Corporate debt is getting downgraded at a record pace unseen since the height of the Asian financial crisis of 1996. Sam Jones at FT Alphaville lays out some statistics about the rash of downgrades:
- 17 companies have had their debt been downgraded from investment grade to junk bond status in the past month alone. This is 300 times the historical average of six per months.
- So far in 2009, 34 companies have had their debt junked.
- That’s $114 billion of rated bonds pushed down into the junk bond market.
“The junk threshold is also critically important because many of the traditional long-only investors in corporate bonds, who might otherwise be a force for stability in the market, may become forced sellers: specific requirements on the percentage of high-yield assets they own may mean freshly junked bonds have to be sold,” Jones explains. “As for the coming months, S&P says 69 issuers (with $250.11bn of debt) are wavering in their angelic status.”