Fitch: Negative rating drift resurfaces for global corporates in 3Q

Tuesday, 10 December 2013 00:00 -     - {{hitsCtrl.values.hits}}

Global corporate downgrades exceeded upgrades by a margin of 1.5 to 1 in the third quarter of 2013, returning to negative territory and reversing the prior quarter’s more measured result of 0.8 to 1, according to a new report by Fitch Ratings. The corporate downgrade rate of 3.5% topped the quarter’s upgrade rate of 2.3%, in contrast with the 1.8% and 2.5% recorded in the prior three months, respectively. France’s sovereign downgrade to ‘AA+’ in July preceded linked bank downgrades, boosting the financial institution downgrade rate to 3% of issuers in the third quarter, up from 1.6% and 2.2% in the second and first quarters, respectively. The share of industrials downgraded (3.9%) also topped prior quarter results of 2.1%, while the share upgraded held relatively steady at 2.8%. Across both developed and emerging markets, downgrades exceeded upgrades by ratios of 1.8 to 1 and 1.2 to 1, respectively. The share of financial institutions downgraded increased quarter to quarter for both developed (2.9% vs. 2%) and emerging (3.1% vs. 0.5%) economies. Similarly, industrial downgrades grew for each respective market segment, most notably among developed markets (4% vs. 1.5%). Fitch-rated global corporate issuer default rate through the third quarter of 2013 - 0.4% remains below average. A negative outlook bias endured at the end of September with the share of global corporate issuers affected (12%) holding steady quarter to quarter, while positive outlook assignments (4%) edged down from 5%.