Moody's says upgrades narrowly outpace downgrades in second quarter

By Angela McDaniels

Seattle, July 10 - Global credit quality, as reflected in credit rating upgrades and downgrades, continued to be slightly positive overall during the second quarter of 2007, according to a Moody's Investors Service report.

The agency found that the ratio of upgrades to downgrades during the quarter was 1.1 to 1, essentially unchanged from the 1.09 to 1 ratio of the previous quarter.

Looking ahead, there are more issuers on review for downgrade than for upgrade and more negative outlooks than positive outlooks, Moody's said, with 4.6% of rated issuers on review for downgrade and 2.4% on review for upgrade. Similarly, 9.8% of rated issuers have negative outlooks, compared with 7.4% with positive outlooks.

"Although the distribution of rating reviews and outlooks appears less positive than the trend in rating actions, these indicators have been very stable over the previous five quarters," Moody's associate analyst Jennifer Tennant said in the report.

Also continuing a trend from the previous quarter, outlooks and reviews show that the credit outlook for investment-grade issuers is slightly more positive than for speculative-grade issuers, Tennant said, although both categories had more issuers on downgrade review than upgrade review.

Tennant added that during the second quarter, investment-grade ratings showed more stability than did speculative grade, which saw more downgrades and upgrades.

By region, Asia-Pacific and Latin America continued to show the most credit strength, with markedly more upgrades than downgrades and issuers on review for upgrade versus downgrade, the agency said. Europe also performed strongly during the second quarter, with the ratio of upgrades to downgrades at 2.25 to 1.

According to the report, the most active industries in terms of the number of rating actions during the quarter were automotive, consumer products, health care and technology. Among these, all but health care saw more downgrades than upgrades.

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