Sprint Nextel Tops S&P List of Potential “Fallen Angels”
With more than $24 billion in rated debt, Sprint Nextel Corp. (NYSE: S) tops the list of 42 potential “fallen angels” in Standard & Poor’s ranking of debt-challenged entities.
However, in a March 19 analysis CreditSights said it does not believe the company has liquidity issues and upgraded it to Marketweight.
Potential fallen angels are defined as entities rated ‘BBB-’ with either a negative outlook or on CreditWatch with negative implications. This year’s tally representing $91.66 billion of rated debt is higher than the annual average count of potential fallen angels of 39 in 2007 and one less than 43 in 2006.
However, the rate of actual fallen angels (as a proportion of total-rated credits) is presently running well below last year’s levels and those in 2001-2002, the last recessionary period, S&P said.
With three out of four fallen angels surfacing in this report, however, we expect these levels to accelerate over the course of this year.
Sectors poised to lead in fallen angels include forest products and building materials and utilities, with five entities each. Retail and restaurants trail behind with four entities, and homebuilders and real estate, consumer products, and transportation sectors, typically more susceptible to recession risk, also show a high preponderance for downgrade pressure.
Currently, roughly one-quarter of entities likely to lose their investment-grade status are affected by acquisition-related risk—exactly one-half that of our midyear report in 2007.
The premium version of S&P’s fallen angels report contains expanded analysis of the most significant points, typically broken out by sector and region. Also in the premium version are in-depth charts and tables, the underlying data of which are available for download.
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