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A Snapshot Of The Corporate Ratings Distribution For The U.S., Europe, Emerging Markets, And Other Developed Region

Publication date: 06-Oct-2011 09:33:57 EST

The share of global corporate speculative-grade ratings increased to 44.1% at the end of June 2011 from 41.6% one year earlier. As of June 30, 2011, Standard & Poor's Ratings Services rated 2,667 entities speculative grade and 3,379 investment grade. These figures bring the total count of rated entities to 6,046, up by 7% from 5,638 a year ago. Entities based outside the U.S. account for 50.7% of the global ratings population. Globally, the majority of issuers (65.6%) are nonfinancial entities. The share of entities rated 'CCC' and lower as of June 30, 2011, decreased to 2.2% from 3.1% at the same time in 2010. The median rating of all rated entities has remained at 'BBB-' since the second quarter of 2010.

During second-quarter 2011, 15 companies defaulted globally, and the 12-month-trailing speculative-grade default rate was 2% as of June 30. Upgrades surpassed downgrades in the U.S. and emerging markets during the quarter, and the global ratio of upgrades to downgrades was 0.64 to 1. In addition, Standard & Poor's assigned 308 new ratings globally in the second quarter, 35% of which were in the emerging markets. Standard & Poor's withdrew 118 ratings, half of which were in the U.S. For details about Standard & Poor's policy on credit rating assignment, withdrawal, and suspension, please see "Credit Ratings Assignment, Withdrawal, And Suspension Policy," published June 1, 2011, on www.standardandpoors.com.

Chart 1

Table 1

Issuer Ratings Distribution By Region (%)
U.S. Europe Other developed Emerging markets Global
AAA 1.0 1.5 0.5 0.6 0.9
AA 4.3 10.1 11.9 1.5 5.6
A 18.6 37.8 35.8 13.5 23.0
BBB 24.6 26.4 30.4 28.5 26.3
BB 16.7 10.2 10.7 27.9 17.1
B 31.9 12.8 9.9 26.2 24.8
CCC and lower 3.0 1.3 0.8 1.8 2.2
Total (count) 2978 1218 598 1,265 6,046
Median rating BB+ BBB+ BBB+ BB+ BBB-
Speculative grade (%) 51.5 24.3 21.4 55.8 44.1
Data as of June 30, 2011. Includes parent and subsidiary-level issuers. Sources: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro®.

Table 2

Issuer Ratings Distribution By Sector (Issuer Count)
Sector AAA AA A BBB BB B CCC and lower
All financials 43 252 817 529 218 196 22
Financial institutions 34 112 411 339 167 167 17
Insurance 9 140 406 190 51 29 5
All nonfinancials 14 89 572 1063 818 1304 109
Auto/capital goods/aerospace/metals 1 9 63 136 124 169 10
Consumer and service 0 10 65 130 103 219 18
Energy/natural resources 2 14 52 114 101 141 16
Forestry, homebuilders 0 0 8 45 54 77 10
Health care/chemicals 1 14 44 75 75 177 6
High technology/office equipment 2 3 28 38 64 96 1
Media and entertainment 0 1 7 58 84 180 26
Real estate 1 1 49 90 62 65 5
Telecommunications 0 4 31 41 41 87 4
Transportation 6 16 20 62 44 67 9
Utility 1 17 205 274 66 26 4
Data as of June 30, 2011. Includes parent and subsidiary-level issuers. Sources: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro®.

An Increase In U.S. Speculative-Grade Corporate Issuers

Speculative-grade ratings make up 51.5% of U.S. ratings, which is an increase from 50% a year earlier. Of the total, 1,443 are rated investment grade and 1,535 are speculative grade. The total count of U.S. rated entities increased to 2,978 as of June 30, 2011, from 2,846 at the same time in 2010. The majority of U.S. issuers (74.9%) are nonfinancial entities. Financial issuers make up 43.2% of investment-grade companies, and nonfinancial issuers comprise 92.1% of speculative-grade entities. The share of entities rated 'CCC' and lower as of June 30, 2011, decreased to 3% from 4.3% a year earlier. The median rating on U.S. rated entities has been 'BB+' since the third quarter of 2010.

Chart 2

Table 3

U.S. Issuer Ratings Distribution By Sector (Issuer Count)
Sector AAA AA A BBB BB B CCC and lower
All financials 25 98 306 195 51 62 9
Financial institutions 17 30 98 100 26 39 5
Insurance 8 68 208 95 25 23 4
All nonfinancials 4 29 249 537 446 888 79
Auto/capital goods/aerospace/metals 0 2 29 54 80 111 9
Consumer and service 0 5 34 67 62 160 14
Energy/natural resources 1 5 30 53 54 93 11
Forestry, homebuilders 0 0 4 19 19 43 5
Health care/chemicals 1 9 20 42 51 144 5
High technology/office equipment 2 2 15 29 44 78 1
Media and entertainment 0 1 5 24 58 144 24
Real estate 0 0 13 53 24 16 1
Telecommunications 0 0 11 2 17 59 1
Transportation 0 2 3 25 15 34 8
Utility 0 3 85 169 22 6 0
Data as of June 30, 2011. Includes parent and subsidiary-level issuers. Sources: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro®.

The Median Rating For European Corporate Issuers Decreases A Notch

Standard & Poor's rated 1,218 European issuers as of June 30, of which 922 are investment grade and 296 are speculative grade. In the second quarter, the median rating in Europe changed to 'BBB+' from 'A-'. Speculative-grade ratings make up 24.3% of European ratings, a significant increase from 19.2% a year earlier. The total count of European rated entities increased to 1,218 from 1,132 over the past year. The proportion of issuers rated in the 'AAA', 'AA', and 'A' categories was 49.3% as of June 30, 2011, down 6.1% from 55.4% at the end of June 2010. In contrast, the proportion of issuers in the 'BBB', 'BB', and 'B' categories increased 6.2% to 49.3%.The majority of European issuers (58.5%) are nonfinancial entities. Financial issuers make up 57.5% of investment-grade companies, and nonfinancial issuers comprise 88.2% of speculative-grade entities. The share of entities rated 'CCC' and lower as of June 30, 2011, decreased to 1.3% from 1.5% a year earlier. By country, 18% of European entities are in the U.K., followed by 13% in France and 9% in Germany.

Chart 3

Table 4

European Issuer Ratings Distribution By Sector (Issuer Count)
Sector AAA AA A BBB BB B CCC and lower
All financials 15 99 309 107 21 9 5
Financial institutions 14 52 181 64 15 8 5
Insurance 1 47 128 43 6 1 0
All nonfinancials 3 24 151 214 103 147 11
Auto/capital goods/aerospace/metals 0 4 19 39 22 26 1
Consumer and service 0 2 12 31 13 24 1
Energy/natural resources 0 5 10 6 10 11 3
Forestry, homebuilders 0 0 2 15 10 8 2
Health care/chemicals 0 4 18 13 8 19 0
High technology/office equipment 0 0 4 3 4 10 0
Media and entertainment 0 0 1 20 9 19 1
Real estate 0 0 2 10 2 2 0
Telecommunications 0 0 10 14 12 13 2
Transportation 2 4 8 17 9 13 1
Utility 1 5 65 46 4 2 0
Data as of June 30, 2011. Includes parent and subsidiary-level issuers. Sources: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro®.

Chart 4

The Other Developed Region Has The Largest Proportion Of Investment-Grade Corporate Issuers

Standard & Poor's rated 470 issuers investment grade and 128 speculative grade at the end of second-quarter 2011. The other developed region includes Japan, Australia, New Zealand, and Canada. Speculative-grade ratings make up 21.4% of other developed ratings, the lowest of the four regions we surveyed and a modest increase from 20.9% a year earlier. As of June 30, 2011, Standard & Poor's rated 598 issuers in the other developed region, which is up by 10 over the past year. The majority of other developed issuers (63.5%) are nonfinancial entities. Financial issuers comprise 40.9% of investment-grade companies, and nonfinancial issuers make up 79.7% of speculative-grade entities. The share of entities rated 'CCC' and lower as of June 30, 2011, decreased to 0.8% from 1.9% a year earlier. The median rating on other developed rated entities remains at 'BBB+'. By country, 36% of the rated entities in the other developed region are based in Canada, followed by 27% in Australia and 24% in Japan.

Chart 5

Table 5

Other Developed Issuer Ratings Distribution By Sector (Issuer Count)
Sector AAA AA A BBB BB B CCC and lower
All financials 1 46 107 38 17 6 3
Financial institutions 1 24 74 31 14 6 2
Insurance 0 22 33 7 3 0 1
All nonfinancials 2 25 107 144 47 53 2
Auto/capital goods/aerospace/metals 0 3 11 20 1 7 0
Consumer and service 0 3 14 15 1 4 0
Energy/natural resources 1 2 7 22 13 16 0
Forestry, homebuilders 0 0 0 7 5 9 1
Health care/chemicals 0 1 1 7 3 1 0
High technology/office equipment 0 1 6 4 6 1 0
Media and entertainment 0 0 1 10 8 8 0
Real estate 0 1 27 13 5 0 0
Telecommunications 0 1 1 8 2 2 1
Transportation 1 6 4 10 2 4 0
Utility 0 7 35 28 1 1 0
Data as of June 30, 2011. Includes parent and subsidiary-level issuers. Sources: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro®.

Chart 6

The Number Of Ratings In The Emerging Markets Continues To Rise

The total count of rated entities in the emerging markets increased to 1,265 from 1,089 over the past year. In the past 15 years, the number of issuer ratings in the region has grown by an average of 16% per year. As of June 30, 558 entities are rated investment grade and 707 are speculative grade. The proportion of speculative-grade ratings in the region increased modestly to 55.9% as of June 30, 2011, from 53.6% a year earlier. More than half of emerging market issuers (56.4%) are nonfinancial entities. Nonfinancial entities account for 65.3% of the speculative-grade-rated issuers in the region, and financial issuers comprise 55% of investment-grade companies. The share of entities rated 'CCC' and lower as of June 30, 2011, decreased to 1.8% from 2.7% a year earlier. The median rating on emerging market entities has been 'BB+' since the fourth quarter of 2006. By country, 14% of rated entities in the emerging markets are based in Mexico, another 14% are in Russia, and 12% are in Israel.

Chart 7

Table 6

Emerging Market Issuer Ratings Distribution By Sector (Issuer Count)
Sector AAA AA A BBB BB B CCC and lower
All financials 2 8 103 194 130 111 4
Financial institutions 2 5 59 146 112 106 4
Insurance 0 3 44 48 18 5 0
All nonfinancials 5 11 68 167 223 220 19
Auto/capital goods/aerospace/metals 1 0 4 22 21 25 0
Consumer and service 0 0 5 17 27 30 3
Energy/natural resources 0 2 5 33 24 24 3
Forestry, homebuilders 0 0 2 4 20 17 2
Health care/chemicals 0 0 5 13 13 13 1
High technology/office equipment 0 0 3 2 10 8 0
Media and entertainment 0 0 0 2 10 8 1
Real estate 1 0 7 14 30 47 4
Telecommunications 0 3 10 19 10 15 1
Transportation 3 4 5 8 18 16 0
Utility 0 2 22 33 40 17 4
Data as of June 30, 2011. Includes parent and subsidiary-level issuers. Sources: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro®.

Chart 8

Global Fixed Income Research:Diane Vazza, Managing Director, New York (1) 212-438-2760;
diane_vazza@standardandpoors.com
Evan Gunter, Associate, New York (1) 212-438-6412;
evan_gunter@standardandpoors.com
Gregg Moskowitz, Associate, New York (1) 212-438-1838;
gregg_moskowitz@standardandpoors.com

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