Credit trend improves in third quarter, Moody's says

New York, Aug. 2 - The trend in U.S. corporate credit quality has improved so far in the third quarter compared to the first and second quarters of the year, according to Moody's Investors Service.

So far in the third quarter upgrades have made up 31% of credit rating revisions, improved from 27% in the second quarter and 30% in the first quarter, according to a report by Moody's analysts John Lonski and Kamalesh Rao. For 2003 so far, the figure is 29%.

By comparison, upgrades made up 17% of changes in 2002, 25% in 2001, 31% in 2000 and 36% in 1999. The peak was 61% in 1996.

By dollar value, upgrades made up 36% of changes to bonds and preferred stock, up from 11% in the first quarter and 28% in the second quarter, Moody's said. For all of 2002 the tally was 14%, for 2001 31% and for 2000 39%.

The analysts anticipate rating changes should continue to show an improving trend.

"If, as expected, the faster growth of aggregate expenditures quickens profitability and widens profit margins, then both the count and par-value-amount versions of the US' upgrade ratios should climb higher," Lonski and Rao said.

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