Bangkok--21 Aug--Standard & Poor's
Globally, two more entities moved to speculative-grade territory since our previous report, pushing the year-to-date tally to 62 issuers, affecting rated debt worth US$221.93 (?156.48) billion, said an article published today by Standard & Poor's.
By debt volume, the current fallen angel tally nearly matches that of the US$226.42 billion in all of 2008. By count, finance companies lead 2009's fallen angels to date with 10 entities, followed by banks with nine entities and utilities with six, 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.
The global potential fallen angel count increased by one issuer from this past month's report to a total of 76 issuers. These companies are rated 'BBB-' and have either a negative outlook or ratings on CreditWatch with negative implications, with a total of US$247.64 (174.61) 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 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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