request a copy of this report by contacting the media representative provided.
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