Recovering earnings, a weaker yen and higher share prices are enhancing the creditworthiness of Japanese companies, according to fresh data from Rating and Investment Information.
R&I said 20 companies scored credit rating upgrades in the period from April to September, three fewer than in the second half of fiscal 2013, which ended in March. At the same time, only three companies were downgraded, the fewest since the first half of fiscal 2007.
The new data covered rating decisions through Friday.
Corporate bond issuances, meanwhile, reached the highest level in four years because companies were able to procure funds at lower interest rates.
“Credit rating upgrades for Japanese companies with improved corporate earnings will continue,” said Toshiyasu Ohashi, chief credit analyst at Daiwa Securities.
Tire manufacturer Bridgestone was upgraded by one rank to AA in August — its first boost in about a decade. Trading houses Itochu and Marubeni saw their ratings raised for the first time in about six and a half years.>> Read More
After yet another profit warning from Sony, S&P warns it may cut its credit rating to below investment grade, or junk.
S&P said the outlook on Sony’s “BBB-” rating on Sony – the lowest on the investment grade scale – has now been revised to “negative,” indicating a cut to junk grade could be next.
Amid intensifying competitive pressure, our assumption of EBITDA from Sony’s mobile business is likely to decrease substantially, and, in turn, the negative impact on consolidated earnings and financial ratios for the company is likely to be larger than we are able to incorporate in the current rating.
Sony shares fell 8.6 per cent on Thursday after it warned its current year loss is now expected to increase almost five-fold from its initial forecast to Y230bn ($2.1 bn), a prediction that would mean cumulative losses of over Y1tn over the past five years.
Moody’s Investors Service has today changed the outlook on Brazil’s Baa2 government bond rating to negative from stable. The change of outlook applies to all rating classes for “Brazil, Government of”, i.e. issuer ratings, government bond ratings and shelf ratings. The foreign currency and local currency country ceilings remain unchanged.
The rating action reflects the rising risk that sustained low growth and worsening debt metrics indicate a reduction in Brazil’s creditworthiness, which would trigger a downward migration in its credit rating.
The drivers of the outlook change are:
1. A sustained reduction in Brazil’s economic growth, which shows little sign of a return to potential in the near term;
2. A marked deterioration in investor sentiment which has negatively impacted fixed capital formation in Brazil; and
3. The fiscal challenges these economic headwinds pose, impeding the reversal of the upward trend in government debt indicators
At the same time, Moody’s has affirmed Brazil’s government bond rating at its current Baa2 level on account of the country’s continued resilience to external financial shocks given its international reserve buffers; the government balance sheet’s limited vulnerability to sudden changes in global risk appetite compared with its peers; and the underlying credit benefits derived from Brazil’s large and diversified economy.
Global rating agency Standard & Poor’s said it is evaluating policies of the Narendra Modi government for a review of India’s sovereign rating, now pegged at the lowest investment grade.
“We are evaluating the new government’s policies and are forming a view on the likelihood of their success,” S&P analyst Agost Benard told PTI when asked if the agency was contemplating a review of India’s sovereign rating. “Any rating implications or possible changes to the outlook on the rating will be communicated to the market and the media through the usual channels,” he said in the e-mail reply.
S&P representatives had recently held extensive discussions with the finance ministry officials. The agency, however, refused to share the details saying it is “confidential”.
The finance ministry officials had impressed upon the agency the government’s resolve to push economic reforms, promote growth and contain fiscal deficit at 4.1% in 2014-15, sources said.>> Read More
Standard & Poor’s slapped emerging markets with 70 sovereign and corporate credit rating downgrades in the second quarter, and awarded just 29 upgrades, but at least ratio of cuts to promotions is improving.
The downgrade-to-upgrade ratio eased to 2.4 times in the three months through June, compared to 5.3 times in the first three months of the year, the rating agency said in a report today.
The demotions were largely triggered by cuts to Argentina, Russia and South Africa’s sovereign ratings, as well as a dimmer view on Brazil’s banking sector.
Diane Vazza, head of Standard & Poor’s global fixed income research, said in the report.
Looking forward, the rating outlooks in the EEMEA region show the highest net negative bias, followed by emerging Asia and Latin America. Russian entities are driving the elevated negative bias in the EEMEA region, just as Indian entities are doing in emerging Asia, and Brazilian and Argentine entities are doing in Latin America.
Moody’s Investors Service has today downgraded the long-term issuer and debt ratings of Espirito Santo Financial Group S.A. (ESFG) to Ca from Caa2 and affirmed the short-term debt ratings at Not Prime; this rating action concludes the review for downgrade initiated on 26 June 2014, and extended on 9 July 2014.The downgrade of ESFG reflects the heightened risk of default of ESFG and significant losses for ESFG’s creditors as a result of very recent developments in ESFG and its troubled indirect shareholders (Espirito Santo International (ESI) and Rioforte, both unrated).
The downgrade of ESFG’s issuer rating to Ca reflects the heightened risk of default for the group, combined with the potential for significant losses for bondholders. This risk is reflected by ESFG’s high direct exposure to ESI and Rioforte, that amounted to EUR2.35 billion at end-June 2014. The precarious financial health of ESI and its subsidiaries was first evidenced on 9 July 2014, when ESI announced the restructuring of maturing debt that it would otherwise not be able to repay, and more recently on 15 July 2014 when Rioforte failed to repay EUR847 million of the matured commercial paper subscribed by Portugal Telecom, SGPS, S.A. In this context, Moody’s commented that the continuing opacity around the full financial health of the Espirito Santo group contributes to the heightened concerns about ESFG’s credit profile.
In addition to the heightened credit risk stemming from the exposure to its troubled shareholders, the increasingly limited financial flexibility of ESFG is also evidenced by the sale on 14 July 2014 of a 4.99% stake in Banco Espirito Santo, S.A. (BES; deposits B2 review for downgrade, BFSR E stable/BCA ca) to repay the obligations it had engaged under a margin loan subscribed at the time of the bank’s capital increase that concluded in June. Moody’s notes that ESFG also disclosed that 20.0% (out of a total 20.1%) of the remaining stake in BES is encumbered via a negative pledge, limiting the capacity of the holding company to raise further funds via the sale of the bank’s shares. >> Read More
Moody’s Investors Service has today downgraded the long-term issuer and debt ratings of Espirito Santo Financial Group S.A. (ESFG) to Caa2 from B2. The entity’s ratings remain on review for downgrade and the short-term ratings have been affirmed at Not Prime.
The downgrade reflects Moody’s view of a higher credit risk profile for ESFG following the increase in ESFG’s exposure to its indirect shareholders (Espirito Santo International (ESI) and Rioforte, both unrated) which it disclosed on 3 July 2014. Moody’s concerns regarding ESFG’s creditworthiness are heightened by the lack of transparency around both the Espirito Santo Group’s financial position and the extent of intra-group linkages including ESFG’s direct and indirect exposure to ESI.
For a full list of affected ratings, please refer to the end of this press release.
The overall creditworthiness of countries is still on a deteriorating path six years after the financial crisis, according to Standard & Poor’s half-yearly outlook.
The average sovereign credit rating has fallen by about one notch since 2008 to somewhere between the BBB and BBB- grades, right at the bottom end of the range known as “investment grade” and perilously close to “junk”.
Negative outlooks still markedly outnumber positive ones (23 to 5 by June 30), which indicates that downgrades will outpace promotions over the next year, S&P noted.
Nonetheless, on closer inspection there are some signs that the deterioration is not as bad as it appears at first blush, and that the trend may be turning somewhat less downbeat.
Part of the reason for the weakening average credit rating is that S&P has over the past six years begun rating a slew of countries in emerging and “frontier” markets, such as Africa, with many only garnering grades in the low single-B range. Weighted by GDP the average rating is currently just above A+. That is slightly down from the AA- peak in mid-2008 but up from a decade ago.
And while negative outlooks still outnumber positive ones, the ratio between the two has improved since the end of 2012 as the eurozone crisis receded. At the post-financial crisis nadir in 2009 negative views outnumbered positive ones by 35 countries, now it is only 18 (See second chart below).
Moody’s Investors Service says that the power sector would continue to be a source of asset quality risk for public and private-sector banks in India if the poor financial profiles of state electricity board distribution companies (discoms) do not improve through further structural reforms.
“The poor financial health of discoms in India is one of the key factors weighing on the asset quality of the country’s banks,” says Srikanth Vadlamani, a Moody’s Vice President and Senior Analyst.
“So far, these problems have almost exclusively affected public-sector banks, which represent more than 70% of total banking system assets, and which are directly and indirectly exposed to the credit quality of discoms,” adds Vadlamani.>> Read More
Moody’s Investors Service says that China’s Aa3 rating and stable outlook are underpinned by the country’s macroeconomic strengths as well as by its fiscal and external cushions, and that the rating agency expects the sovereign’s credit profile to withstand the rebalancing challenges.
Nonetheless, the success of policy measures will be critical for China’s ability to negotiate successfully the challenges which lie ahead. To that end, the government’s unfolding policy approach that favors long-term stability over short-term growth provides support to China’s sovereign credit profile.
China’s real GDP growth — according to Moody’s central scenario — will edge down into the 6.5%-7.5% range this year and the next, while the longer-term growth outlook hinges on the success of credit tightening policies and the pace of structural reforms.
Moody’s views were presented at the annual Moody’s & CCXI China Credit Risk Conference, with the theme: “Can China Weather the Risks of Rebalancing?” The conference takes place in Beijing today, and in Shanghai on Thursday 19 June.>> Read More