In 2023, global rating agencies will downgrade global companies 1,409 times, an increase of 8% year-on-year. The number of rating upgrades exceeded for 2 consecutive years (1001 times). Against the backdrop of high interest rates and declining consumer purchasing power, the credit ratings of otherwise financially fragile businesses are declining.
The Nihon Keizai Shimbun (Chinese version: Nikkei Chinese Net) has compiled the ratings of global bond issuers (about 10,000 companies excluding financials) adjusted by the U.S. rating agency S&P Global Ratings and Moody's Investors Service.
The number of downgrades in 2023 has increased for the second year in a row. In 2020, when the coronavirus pandemic spread, there were 3,042 cases, which surged about twice as much as in 2019, and decreased to 891 times in 2021 against the backdrop of economic stimulus measures and monetary easing in various countries. After 2022, with the rapid rate hikes by central banks in Europe and the United States, the rating downgrades have increased again.
Nearly 90% of the downgrades were originally rated as junk and below BB companies. At a time when debt is at a high level, interest rates are high, and the burden of interest payments becomes heavy.
By sector, retail and catering companies have been downgraded more. The effects of inflation's reduced purchasing power for consumers are being felt.
Standard & Poor's downgraded 99 Cents Only Stores, a U.S. discounter, from "CCC" to "Selective Default (SD)" indicating that part of the debt cannot be repaid.
Moody's downgraded the credit rating of food giant B&G Foods from "CAA1 (CCC)" to "CAA2".
The downgrade in the real estate sector is also prominent. Standard & Poor's is looking at downgrading Swedish real estate companies to "selective defaults" on SBB. In November 2023, Moody's downgraded Chinese real estate company Vanke by two notches.
Country Garden Holdings, China's largest real estate company, which was downgraded by Moody's in August 2023, has been identified as a debt default by international financial groups.
By region, the United States has the most downgrades, accounting for 6% of the total. The background is that the market for high-yield bonds (low-rated bonds) is well developed, and it is common for lower-rated companies to issue corporate bonds. In addition, 6% in the UK, 3% in Canada and 1% in China.