S&P reviews Q1 US utility rating trends
By Our Corporate Bureau | 15 Apr 2002
Our Corporate Bureau
15 April 2002
New York: Standard & Poors (S&P) has published its review of first-quarter rating trends in the US utility industry.
In
the report, S&P credit analyst Barbara Eiseman says
while the trend in credit quality for the US utility industry
remains negative, the number of actual ratings actions
diminished somewhat in the first quarter of 2002, as S&P
revised the ratings of 19 companies (16 downgrades and
three upgrades among holding companies and operating subsidiaries).
This follows the torrid pace of the previous quarter (44 downgrades and seven upgrades) as well as the first quarter of 2001 (20 downgrades and eight upgrades). This years first quarter also witnessed numerous outlook changes to negative from stable and a handful of CreditWatch listings, most of which were negative.
The bleak credit picture can be traced primarily to weakening financial profiles, increasing business risk related to investments outside the traditional regulated utility business, stock repurchases, and faltering regulatory support. These trends, in turn, reflect companies strategies to deal with an increasingly competitive market, while seeking to enhance shareholder value in a more uncertain environment.
In just 12 months, the number of companies rated single-A and above has significantly declined while the number of firms rated triple-B and below has risen substantially. About 44 per cent of the industry now carries a triple-B category rating, while 6 per cent are rated below investment grade, including two companies that are rated D - compared with 40 per cent and 5 per cent, respectively, at the end of 31 March 2001. About 50 per cent of the companies in the utility industry carry ratings of single-A and above, versus 55 per cent one year earlier.
Nevertheless, the sector overall remains highly rated, certainly compared with the US industrials average double-B category rating. This reflects the large percentage of companies (87 per cent) that have average or above-average business profiles.
