Market volatility shakes out three new potential fallen angels, S&P says

By Jennifer Chiou

New York, March 24 - Rising from last year's annual average, 42 issuers globally, with rated debt totaling $91.66 billion, are listed as potential fallen angels, according to a report by Standard & Poor's.

The report noted that this tally is higher than the annual average count of 39 in 2007 and one fewer than 43 in 2006.

"However, the rate of actual fallen angels, as a proportion of total-rated credits, is presently running well below last year's levels and those in 2001-2002, the last recessionary period," Diane Vazza, head of S&P's global fixed-income research group, said in a written statement.

With three out of four fallen angels surfacing in this report, however, the agency said that it expects these levels to accelerate over the course of this year.

Sectors poised to lead in fallen angels include forest products and building materials and utilities, with five issuers each, S&P noted.

Retail and restaurants trail behind with four issuers, and homebuilders and real estate, consumer products, and transportation sectors, typically more susceptible to recession risk, also show a high preponderance for downgrade pressure, the report added.

According to the previous month's report, the volume of debt affected by fallen angels in 2007 nearly doubled, to $131.3 billion from $70.2 billion in 2006, dwarfing that of rising stars, which accounted for $71.8 billion of rated debt in 2007, compared with $44.9 billion in 2006.

Fallen angels are issuers downgraded to speculative grade, BB+ and lower, from investment grade, BBB- and higher.

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