High-yield first timers continue to enter market, S&P says

By Reshmi Basu

New York, Feb. 17 - The number of high-yield first-time issuers continued to rise in 2003, according to a Standard & Poor's press release issued Tuesday.

With supply and demand conditions in unison, the number of first-time high-yield issuers for 2003 was 77, double the level of 2001. However, this number falls below 1997's annual high of 256.

But there are concerns that the rise of low-rated first time issues will have negative effects down the road, S&P said.

"This rising influx of lower rated issuers into the U.S. speculative-grade market spells caution for credit quality and defaults along the road," said Diane Vazza, head of S&P's Global Fixed Research Income Group, in a news release. "When the share of lower grade issuance (particularly at the B- level or lower) exceeds 30% for a sustained period of time, it generally serves as a reliable indicator of imminent default pressure two to three years ahead."

The gradual decrease in defaults will continue through 2004, lingering below the U.S. high-yield long-term average default rate of 5.3%, according to the release.

S&P says that the capital goods sector and utilities will face challenges in the market, given each of their negative outlooks. Upgrades are more likely to be found in the wireless telecommunications and real estate industries.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.