Bangkok--9 Nov--Standard & Poor's
Standard & Poor's Global Fixed Income Research has released its monthly "Stress In Corporate America" report. In this article, we use three of our preexisting research criteria--notably, weakest links, potential bond downgrades, and the distressed report--to identify and spotlight U.S. sectors that have the highest levels of credit stress.
As of Oct. 26, 2009, consumer products, media and entertainment, and retail/restaurants remained the most negatively affected sectors amid the economic downturn, in light of falling consumer demand against a backdrop of economic and credit market turbulence, according to the article, titled "Stress In Corporate America: Consumer-Reliant Sectors Face Easing Conditions But Are Still The Hardest Hit (Premium)."
These sectors consistently have the highest levels of risk among our current lists of distressed companies (defined as speculative-grade companies with securities trading in excess of 1,000 basis points above U.S. Treasuries), weakest links (companies rated 'B-' or lower with either a negative outlook or ratings on CreditWatch with negative implications), and potential bond downgrades (investment-grade or speculative-grade companies that have either a negative outlook or ratings on CreditWatch negative).
We identified 203 companies across these sectors (consumer products, media and entertainment, and retail/restaurants) on the basis of the three criteria described above. Of these 203 companies, 46 are on more than one list, indicative of even higher vulnerability. Seven companies are featured on all three lists.
In line with the broader nonfinancial universe, these sectors have a ratings mix with the greatest concentration in the 'B' rating category, which includes 'B+', 'B', and 'B-'. "Despite having ratings concentrated in this category, the overall ratings distribution for these sectors has improved in recent months, in part because of an increase in the number of defaults from the lowest-rated companies in these sectors," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. "The lowest-rated companies transitioning to default leaves behind the stronger, more highly rated companies."
Default activity in 2009 has been heavily concentrated in the media and entertainment sector.
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.
Media Contact:
Mimi Barker, New York (1) 212-438-5054, [email protected]
Analyst Contact:
Diane Vazza, New York (1) 212-438-2760
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Americas Media Relations: (1) 212-438-6667
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