Chennai: Despite some recent hints of stabilising credit quality in the US and emerging markets, the number of global bond issuers with rising star potential continues to slip, states a Standard and Poors (S&P) study.

A rising star is an issuer whose credit rating rises to triple-B-minus or above from double-B-plus or below, hence making the move to the investment-grade rating category from the speculative-grade rating category.

The continuing decline, which began in 1997, is not surprising given that in the past four years downgrades have outpaced upgrades. In the near term, the potential number of rising stars in the US is expected to remain limited, with outlooks on US corporate ratings being 31 per cent negative, 63 per cent stable, and only 6 per cent positive.

In emerging markets, the outlook distribution is 27 per cent negative, 62 per cent stable, and 11 per cent positive. S&P has identified 19 issuers around the globe with rising star potential, 10 fewer than the number identified three months earlier.

Sixteen issuers, with bonds outstanding totalling $23.0 billion, have risen to the investment-grade category from the speculative grade in the first quarter of 2002. In contrast, 15 issuers, with bonds totalling $19.3 billion, have fallen to the speculative-grade category from the investment grade. In the past 15 years, there have been 417 ($329 billion) rising stars and 393 ($391 billion) fallen angels.

Year-to-date, there have been 16 rising stars with debt totalling $23.0 billion, most of which were due to the 7 February 2002 sovereign upgrade of Mexico (10 issuers on $12.8 billion). There were also four US, one Korean and one Hong Kong issuers, finds the study.

By sector, there were 11 industrial issuers ($19.2 billion) and one each in the following sectors: telecommunications ($2.5 billion), financial institutions ($0.3 billion), infrastructure finance ($0.1 billion), utilities ($0.8 billion), and sovereigns. The largest were Petroleos Mexicanos ($7.8 billion) and HCA Inc ($7.8 billion).

Currently, S&P has 19 issuers globally that are rated double-B-plus and are on CreditWatch with positive implications or are rated double-B-plus and have positive outlooks. This rating and CreditWatch implication/rating outlook combine for the highest in the speculative-grade category.

The five global issuers rated double-B-plus/Watch Pos are industrial. Three are US issuers, and there is one each from Germany and the UK. Of the 14 global issuers rated double-B-plus/positive, 10 are industrials and four are financial institutions. Within the industrial sector, two are consumer products, two healthcare, two media and entertainment, and there is one each in forest products and building materials, metals, mining and steel, oil and gas exploration and production, and retail/restaurants. Nine are US issuers.

Since S&Ps last commentary on rising stars 14 issuers on the list were upgraded to the investment grade, one issuer was downgraded to double-B with a stable outlook, one issuers outlook was revised to stable, and 13 issuers remain on the current list. There are six new issuers on the current list.

BB+ rated issuers on CreditWatch with positive implications:

BB+ rated issuers with positive outlooks:

*Cap. Goods - Capital goods.
Cons. Prod - Consumer products.
CP&ES - Chemicals, packaging & environmental services.
Health - Health care.
M&E - Media & entertainment.
MM&S - Metals, mining & steel.
Oil & Gas - Oil & gas exploration & production.
Transport - Transportation.