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Moody's Analyst Jennifer Tennant says:
"At the end of the second quarter of 2008, 8.9% of rated issuers were on review for downgrade, up from 4.2% at the end of the second quarter."
Both of these percentages were higher than the corresponding reviews for upgrade, which stood at 1.2% of rated issuers. Looking at a longer timeframe, negative outlooks outnumbered positive outlooks, 14.7% to 5.3%, respectively.
Continuing the trend from the previous quarter, the credit outlook for investment-grade issuers was slightly more positive than for speculative-grade issuers. Both categories, however, had more issuers on review for downgrade than for upgrade.
The US and Canada have the largest disparity, with a ten-to-one watch-for-downgrade/watch-for-upgrade ratio, says Moody's, while the US, Canada and Europe have the largest percentage of negative outlooks and watches for downgrade. On a positive note, the Middle East and Africa have the largest percentage of positive outlooks and Latin America had the highest percentage of rated issuers on watch for upgrade.
According to Moody's, the ratings actions and outlooks differed by industry: Airlines, Non-Life Insurance, Real Estate and Construction, Retail, Banks and BHCs and Finance, Securities and Leasing all had large proportions of downgrades in the third quarter of 2008, with the last two industries having the largest absolute number of downgrades. All of these industries also currently have many more issuers on review for downgrade than review for upgrade.
"These rating actions and reviews highlight the recent financial crisis and continued problems in residential real estate markets," says Tennant.
The title of this Moody's Special Comment is "Moody's Rating Actions, Reviews and Outlooks: Quarterly Update -- Third Quarter 2008".
Posted by Siba Sami Ammari
