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Fallen angel number rises, S&P report says
By Jennifer Chiou
New York, Dec. 11 - Standard & Poor's said 46 fallen angels - issuers that were downgraded to speculative grade (BB+ and lower) from investment grade (BBB- and higher) - with $67.1 billion of rated debt have been recorded this year through Dec. 6.
The figure is an increase of six from November's report, when the agency reported 40 fallen angels with $58 billion or rated debt.
In addition, 43 issuers globally with rated debt totaling $76.4 billion are at risk of becoming fallen angels, the agency said. This number is unchanged from last month, but fewer than in December 2005.
"Fallen angels' share of total downgrades increased to 10% in the year to date, compared with 8% in 2005 and 6% in 2004," Diane Vazza, head of S&P's global fixed-income research group, said in an agency news release.
Vazza added that fallen angel activity should accelerate in line with the anticipated economic slowdown.
S&P previously reported that although fallen angels are relatively rare in any single year - constituting only 2.19% of the total count of investment-grade issuers each year on average from 1981 to 2004 - the behavior of issuers positioned in these threshold categories bears market significance because the cumulative share of bonds in these threshold categories to the total outstanding is substantial, both by count and dollar amount.
On a relative-value basis, fallen angels are important to investors because they outperform their peers as an asset class, albeit with greater variability, and movement between these threshold categories has important market implications for the cost of borrowing among issuers, the agency said.
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