More Asia-Pacific issuers are set to topple out of investment grade, according to S&P Global Ratings.
Slowing growth and the prospect of a recession in key export markets of the US and Europe will likely hit the 2023 revenues across a swath of regional entities.
About two-thirds of ‘BBB’ rated firms continue to spend heavily in the face of macro strains, despite the possibility this may trigger downgrades, S&P explained.
S&P Global Ratings expected that as many as 26 of investment-grade issuers with about $210 billion of reported debt could become speculative grade–or potential fallen angels–over the next 12 months.
Fallen angels in horizon
“Fallen-angel risk has shifted to company spending and leverage choices rather than Covid-19 related weakness, as was the case 12 months ago,” S&P Global Ratings credit analyst Xavier Jean said.
While the pandemic was directly responsible for about half of issuers facing fallen-angel risk a year ago, only one firm is at risk of losing its investment-grade status primarily due to Covid factors this year.
Investors frequently ask us about the state of the speculative-grade market in China, particularly for property names, S&P said.