Bangkok--5 Apr--Standard & Poor's
Nonfinancial corporate credit quality is, for the most part, stabilizing in the U.S., said an article published today by Standard & Poor's Global Fixed Income Research, titled "Comparing The Risks And Opportunities For 16 U.S. Industries (Premium)." Most sectors have either hit a bottom or are experiencing a slower decline in both revenues and earnings.
The rebound in the high-yield bond and leveraged loan markets has reduced refinancing risk for most issuers in the speculative-grade segment. In addition, credit spreads on bonds and loans have declined substantially from their highs in late 2008, and the default rate appears to have peaked at 11.26% in November and has fallen since.
Despite the recent improvement, we expect that credit quality could be very slow to rebound in a number of sectors. We believe the economy will recover slowly and that the recovery will be weak by historical standards. Slower economic growth should correlate with weaker revenue growth.
In the article, Global Fixed Income Research presents the results of its study of the risks and opportunities for 16 nonfinancial U.S. sectors. "We evaluated relative risk based on factors such as bond spreads, key financial credit metrics, refinancing exposure, ratings volatility, ratings mix, and negative bias to identify sectors with the weakest credit profiles," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research.
"Automotive, forest products and building materials, and media and entertainment stand out as vulnerable based on many of the metrics we studied in our analysis," said Ms. Vazza. "We also note significant weakness in the credit profiles of issuers in a number of sectors, including homebuilders and real estate companies; metals, mining, and steel; transportation; and chemicals, packaging, and environmental services."
This article is part of our premium Global Fixed Income Research content, which is available to premium subscribers to RatingsDirect on the Global Credit Portal at www.globalcreditportal.com and to RatingsDirect at www.ratingsdirect.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
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