Potential rising stars still at lowest level in two years, S&P says

By Jennifer Chiou

New York, April 13 - The number of potential rising stars remains at its lowest level in two years, Standard & Poor's said in a report Thursday.

As of April 12, 19 rated issuers - with $25.5 billion in rated debt - were placed to acquire rising-star status, one fewer than the number reported in March.

"Rising stars still outpace fallen angels globally, though the gap is narrower than in 2005, when the number of rising stars exceeded that of fallen angels by the biggest margin since 1997," Diane Vazza, head of S&P's fixed income research group, said in the report.

The agency noted that 13 entities have crossed over to investment grade from speculative grade this year up to April 12, affecting rated debt worth $21.2 billion. The figure is more than double the volume reported in March due to the upgrades of ABB Ltd. and J.C. Penney Co., the report said.

ABB was raised to BBB- from BB+ to reflect the reduced financial uncertainty from the successful completion of the asbestos litigation settlement for subsidiary Combustion Engineering, S&P said. J.C. Penney was boosted to BBB- from BB+, reflecting the steady and impressive progress management has made in re-establishing the company in the intensely competitive department store sector, the report added.

The proportion of entities listed with a positive bias has stabilized at a high level in the past 12 months, even though global bond markets are at a turning point, with many of the factors that contributed to the bullishness now poised to weaken from previous levels, S&P said.

Globally, sectors displaying the highest count of potential rising stars included capital goods and media and entertainment, both with three, transportation, utility, and oil and gas exploration and production, all with two each, the report said.

In terms of rated debt outstanding, the utility sector was the most prominently placed for the highest amount of debt affected by potential upgrades, followed by oil and gas exploration and production, transportation and high technology.

Based on rated debt volume with $3.4 billion, Fidelity National Information Services Inc. was the largest issuer potentially poised to ascend to investment grade.

Potential rising stars are rated BB+ and have either a positive outlook or their ratings are on CreditWatch with positive implications.

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