Credit quality has "taken a beating" in April, Moody's said

New York, April 29 - Corporate credit quality has "taken a beating" in April, according to Moody's Investors Service and if the current trend continues for the rest of the quarter it will be the worst since at least the first three months of 1986.

So far this month - with just one day remaining - the upgrade to downgrade ratio has been 0.15:1.00, Moody's said.

Moody's said no one sector has been responsible for "this spectacularly low" ratio.

Rather the problem has been a "broad-based deterioration" of credit worth.

In the month so far, there were 59 downgrades, a figure that includes both high-yield and investment-grade credits.

Of this figure, 12 were utilities while a "wide variety" of industrials made up 43.

Only four downgrades were financial companies, a sector which also accounted for two of the nine upgrades.

The other seven upgrades were all industrials, including three health care-related issuers, a sector which saw no downgrades so far in April.

Outside the U.S., the picture is little better - although the deterioration is not so widely spread by industry, Moody's said.

For April there were nine rating actions on non-U.S. issuers of which eight were downgrades.

However, outside the U.S. the ratings lowered were concentrated in the telecom industry which made up four of the eight, three of them in Canada and one from Bermuda.

The one non-U.S. upgrades was Canada's Shoppers Drug Mart Corp.

Looking ahead, Moody's said that improvement in profitability both at U.S. companies and those abroad will go a long way to improving credit worth across the board.

"As we have noted in the past however, especially for the U.S., low rates of capacity utilization and continued pricing pressure given somewhat sluggish demand will make it difficult for profits to improve substantially," the rating agency commented. "Thus, cost containment and debt refinancing/reduction may be the key drivers that help to boost profitability in the near term and ultimately lead to improvement in credit quality."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.