Reuters logo
TEXT-S&P: Canadian banks lead spike in potential bond downgrades
August 21, 2012 / 8:28 PM / 5 years ago

TEXT-S&P: Canadian banks lead spike in potential bond downgrades

Aug 21 - The number of potential downgrades increased to 573 in July--the
highest count since July 2010, said an article published today by Standard &
Poor's Global Fixed Income Research, titled "Bond Downgrade Potential In
Emerging And Developed Markets, Including The U.S. And Europe: The Count Spiked
In July." 

"Although this total is higher than the one-year moving average of 500, it is 
significantly lower than the 1,028 reached in April 2009," said Diane Vazza, 
head of Standard & Poor's Global Fixed Income Research. "The recent negative 
rating outlooks on Canadian banks, which resulted from economic and industry 
risk in the sector, led the spike in the potential bond downgrades."

Potential downgrades are entities that have either negative rating outlooks or 
ratings on CreditWatch with negative implications across the 'AAA' to 'B-' 
rating categories. As of July 31, 573 entities were most at risk of 
downgrades--an increase from 548 as of June 29. Banks represented 17% of the 
potential downgrades, followed by the media and entertainment sector (9%). 

Since our last report, we removed 23 entities from the potential downgrades 
list and added 48. Standard & Poor's Ratings Services downgraded 22 entities 
that were on the potential downgrades list last month. By rating, 'B' rated 
issuers make up the largest proportion of entities with negative rating 
outlooks or ratings on CreditWatch negative, at 13%, followed by 'B+' rated 
issuers, at 11%. Globally, Standard & Poor's rates 49% of the 573 issuers at 
risk of downgrades as speculative grade ('BB+' and lower). 

The three regions contributing the most to the additions were the U.S. and 
Europe (with 14 issuers each), and Asia-Pacific (with eight). Of the 99 banks 
on the potential downgrades list, 48 are based in Europe and 18 are based in 
the U.S. region (which includes Bermuda and the Cayman Islands). We added 14 
banks to our list this month, half of which were from Canada. The sovereign, 
bank, and transportation sectors show the greatest downgrade risk relative to 
their average negative biases. Of the 573 potential downgrades, 163 are 
constituents of Standard & Poor's equity-based indices.

The gap between potential bond downgrades and potential bond upgrades began to 
narrow in late 2009 when the U.S. economic recession ended and economic 
recovery began. "However, recent stress in Europe has led to more companies 
having ratings with negative outlooks or on CreditWatch negative and fewer 
having ratings with positive outlooks or on CreditWatch positive," said Ms. 
Vazza. "As a result, the gap between potential downgrades and potential 
upgrades widened in the past few months." 

The report is available to subscribers of RatingsDirect on the Global Credit 
Portal at If you are not a RatingsDirect 
subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 
or sending an e-mail to Ratings 
information can also be found on Standard & Poor's public Web site by using 
the Ratings search box located in the left column at 
Members of the media may request a copy of this report by contacting the media 
representative provided.

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below