The number of global high-grade issues rated triple-B minus with a negative outlook has risen to 46, indicating that the pace of new fallen angels may pick up later this year, according to Standard & Poor's. Most vulnerable to future downgrades to junk are high technology, insurance and media and entertainment, said Diane Vazza, managing director and head of global fixed-income research.
Specifically, six high-tech companies are at risk: Computer Associates International, Electronic Data Systems, Amdocs Ltd., Anixer International, Arrow Electronics and Avnet Inc. Vazza explained slower technology spending and increased pricing pressure have continued to squeeze companies in the sector. The insurance sector also contains six issuers susceptible to downgrade, with property/casualty insurance companies most at risk. The vulnerable insurance issuers include Converium Holdings and CNA Financial.
To date, 19 high-grade companies have had their debt ratings slashed to speculative grade, compared to 42 and 51 at corresponding points in 2003 and 2002, respectively, according to a report from S&P. Vazza expects this year's fallen angel tally to remain below last year's count given the economic recovery.
