Friday, November 03, 2006

US credit quality in 25-year retreat toward junk-S&P

das paßt irgendwie nicht zu der allgemein these das die bilanzen der us unternehmen angeblich so stark wie nie sind und die alle in cash ertrinken. die liquidität die oft vorgegaukelt wird kommt in erster linie durch die großzügige kreditvergabe und wird immer mehr benutzt um aktienrückkäufe oder hohe dividenden an private equity auszuschütten.

that fits in no way with the mantra that wall street is trying to spin things that the balance sheets of the us companies are stonger than ever and that they a awash with cash. nobody seems to wonder where this liquidity is often coming from. its mounting credit/debt.

more on debt/credit/buybacks

dank geht an mish und sein

NEW YORK, Nov 2 (Reuters) - U.S. corporate credit quality has been on a 25-year decline toward junk status, with almost half of all companies now rated below investment grade, Standard & Poor's said on Thursday.

Liquid financial markets, downgrades in the auto and airline sectors, a spate of takeovers and global competition have contributed to the credit quality erosion,

"An aggressive financial posture is necessary for survival in a stiff globally competitive environment," S&P said. "The same dynamics are unfolding in Europe, albeit at a slower pace." (and to pump the stock price...../und um den aktienkurs zu pushen)

As of September, junk, or speculative-rated issuers, defined as those rated "BB-plus" or below, stood at a record high of 49 percent, up from 48 percent at the end of 2005 and a low of 28 percent in 1992, S&P said.

Downgrades and mergers have taken an even higher toll on U.S. nonfinancial, or industrial companies, with 61 percent carrying junk ratings. !!!!!!

In Europe, where investors are less receptive to high-yield issuers, just 17 percent of all borrowers are rated junk.

While U.S. junk ratings have climbed, the number of top "AAA" ratings has dropped to 18 from a peak of 24 in 1998, S&P said.

In the industrial sector, only six parent companies have "AAA" ratings....

"Maintaining an 'AAA' status does not yield the payoff it once did," S&P said. Borrowing costs are only about 5 basis points lower for an "AAA" 10-year bond than for an "AA" bond of that maturity, the rating agency said ( the main problem is that the riskpremium at all asset classes have disappeared/ betrifft die risikoaufschläge in allen anlageklassen)

Some strategists have cautioned that the slump in credit quality could end badly.

Given the present ratings mix, the default rate could exceed 15 percent, the highest since the Great Depression, if the economy goes into a recession, ...

Shareholder-friendly activity, such as share buybacks, restructurings and leveraged buyouts, have all increased debt burdens and lowered credit quality, S&P said.

High risk tolerance by investors has also attracted more speculative grade issuers to the bond market, the rating agency said.

This year, 61 percent of all newcomers to the bond market had ratings at the "B" level, a mid-level junk considered highly speculative. In fact, "B" is now the largest rating category, making up 27 percent of all issuers.

The investment-grade universe, meanwhile, is now dominated by financial institutions, "as mergers and acquisitions have created enormous financial entities with huge funding appetites," S&P said.

es wäre schön wenn s&p auch den mut hätte us staatsanleihen dem risiko und der finanziellen verfassung der usa entsprechend von ihrem aaa thron runterzuholen (gilt auch für deutschland u.a.)

it would be nice if s&p would have the courage to rate the us treasuries adequatly. i think the fundamentals are not reflecting the aaa rating any more.(same to germany etc.)


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