subscribe to our newsletter
Return to crisis-era spreads may lead to downgrades

Return to crisis-era spreads may lead to downgrades

S&P Global Ratings has warned that nearly one in 10 corporate debt issuers around the globe could be downgraded if credit spreads return to levels seen during the financial crisis.

According to an article published last week titled “If Credit Spreads Hit Crisis Levels, US Corporates Would Fare Better Than Those In The Emerging Markets,” companies in North America and Europe would fare better than those in Latin America and Asia-Pacific.

“Globally, the sector most hurt in our stress scenario would be homebuilders, with about one in six issuers (16 per cent) at risk of a downgrade,” S&P credit analyst and co-author of the report David Tesher said.

“Other sectors in the worst quintile include metals and mining, transportation, forest and paper products, and retail and restaurants.”

S&P noted that homebuilders' vulnerability is concentrated in Asia-Pacific, where property markets have ridden high amid surging economic growth in the past decade.

Metals, mining and forest and paper products also share the ongoing vulnerability of the commodities sectors in recent years.

“We believe our findings imply that deeper debt markets would help borrowers to extend the distribution of maturities and would take pressure off the banking sector during times of crisis,” Mr Tesher said.

[Related: S&P warns of 'significant risks' to bank credit quality]

Return to crisis-era spreads may lead to downgrades
mortgagebusiness logo

Latest News

Philip Lowe, the governor of the Reserve Bank of Australia, has said that he is “incredibly disappointed” and “appalled” at the beha...

The major bank has appointed a new chief information officer to replace Dave Curren, whose retirement has also been announced. ...

Borrowers paying lenders mortgage insurance should be offered more choice and ASIC should intervene to safeguard their interests, according ...

FROM THE WEB

podcast

LATEST PODCAST: Cash rate to remain unchanged, corporate cops for the banks and a new type of credit card

Do you expect access to credit to get harder this year?