S&P: Negative view for four U.S. development firms

Standard & Poor’s said it revised the outlooks to negative from stable for Ares Capital Corp., FS Investment Corp., Prospect Capital Corp. and Fifth Street Finance Corp.

The agency also said it affirmed the issuer and issue credit ratings on each company.

These rating actions follow a review of U.S. business development companies, S&P said.

Cracks in the leveraged loan market have emerged in the past few quarters, indicated by spreads widening in the speculative-grade market and a slowdown of the collateralized loan obligation (CLO) market, the agency explained.

Depressed oil prices and higher loan losses have contributed to the weakness, S&P added.

The outlook revisions are due to the companies’ vulnerability to these conditions, especially for those companies with higher exposure to energy sectors, the agency said.

These companies will continue to post higher non-accrual rates and losses if oil and gas prices remain near currently low levels for an extended period, S&P said.

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