S&P says downgrades cause number of potential fallen angels to slip

By Angela McDaniels

Seattle, Oct. 19 - Standard & Poor's said that there were no additions to the potential fallen angels list this month and, because of downgrades, the number of entities at risk of slipping into speculative-grade territory has declined by three compared with a month ago.

S&P lists 37 issuers with rated debt totaling $64.7 billion as potential fallen angels, four fewer than recorded 12 months ago. Potential fallen angels are defined as entities rated BBB- that either have a negative outlook or are on CreditWatch with negative implications.

Fallen angels lag rising stars in the year to date, according to an agency news release.

"However, this masks a divergence of trends in crossover activity in the U.S. compared with crossover worldwide," Diane Vazza, head of S&P's global fixed income research group, said in the release. "In the U.S., fallen angels have exceeded rising stars each year since 2005, in sharp contrast with the trend observed in other markets."

Merger and acquisition activity has played a key role in the crossover of companies from investment grade to speculative grade, the agency said, with one new addition this month attributed to merger and acquisition activity.

As of Oct. 3, there have been 27 fallen angels this year affecting rated debt worth $80.8 billion. This is an increase of four issuers from the previous month.

S&P said that at the same point a year ago, 38 issuers had been downgraded to speculative grade, with $56.9 billion in rated debt.

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