Deterioration in credit quality to continue to slow, Moody's says

New York, July 15 - The deterioration in credit quality should continue to slow, as it did over the last quarter, Moody's Investors Service said Tuesday.

At the end of the second quarter, 1.2% of all issuers from around the world were on review for upgrade and 5.8% were on review for downgrade. Those figures were virtually unchanged from 1.3% and 5.9% respectively at the end of the first quarter.

The reviews indicate "that the coming months will also see credit deterioration, but at a rate that should continue to moderate slightly," Moody's said. Approximately three-quarters of all reviews are ultimately resolved in the direction in which they are initiated.

During the second quarter the proportion of downgrades to upgrades declined significantly to 2.8 to 1 from 3.8 to 1, Moody's said.

While 5.3% of all issuers were downgraded during the three months, an increase from the 5.1% rate of the previous three months, there was a more rapid rise in upgrades, which affected 1.9% of issuers compared with 1.3% the previous three months.

For high yield issuers, the ratio of downgrades to upgrades improved to 1.7 to 1 from 2.1 to 1 while investment grade companies saw a more market improved to 4.2 to 1 from 8.7 to 1.

Moody's also noted a shift in the sectors affected by credit deterioration.

During the quarter, only 2.3% of telecom issuers were downgraded compared to 9.7% the previous three months. Meanwhile 1.4% actually saw upgrades during the quarter. However 15.5% of telecom companies remain on review for downgrade.

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