Capital Markets

Rising Stars Surpassing Fallen Angels

This year, as in 2004, a new report finds that companies whose debt has been upgraded from junk status outnumber those that have been stricken from...
Stephen TaubSeptember 14, 2005

The global bond markets may be at a pivotal period, but their credit quality continues to hang tough.

In the first eight months-plus of this year, the number of rising stars has exceeded that of fallen angels, maintaining the trend set in 2004, according to Diane Vazza, head of Standard & Poor’s Global Fixed Income Group, in a new report.

Vazza noted that so far this year, 45 rising stars — companies whose debt has been upgraded from junk status to investment grade — have been recorded worldwide so far this year; the upgrades affect rated debt worth $95.2 billion. For the same period in 2004, S&P reported only 31 rising stars.

Through September, Standard & Poor’s also counted 28 fallen angels — companies whose debt has been downgraded from investment grade to junk. The ratings agency pointed out that the volume of debt affected by the downgrades — $501.7 billion — has “vastly outpaced” the equivalent affected by upgrades, though much of this volume is attributable to the downgrades of General Motors Corp. and Ford Motor Co.

Worldwide, S&P singled out 30 companies as candidates to become rising stars, three fewer than the number cited in August. The 30 companies account for $62.1 billion in rated debt, added the ratings agency. Sectors displaying the highest numbers of potential rising stars included high technology, telecommunications, capital goods, media and entertainment, and retail/restaurants, according to S&P.