Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

COVID recovery drives U.S. credit rating upgrades to record high

Published 07/29/2021, 12:28 PM
Updated 07/29/2021, 12:31 PM
© Reuters. FILE PHOTO: A view of the New York City skyline of Manhattan and the Hudson River during the outbreak of the coronavirus disease (COVID-19) in New York City, as seen from Weehawken, New Jersey, U.S. April 18, 2020. REUTERS/Jeenah Moon

© Reuters. FILE PHOTO: A view of the New York City skyline of Manhattan and the Hudson River during the outbreak of the coronavirus disease (COVID-19) in New York City, as seen from Weehawken, New Jersey, U.S. April 18, 2020. REUTERS/Jeenah Moon

By Marc Jones

LONDON (Reuters) - The strong economic recovery in the United States has led to a record number of corporate credit rating upgrades this year, figures from S&P Global (NYSE:SPGI) showed on Thursday.

The combination of vaccine rollouts, reopening the economy and ultra-low borrowing costs has boosted firms' finances and made debt piles more manageable.

S&P said it had made a record 121 upgrades during the second quarter and 220 since the start of the year although that was still well below the 715 downgrades during the first half of last year as the pandemic spread.

Most of the upgrades in recent months have been of lower-rated firms with 58% of all upgrades of issuers rated 'B' and lower. They have also been led by several of the sectors hardest hit by the pandemic, and about half were of issuers that had been downgraded since the start of 2020.

The proportion of firms at risk of downgrades also fell by eight percentage points to 19%, and is now below its long-term average of 22%.

"This steady decline points to a further decrease in downgrade potential and indicates the number of quarterly downgrades should continue to fall," S&P said.

The surge in oil and gas prices over the last 12 months mean the sector's negative rating bias has fallen 39 percentage points this year, the most of any U.S. sector, although it remains fractionally above the long term average.

© Reuters. FILE PHOTO: A view of the New York City skyline of Manhattan and the Hudson River during the outbreak of the coronavirus disease (COVID-19) in New York City, as seen from Weehawken, New Jersey, U.S. April 18, 2020. REUTERS/Jeenah Moon

The retail and restaurant sector's negative bias has fallen 32 percentage points this year, the second most among all sectors, while the media and entertainment sector's 33% negative bias is the highest despite a 20 percentage points drop.

"We expect the recovery of pre-2020 credit metrics to be uneven, with the hardest-hit industries of out-of-home entertainment and hotels not expected to recover before 2023 and even later for the cruise industry," S&P said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.