Forward-looking indicators point to possible easing in credit deterioration, Moody's says

New York, June 12 - Forward-looking indicators of credit rating changes are showing the current "deluge" of downgrades could ease, Moody's Investors Service said Wednesday.

Although downgrades still far outnumber upgrades, reviews and outlooks are not so negative.

"Rating reviews for downgrade have narrowed relative to reviews for upgrade while favorable outlook changes hold a slim lead over unfavorable outlook changes thus far in the second quarter," said Moody's analyst John Puchalla in a report Wednesday.

So far in the second quarter there have been 27 favorable outlook changes, more than the 23 unfavorable changes. For non-financial companies, the figures are 21 favorable changes compared to 20 unfavorable.

"The slight excess of favorable rating outlook changes hints that credit deterioration among non-financial could ease over the next 12-18 months," Puchalla added. "However, credit risks will remain high until corporate earnings rebound."

Looking at reviews, there have been 52 reviews for downgrade so far in the second quarter compared to 13 reviews for upgrade.

Those figures indicate credit deterioration will continue in the third quarter, Puchalla said.

But the 4:1 downgrade-to-upgrade review ratio is better than the 8:1 ratio for the first quarter and the 5:1 ratio of actual downgrades compared to actual upgrades.

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