S&P: Potential Downgrades At Three-Year High
September 24, 2008
The number of issuers at risk of a downgrade has risen to 758 this month, an increase of 11 from August and the highest potential downgrade count since September 2005, according to Standard & Poor’s.
September’s list of companies potentially headed for a downgrade contains 120 more than reported in the same period a year ago and more than double the count of those poised for potential upgrades. This continues the trend that started last July.
Compared with this time last year, the number of issuers poised for downgrades nearly quintupled in the banking and brokerage sectors and nearly doubled in the mortgage, finance, and homebuilders/real estate sectors.
The housing and financial sectors expectedly show the highest downgrade risk, with forest products and building materials showing a negative bias of 41.3%, mortgage institutions 40%, and savings and loans 33.3%. In the automotive sector, 36.8% of issuers are poised for a negative rating action.
Geographically, the U.S. continues to top the list of potential bond downgrades, where roughly a quarter of current ratings are at risk. By rating designation, B-rated companies have the highest potential for downgrades, with 153 companies or 20% of the total. Globally, of the 758 issuers at risk for downgrade, 62% are speculative grade—BB+ or below.
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