More companies were tossed into the investment junkyard during the first three months of this year than in all of 2015, as weak commodity prices helped to undermine once-solid corporate balance sheets.
Moody’s Investors Service, one of the world’s largest credit raters, said in a report that it pushed 51 companies out of its investment-grade category during the first quarter of 2016, a reflection of their increasing risk of default.
By comparison, Moody’s downgraded only 45 companies to below investment-grade status during all of last year. The surge in downgrades is a worrisome sign for a global economy that is still finding it difficult to generate robust growth seven years after the financial crisis ended.
Companies that have fallen from investment-grade respectability are known as fallen angels. An increasing number of such casualties suggests that credit quality is growing more fragile. Companies are becoming fallen angels at the fastest pace since the last crisis ended in 2009, raising concern that the current business cycle may be feeling its age.
“The pressure on commodity-linked industries and sovereign ratings were key drivers of the increased activity,” Moody’s said in explaining its recent downgrades.
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