Consumer Discretionary Sectors Remain Most At Risk For Downgrades

16 November S&P

NEW YORK Nov. 16, 2006--The number of entities at risk of potential downgrades reached 646 in mid November, according to an article published today by Standard & Poor's Ratings Services. The article, which is titled "Downgrade Potential Across Credit Grades And Sectors," says that this is 17 fewer than the number reported last month and seven fewer than the average of the last 12 months.

Of the total number of entities, 82% are based in the U.S. or Europe, 67% of which are in the U.S. The media and entertainment, telecommunications, automotive, and health care sectors have the highest ratio of issuers with a negative bias relative to their respective total rated universe. These sectors--the same as a month ago--are therefore most vulnerable to credit-quality deterioration.

"Many of the entities at risk of potential downgrades are in the consumer discretionary domain, where momentum is expected to decelerate," noted Diane Vazza, head of Standard & Poor's Global Fixed Income Research. (Examples of this domain include media and entertainment, automotive, consumer products, high technology and retail/restaurants.) "These sectors will feel increased pressure as a result of greater consumer indebtedness, growing uncertainty about the housing outlook, and high energy prices," Ms. Vazza added.

Among industrial issuers listed with a negative bias, integrated oil and gas companies appear least vulnerable, with no issuers listed with a negative bias as of Nov. 14, 2006. Of the 646 companies at risk for potential downgrades globally, 59% are speculative grade, with those rated 'B+' most vulnerable to downgrades at 114 companies (18% of the total).