Fallen angels tally rises to 62 issuers thus far in 2009, S&P says

By Jennifer Chiou

New York, Aug. 20 - Standard & Poor's said in a report that the number of fallen angels recorded in 2009 rose by two, pushing the year-to-date tally to 62 issuers.

The affecting debt amounts to $221.93 billion.

"Fallen angel activity generally increases during periods of weak real GDP growth and declines when GDP is strong," Diane Vazza, head of the S&P global fixed-income research group, said in the report.

"This inverse correlation is not surprising because companies' aggressive leverage at the peak of the economic cycle makes them vulnerable to downgrades when economic conditions deteriorate, resulting in an increase in fallen angels in and around troughs in the economic cycle."

By debt volume, the current fallen angel tally nearly matches that of the $226.42 billion in all of 2008, the report said. By count, finance companies lead 2009's fallen angels to date with 10 issuers, followed by banks with nine issuers and utilities with six.

The global potential fallen angel count - issuers poised to cross over from investment-grade territory to speculative-grade territory - increased by one issuer from 76 issuers in the prior report.

According to S&P, these companies are rated BBB- and have either a negative outlook or ratings on CreditWatch with negative implications, with a total of $247.64 billion of rated debt.

Over the long term, fallen angel activity mirrors the broader movement in credit quality, S&P noted.

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