Standard & Poor’s identifies 87 companies with a high level of credit stress in its latest Stress In Corporate America report.
In light of sluggish consumer demand and some uncertainty about economic and credit market conditions, the media and entertainment, oil and gas, and retail/restaurants sectors were, in our opinion, the most troubled sectors as of March 31, 2011.
“These sectors had the highest levels of risk among our lists of distressed companies, weakest links, and potential bond downgrades,” said Diane Vazza, head of Standard & Poor’s Global Fixed Income Research.
We identified 87 companies in these three sectors that meet at least one of the criteria described above. Of these 87 companies, 20 are on more than one list, indicating even higher vulnerability, and one company (Geokinetics Holdings Inc.) is featured on all three lists.
Over the past 12 months, 44% of all rating actions in media and entertainment, 57% of rating actions in retail/restaurants, and 40% of all rating actions in oil and gas exploration and production were downgrades. This was higher than the 39% for all nonfinancial issuers. “Downgrade ratios have fallen precipitously for all three industries since the third quarter of 2009, which is indicative of a protracted period of improving credit conditions. The total nonfinancial downgrade ratio has declined in a similar fashion since the third quarter of 2009,” said Vazza.
“These sectors also account for some of the largest contributions to negative bias in the speculative-grade segment,” said Ms. Vazza. “Media and entertainment leads, with 22% of the total, followed by oil and gas at 11% and retail/restaurants at 4.7%. However, current negative bias levels are either lower than or close to the long-term averages in all three sectors.”
