Please ensure Javascript is enabled for purposes of website accessibility

S&P Global Reports Record Number of Potential Downgrades

By Bram Berkowitz - Updated May 28, 2020 at 7:50AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In total, 1,287 of S&P’s ratings are now on a downgrade warning, more than in April 2009.

Nearly 80 banks all over the world and a number of prominent countries such as Australia, Chile, Mexico, and South Africa are facing potential credit deterioration because of the coronavirus, according to a new S&P Global Ratings report. 

S&P Global has identified 1,287 potential credit downgrades around the world in its latest credit update, more than doubling its total in two months -- and even coming in higher than the previous record set in April 2009, during the financial crisis.

The ratings agency said that of the 550 new potential downgrades that emerged over the past month, some 90% were attributable to the coronavirus pandemic. The threat timeline for official downgrades ranges from 90 days (for entities under the CreditWatch designation) to two years (for entities with a negative outlook).

Credit Cards

Image Source: Getty Images

S&P issued 492 credit downgrades in the first quarter, but 415 in just the first 28 days of the second quarter. 

"We expect heavy credit erosion in coming months as issuers, especially those in the lower-rated spectrum come under heavy fire from poor earnings, continued difficulties in managing cost structures, and market volatility," S&P said.

Credit ratings are important because they show investors how likely a country or company is to repay their debt, and also includes any political risk. Additionally, a good sovereign credit rating is very important for developing countries that want to access the international bond markets.

Media and leisure firms, carmakers, and transportation companies saw the highest percentage of at-risk ratings, according to S&P's analysis, while hotels and entertainment firms had the highest percentage of CreditWatch negatives to potential downgrades.

 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
323%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.