In the years leading up to the credit crunch, speculative-grade debt (i.e., debt rated 'BB+' or lower) issuance had grown tremendously. Prior to the collapse of Lehman Brothers in September 2008, Standard & Poor's Ratings Services' median credit rating for nonfinancial U.S. corporations was 'BB-' (versus 'BBB-' in 1997 and 'A' in 1980), and it remains at the 'BB-' level currently. By their nature, speculative-grade issuers are more vulnerable to adverse economic conditions than investment-grade companies and, sure enough, ratings activity was far more significant for speculative-grade companies in the years following the Lehman bankruptcy filing.
Still, according to a report that Standard & Poor's published earlier today, titled "Why Some U.S. Spec-Grade Corporate Issuers Maintained Stable Credit Quality Through The Downturn," about 20% of U.S. corporate speculative-grade ratings did not experience ratings activity during the recession. And certain industries displayed significantly greater ratings stability than others.
"These pockets of stability reflect some industry-specific characteristics," said Standard & Poor's credit analyst Chris Johnson, "but, in our view, companies' financial policies played a critical role as well."
The report takes a look at why some speculative-grade companies were able to fend off negative actions during the economic downturn, while the vast majority of them were not. The article is part of Standard & Poor's Ratings Services' "Reshuffling The Debt" series, which we launched at the beginning of 2011. The series rekindles the "Leveraging Of America" series of articles that Standard & Poor's published in 2007, which commented on the large increases in nonfinancial corporate issuers' debt leverage shortly before the Great Recession began. "Reshuffling The Debt" investigates the leveraging trends of these entities now that we are in the wake of the recession.
The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. 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.
Media Contact:
Mimi Barker, New York (1) 212.438.5054,
[email protected]
Analyst Contacts:
Christopher Johnson, CFA, New York (1) 212-438-1433
Mimi Barker, New York (1) 212-438-5054