Bangkok--24 Aug--Standard & Poor's
The share of U.S. speculative-grade ratings continues to decline as mounting defaults from this segment shrink the pool of speculative-grade entities, said an article published yesterday by Standard & Poor's. Of the 2,858 rated issuers, 49.51% are speculative grade, down from 49.60% at the end of 2008 and 51.19% at the end of 2007.
The 'B' rating category remains the largest, with 27% of issuers, followed by 'BBB' (25.2%) and 'A' (19%). The share of entities rated 'CCC' and lower rose to 6.44%, or 184 entities, during the second quarter of 2009 from 4.85%, or 146 entities, at year-end 2008 and only 2.26%, or 71 entities, at the end of 2007, according to the article, titled "U.S. Ratings Distribution: Growing Number Of Issuers With Low Ratings Presages More Defaults (Premium)."
"The sharp increase in entities rated 'CCC' and lower is indicative of the magnitude of the credit erosion of the past few quarters," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Historically, these entities have been more likely to default, and we expect that the elevated number of entities at this end of the ratings spectrum will continue to fuel the increase in the default rate through 2010."
The current ratings universe of parents and major subsidiaries in U.S. corporates, excluding issuers currently rated 'D' or 'SD', decreased to 2,858 at the end of second-quarter 2009 from 2,953 at the end of April 2009 and 3,012 at the end of 2008. Nonfinancial entities totaled 2,094, of which 1,356 (61.6%) were rated speculative grade. Financials totaled 764, of which 125, or 16.4%, have speculative-grade ratings.
Standard & Poor's had only 39 newly rated entities in the second quarter. We expect that new issuer growth will remain sluggish throughout the rest of 2009, even as signs of increasing investor confidence emerge.
This article is part of our premium Global Fixed Income Research content, which is available to premium subscribers to RatingsDirect, at www.ratingsdirect.com. 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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