october 2008 moody’s rating actions, reviews and … · moody’s global special comment ......

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Credit Policy Moody’s Global

Special Comment

Table of Contents: Figure 1: Downgrade/Upgrade Ratio, Rating

Drift and Outlook Distribution 3 Figure 2: Rating Reviews and Actions Since Jan, 1996 3 Figure 3: Rating Actions, Reviews and Outlooks as of September 30, 2008 4 Figure 4: Rating Actions, Reviews and Outlooks as of September 30, 2008 5 Figure 5: Rating Actions, Reviews and Outlooks as of September 30, 2008 6 Figure 6: Distribution of Actions, Reviews and Outlooks by Broad Industry Sector 7 Figure 7: Distribution of Rating Actions, Reviews and Outlooks by Broad Rating Category 7 Figure 8: Distribution of Rating Actions, Reviews and Outlooks by Regions 8 Figure 9: Rating Actions, Reviews and Outlooks by Sector 9 Figure 10: Rating Actions, Reviews and Outlook by Rating 10 Figure 11: Rating Actions, Reviews and Outlook by Region 10 Moody’s Related Research 11

Analyst Contacts:

New York 1.212.553.1653

0 Jennifer Tennant Analyst

0 Kenneth Emery Senior Vice President

0 Richard Cantor Group Managing Director

October 2008

Moody’s Rating Actions, Reviews and Outlooks: Quarterly Update – Third Quarter 2008

This Special Comment presents recent changes in the credit quality of Moody’s rated corporate, sovereign and banking issuers on a global basis. Changes in credit quality are measured by the number of issuers upgraded or downgraded, placed on review for upgrade or downgrade, or assigned positive or negative outlooks. This report presents information on credit quality trends by different regions, industries and rating categories. Key findings are as follows:

During the third quarter of 2008, overall credit quality continued its negative trajectory, with an upgrade-downgrade ratio of 0.24.

The number of rated issuers on review for downgrade doubled in the third quarter. At the end of the third quarter of 2008, 8.9% of rated issuers were on review for downgrade, up from 4.2% at the end of the second quarter. Both of these percentages are higher than the corresponding reviews for upgrade, which stood at 1.2% of rated issuers at the end of the third quarter. Similarly, a greater percentage of issuers held negative outlooks than positive ones. At the end of the third quarter, 14.7% of rated issuers were given negative outlooks, compared with 5.3% with positive outlooks.

Continuing the trend from the previous quarter, the credit outlook for investment-grade issuers was slightly more positive than for speculative-grade issuers. As in the recent past, both categories had more issuers on review for downgrade than for upgrade. Investment-grade issuers show more stability with speculative-grade issuers more likely than investment-grade issuers to experience downgrades and upgrades in the third quarter of 2008. Speculative-grade issuers were also much more likely than investment-grade issuers to hold negative outlooks.

2 October 2008 Special Comment Moody’s Global Credit Policy - Moody’s Rating Actions, Reviews and Outlooks: Quarterly Update – Third Quarter 2008

Special Comment Moody’s Global Credit Policy


Regardless of the region, there are more issuers on review for downgrade than review for upgrade, although the United States and Canada is the region with the largest disparity, with a ten-to-one watch-for-downgrade/watch-for-upgrade ratio. The United States, Canada and Europe are the regions with the largest percentage of negative outlooks and watches for downgrade. On a positive note, Middle East and Africa is the region with the largest percentage of positive outlooks and Latin America had the highest percentage of rated issuers on watch for upgrade.

There were differences in rating actions and outlooks by industry. Airlines, Non-Life Insurance, Real Estate and Construction, Retail, Banks and BHCs and Finance, Securities and Leasing all had large proportions of downgrades in the third quarter of 2008, with the last two industries having the largest absolute number of downgrades. All of these industries also currently have many more issuers on review for downgrade than review for upgrade. These rating actions and reviews highlight the recent financial crisis and continued problems in residential real estate markets.

These data do not reflect issuer rating changes that were driven by previous changes in methodology (rather than company fundamentals) such as the application of joint default analysis for banks and sub-sovereign or introduction of loss-given-default assessments for speculative-grade issuers in the US and Europe.


Special Comment Moody’s Global Credit Policy


Figure 1: Downgrade/Upgrade Ratio, Rating Drift and Outlook Distribution

Distribution of Watchlist & Outlooksshare of issuers

8.9%

5.3%

1.2%

5.6%

3.8%

13.1

%

6.1%

1.8%

14.7

%

4.2%

1.9%

13.9

%

0 .0 %

5 .0 %

1 0 .0 %

1 5 .0 %

2 0 .0 %

2 5 .0 %

3 0 .0 %

Watch-Dow n Negativ e Outlook Positiv e Outlook Watch-Up

Sep08Jun08Mar08

Downgrade/Upgrade RatioLHS Scale,3-m onth moving average

1

3

5

7

96 97 98 99 00 01 02 03 04 05 06 07 08-6%

-4%

-2%

+0%

+2%

+4%

+6%

-3

-5

-7

Rating Drift% issuers , 3-m onth moving average

Figure 2: Rating Reviews and Actions Since Jan, 1996

Share of Issuers on Review

10.0%

7.5%

5.0%

2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

96 97 98 99 00 01 02 03 04 05 06 07 08

Upgrade Dow ngrade

Monthly Rating Actions(% issuers,3-month moving average)

3%

2%

1%

0%

1%

2%

3%

96 97 98 99 00 01 02 03 04 05 06 07 08

Upgrade Dow ngrade


Special Comment Moody's Global Credit Policy


Figure 3: Rating Actions, Reviews and Outlooks as of September 30, 2008

as a percentage of rated issuers in each sector

Number of rated issuers

Outlook currently

stable

Currently on review

for upgrade

Outlook currently positive

Upgrades in past 3 months

Upgrades in year 2008


Average annual

upgrades (1985-2008)

Currently on review for downgrade

Outlook currently negative

Downgrades in past 3 months

Downgrades in year 2008


Average annual

downgrades (1985-2008)

Aerospace & Defense 56 71% 3.6% 14.3% 0.0% 0.0% 2.0% 8.1% 5.4% 5.4% 3.4% 3.6% 3.9% 13.2%

Airline 23 17% 0.0% 8.7% 0.0% 0.0% 0.0% 8.3% 39.1% 34.8% 33.3% 40.9% 45.5% 21.7%

Automotive 153 55% 0.0% 19.1% 1.9% 6.3% 7.0% 8.9% 2.6% 23.0% 6.4% 10.7% 12.7% 17.4%

Banks & BHCs 772 78% 1.3% 2.5% 0.4% 2.1% 11.3% 11.5% 9.2% 8.2% 7.2% 10.8% 8.1% 11.0%

Building Materials 46 52% 0.0% 4.3% 0.0% 0.0% 2.6% 7.2% 8.7% 34.8% 0.0% 2.6% 5.3% 14.2%

Capital Goods 179 71% 1.7% 6.1% 0.6% 4.9% 9.1% 7.3% 2.2% 19.0% 6.1% 11.4% 12.8% 12.2%

Chemicals 151 68% 0.0% 7.3% 2.6% 8.6% 9.6% 7.0% 12.6% 12.6% 1.9% 8.0% 9.6% 12.1%

Consumer Products 305 67% 0.7% 3.6% 2.6% 4.2% 5.1% 7.1% 6.9% 21.8% 5.2% 11.9% 16.3% 15.4%

Energy 455 83% 1.1% 3.3% 1.1% 2.2% 5.0% 9.7% 4.8% 7.0% 1.1% 2.6% 3.3% 11.7%

Finance, Securities & Leasing 416 60% 1.7% 2.4% 1.5% 2.7% 4.7% 10.9% 16.6% 18.9% 10.7% 21.8% 27.3% 10.8%

Forest Products 77 53% 2.6% 5.2% 1.3% 2.5% 2.4% 6.8% 3.9% 35.1% 2.6% 18.5% 19.0% 18.5%

Health Care 171 71% 0.6% 4.7% 0.6% 3.4% 4.2% 7.6% 1.8% 22.2% 1.2% 7.4% 10.1% 11.2%

Hotels, Gaming and Leisure 85 55% 0.0% 3.5% 1.2% 1.1% 1.2% 8.3% 14.1% 27.1% 13.1% 18.2% 18.8% 14.2%

Life Insurance 76 82% 0.0% 5.3% 3.9% 3.9% 6.4% 9.4% 7.9% 5.3% 2.6% 5.2% 5.1% 9.3%

Media & Entertainment 225 60% 0.0% 8.9% 0.4% 3.5% 3.9% 9.0% 7.1% 23.6% 5.8% 17.7% 17.0% 15.8%

Metals & Mining 121 66% 1.7% 10.7% 4.9% 8.8% 14.8% 10.0% 4.1% 17.4% 0.8% 5.6% 8.2% 13.1%

Non-Life Insurance 212 72% 1.4% 2.8% 1.4% 5.0% 6.8% 6.6% 14.6% 9.4% 10.2% 13.8% 14.1% 12.2%

Other Financial 210 76% 0.0% 2.4% 0.0% 1.4% 3.3% 8.7% 9.0% 11.4% 5.8% 9.4% 11.3% 11.4%

Other Non-Financial 188 68% 2.1% 6.9% 0.0% 3.3% 3.9% 6.1% 5.9% 17.6% 5.4% 8.7% 11.7% 14.1%

Other Transportation 161 83% 0.6% 1.9% 2.4% 4.9% 7.8% 5.7% 3.7% 11.2% 6.1% 12.2% 15.1% 10.9%

Packaging 45 67% 0.0% 20.0% 2.1% 12.5% 15.2% 6.3% 0.0% 13.3% 4.3% 6.3% 8.7% 17.6%

Real Estate Finance 25 77% 4.0% 3.8% 0.0% 0.0% 0.0% 6.7% 4.0% 7.7% 4.2% 12.5% 12.0% 14.4%

Real Estate and Construction 101 65% 1.0% 4.0% 1.0% 2.0% 2.1% 7.1% 2.0% 27.7% 10.0% 22.8% 26.3% 14.1%

Retail 174 62% 0.6% 4.6% 0.0% 2.3% 2.9% 7.8% 6.9% 25.9% 9.7% 16.4% 15.5% 16.6%

Sovereign 246 86% 0.8% 7.7% 1.2% 5.5% 7.6% 8.6% 2.4% 2.8% 0.4% 2.1% 2.5% 4.5%

Technology 159 71% 1.3% 8.8% 1.3% 5.8% 5.6% 7.5% 4.4% 14.5% 3.8% 6.4% 8.8% 13.4%

Telecom 244 62% 2.5% 9.8% 2.9% 5.7% 8.7% 9.9% 13.9% 11.5% 2.9% 7.7% 9.5% 13.9%

Thrifts 17 65% 11.8% 0.0% 0.0% 0.0% 0.0% 6.4% 11.8% 11.8% 11.8% 23.5% 23.5% 14.5%

Utilities 405 59% 2.7% 4.4% 1.2% 1.5% 4.3% 9.1% 21.7% 12.1% 1.2% 5.8% 7.3% 11.3%

All sectors 5498 70% 1.2% 5.3% 1.3% 3.6% 5.3% 8.7% 8.9% 14.7% 5.2% 10.6% 12.4% 12.6%





as a percentage of rated issuers in each region


Outlook currently

stable

Currently on review

for upgrade





Average annual


Currently on review for

downgrade





Average annual


US & Canada 2923 67% 1.0% 4.8% 1.2% 3.4% 4.9% 8.5% 10.6% 16.9% 5.6% 12.0% 13.9% 13.3%

Europe 1445 70% 1.2% 6.3% 1.2% 3.4% 5.3% 8.0% 8.7% 13.1% 5.9% 10.7% 13.0% 11.4%

Asian Pacific 600 76% 0.7% 6.2% 1.0% 3.9% 6.5% 9.9% 5.0% 12.0% 2.7% 5.8% 7.5% 11.1%

Latin America 450 77% 3.6% 4.7% 2.4% 5.5% 7.1% 11.9% 5.1% 8.9% 4.6% 7.8% 7.8% 12.5%

Middle East & Africa 65 72% 1.5% 7.7% 0.0% 1.6% 3.4% 9.2% 1.5% 16.9% 1.6% 6.3% 10.3% 8.0%

Supranational 15 100% 0.0% 0.0% 0.0% 0.0% 0.0% 0.3% 0.0% 0.0% 0.0% 0.0% 0.0% 1.0%

All regions 5498 70% 1.2% 5.3% 1.3% 3.6% 5.3% 8.7% 8.9% 14.7% 5.2% 10.6% 12.4% 12.6%





as a percentage of rated issuers in rating category


Outlook currently

stable

Currently on review

for upgrade





Average annual


Currently on review for

downgrade





Average annual


Aaa 217 90% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.3% 7.4% 0.0% 8.5% 13.7% 7.5%

Aa1 276 74% 0.0% 1.4% 0.0% 0.3% 0.0% 2.6% 18.5% 5.1% 4.9% 8.7% 12.7% 12.0%

Aa2 262 72% 0.4% 1.1% 0.4% 1.5% 4.7% 5.5% 6.9% 18.9% 9.1% 16.9% 16.7% 11.8%

Aa3 254 80% 0.0% 1.6% 0.0% 0.0% 0.4% 5.8% 9.8% 7.9% 13.6% 15.4% 20.9% 12.2%

A1 359 80% 1.9% 2.2% 0.3% 1.6% 2.7% 6.4% 6.4% 8.9% 9.9% 14.3% 14.8% 11.2%

A2 433 73% 1.6% 3.2% 1.2% 4.3% 4.6% 6.6% 9.9% 12.2% 2.5% 8.1% 10.4% 11.7%

A3 402 68% 1.0% 11.5% 0.7% 2.1% 3.1% 9.2% 12.7% 6.7% 2.2% 4.2% 5.6% 11.6%

Baa1 370 71% 0.8% 4.3% 1.1% 3.5% 7.0% 9.5% 13.8% 9.7% 2.1% 6.1% 7.0% 12.5%

Baa2 407 73% 0.5% 6.1% 0.7% 1.8% 6.9% 10.5% 11.3% 9.3% 1.2% 3.8% 6.1% 10.3%

Baa3 316 67% 1.9% 5.4% 2.4% 4.7% 7.0% 12.5% 9.2% 16.7% 1.5% 3.1% 4.6% 11.1%

Ba1 187 77% 0.5% 6.4% 1.1% 3.7% 5.6% 13.3% 7.5% 8.6% 4.2% 9.6% 13.2% 13.1%

Ba2 213 65% 2.8% 12.2% 0.9% 3.1% 4.3% 12.9% 8.0% 12.2% 3.3% 8.8% 10.9% 14.6%

Ba3 221 62% 4.5% 11.8% 2.8% 8.5% 12.8% 10.7% 5.4% 15.8% 4.1% 13.2% 11.9% 16.3%

B1 289 68% 2.8% 8.3% 3.8% 7.3% 11.6% 10.9% 5.2% 15.9% 4.1% 12.0% 14.3% 16.7%

B2 344 69% 1.5% 6.1% 2.0% 6.0% 8.9% 10.7% 4.7% 18.6% 4.6% 16.1% 18.1% 17.7%

B3 467 65% 0.2% 5.8% 1.4% 5.1% 6.1% 10.4% 6.2% 23.0% 8.1% 14.8% 16.6% 16.1%

Caa-C 481 49% 1.5% 4.4% 2.0% 5.1% 7.4% 10.4% 9.4% 36.0% 11.2% 16.3% 16.6% 10.3%

Investment Grade 3296 74% 0.9% 4.2% 0.8% 2.2% 3.5% 7.3% 10.4% 10.3% 4.4% 8.5% 10.4% 11.3%

Speculative Grade 2202 63% 1.7% 7.1% 2.0% 5.6% 8.1% 11.2% 6.7% 21.2% 6.5% 13.8% 15.5% 15.0%

All ratings 5498 70% 1.2% 5.3% 1.3% 3.6% 5.3% 8.7% 8.9% 14.7% 5.2% 10.6% 12.4% 12.6%


Special Comment Moody's Global


Figure 6: Distribution of Actions, Reviews and Outlooks by Broad Industry Sector

On Review for Dow ngrade

Capital Indust ries

35%

Consumer Indust ries

24%

Financials41%

Last Quarter Dow ngrades


28%

Financials48%

Capital Indust ries

24%

Negative Outlook

Capital Indust ries

37%


39%

Financials24%

Last Quarter Upgrades

Capital Indust ries

47%


30%

Financials23%

On Review for Upgrade

Capital Indust ries

41%


24%

Financials35%

Positive Outlook

Capital Indust ries

47%


37%

Financials16%

Financial: Banks & BHCs, Finance & Securities & Leasing, Life Insurance, Non-life Insurance,

Other Financial, Real Estate Finance, Thrifts Capital-intensive Industries: Aerospace & Defense, Airline, Automotive, Building Materials, Capital

Goods,Chemicals,Energy,Forest Products, Metals & Mining, Other Transportation, Packaging, Real Estate & Construction, Utilities

Consumer Industries: Consumer Products, HealthCare, Hotels, Gaming & Leisure, Media & Entertainment,Other Non-Financial, Retail, Technology, Telecom

Figure 7: Distribution of Rating Actions, Reviews and Outlooks by Broad Rating Category

Dow ngrades, on review s for dow ngrades, negative outlooks

0%

20%

40%

60%

80%

Investment Grade Speculative GradeAs a % of all rated issuersAs a % of all dow ngrades over past 3 monthsAs a % of all review s for dow ngradeAs a % of negative outlooks

Upgrades, on review s for upgrades, positive outlooks

0%

20%

40%

60%

80%

Investment Grade Speculative GradeAs a % of all rated issuersAs a % of all upgrades over past 3 monthsAs a % of all review s for upgradeAs a % of all positive outlooks




Figure 8: Distribution of Rating Actions, Reviews and Outlooks by Region

Dow ngrades, on review s for dow ngrades, negative outlooks

0%

20%

40%

60%

80%

US &Canada

Europe AsianPacif ic

LatinAmerica

Other

As a % of global rated issuersAs a % of all dow ngrades over past 3 monthsAs a % of all review s for dow ngradeAs a % of all negative outlooks

Upgrades, on review s for upgrades, positive outlooks

0%

20%

40%

60%

US &Canada

Europe AsianPacif ic

LatinAmerica

Other

As a % of global rated issuersAs a % of all upgrades over past 3 monthsAs a % of all review s for upgradeAs a % of all positive outlooks




Figure 9: Rating Actions, Reviews and Outlooks by Sector

Last 12 Months Rating Actions

30% 20% 10% 0% 10% 20%

Airline

Finance, Securit ies & Leasing

Real Estate and Const ruct ion

Thrif t s

Forest Products

Hotels, Gaming and Leisure

M edia & Entertainment

Consumer Products

Retail

Other Transportat ion

Non-Life Insurance

Capital Goods

Automot ive

A ll Sectors

Banks & BHCs

Real Estate Finance

Other Non-Financial

Other Financial

Health Care

Chemicals

Telecom

M etals & M ining

Technology

Packaging

Ut ilit ies

Build ing M aterials

Life Insurance

Aerospace & Defense

Energy

Sovereign

Dow ngraded Upgraded

Last Quarter Rating Actions

40% 35% 30% 25% 20% 15% 10% 5% 0% 5% 10%

A irline


Thrif ts


Non-Life Insurance


Retail

Banks & BHCs

Automot ive


Capital Goods


Other Financial

Other Non-Financial

A ll Sectors

Consumer Products

Packaging

Real Estate Finance

Technology

Aerospace & Defense

Telecom

Life Insurance

Forest Products

Chemicals

Ut ilit ies

Health Care

Energy

M etals & M ining

Sovereign



Reviews and Outlooks

80% 60% 40% 20% 0% 20% 40%

Airline



Forest Products


Ut ilit ies

Retail



Consumer Products

Automot ive

Telecom

Chemicals

Non-Life Insurance

Health Care

ALL SECTORS

Thrif ts

Other Non-Financial

Other Financial

M etals & M ining

Capital Goods

Technology

Banks & BHCs

Real Estate Finance


Packaging

Life Insurance

Energy

Aerospace & Defense

Sovereign

Negative Outlook Watch_Dow nPositive Outlook Watch_Up




Figure 10: Rating Actions, Reviews and Outlook by Rating

as a percentage of all issuers in each rating category


20% 10% 0% 10%

Aaa

Aa

A

Baa

Ba

B

Caa-C



15% 10% 5% 0% 5%

Aaa

Aa

A

Baa

Ba

B

Caa-C



50% 40% 30% 20% 10% 0% 10% 20%

Aaa

Aa

A

Baa

Ba

B

Caa-C


Figure 11: Rating Actions, Reviews and Outlook by Region

as a percentage of issuers in each region


15% 10% 5% 0% 5% 10%

Asian Pacif ic

Europe

Latin America

Middle East &Af rica

US & Canada

Supranational



15% 5% 5% 15% 25%

Asian Pacif ic

Europe

Latin America


US & Canada

Supranational



30% 20% 10% 0% 10% 20%

Asian Pacif ic

Europe

Latin America


US & Canada

Supranational





Moody’s Related Research

Special Comments: Moody's Rating Actions, Reviews and Outlooks: Quarterly Update - Second Quarter 2008

July 2008 (109849)

Moody's Rating Actions, Reviews and Outlooks: Quarterly Update – First Quarter 2008, April 2008 (108473)

Moody's Rating Actions, Reviews and Outlooks: Quarterly Update – Fourth Quarter 2007 January 2008 (106877)

Moody's Rating Actions, Reviews and Outlooks: Quarterly Update – Third Quarter 2007 October 2007 (105111)

Moody's Rating Actions, Reviews and Outlooks: Quarterly Update – Second Quarter 2007, July 2007 (103773)

Moody's Rating Actions, Reviews and Outlooks: Quarterly Update – First Quarter 2007, April 2007 (102719)

Moody's Rating Actions, Reviews, and Outlooks: Quarterly Update – Fourth Quarter 2006, January 2007 (101761)

Moody's Rating Actions, Reviews, and Outlooks: Quarterly Update – Third Quarter 2006, October 2006 (100144)

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. All research may not be available to all clients.

http://www.moodys.com/cust/getdocumentByNotesDocId.asp?criteria=PBC_109849



















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Report Number: 111847

Author Production Associates Jennifer Tennant

Fabian Alvarez

october 2008 moody’s rating actions, reviews and … · moody’s global special comment ......

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