Global Bond Downgrades Climb to Highest in Six Years, S&P Saysby
The number of issuers that had credit ratings cut by Standard & Poor’s in 2015 rose to the highest in six years, as emerging-market economies slowed and commodity prices tumbled.
S&P last year downgraded 892 issuers, representing 69 percent of all ratings actions, according to a report published on Wednesday. That’s the most since 2009, when it downgraded 1,325 issuers, or 83 percent of total actions. Downgrade potential remains under historical averages, S&P said.
"While we expect further deterioration in global credit markets, we do not see a particularly disruptive or abrupt acceleration, despite a backdrop of financial and market volatility in recent weeks," S&P analysts including Diane Vazza and Sudeep Kesh wrote in the report. The impact of a slowdown in China has been "more pronounced with respect to market volatility than a rapid, lower revision of our ratings on global corporate issuers," they wrote.
A measure of investor fear of junk-bond defaults is set to turn in its biggest jump at the start of a year since 2009 as China, the world’s second-largest economy, reported its slowest expansion in a quarter of century. Bonds sold by energy companies led the losses.
The fourth quarter saw "a rather extreme" number of credit cuts in the oil-and-gas sector, with 58 downgrades -- compared with just two upgrades -- reflecting lower credit-protection measures, negative cash flow and uncertain liquidity over the next 12 months, S&P said. Emerging markets will stay the focal point for negative rating actions, with pressure largely concentrated in Middle East, Africa and Latin America.