Credit Ratings

Corporate ratings outlook worst since crisis: S&P

S&P warns of worst ratings outlook since crisis

Pressure on global corporate credit ratings is at the worst level since the financial crisis, Standard & Poor's (S&P) has warned.

In a report on Tuesday, the ratings agency said that 17 percent of debt-issuing companies were on "negative credit watch" at the end of 2015, meaning they had a 50 percent chance of being downgraded within the next three months. This outnumbered the number of companies on "positive credit watch" by a ratio of three-to-one.

This meant that negative outlooks on global companies exceeded positive ones by the worst margin —11 percent — since 2008-09, S&P said.

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters

"Meanwhile, global corporate creditworthiness has declined slightly since the onset of the crisis. The average long-term corporate credit rating has fallen by about half a notch to between 'BB-plus' and 'BB' compared with 'BB-plus' at end-2008," S&P credit analyst, Terry Chan, said in the report.

"The fall in the average rating is because more new corporate ratings were in lower rating categories and due to issuer rating downgrades," he added.

In addition, S&P said that global prospects for companies were diverging by region as a result of variance in the credit cycle and exposure to commodities.

"We are expecting mixed fortunes for European corporates, cautious about the U.S., somewhat negative on Asia-Pacific, and see further weakening for Latin America," the agency said.

Last week, S&P warned that sovereign creditworthiness had worsened sharply since the middle of 2015.