The Debt Doghouse Is Filling-Up Fast – -Junk Downgrades Soaring

The debt doghouse is filling up fast. More companies were downgraded to junk status by Moody’s in the first three months of the year than in the whole of 2015.
In total, 51 companies were pushed into junk territory, up from eight in the fourth quarter and 45 in 2015.
The sharp increase in number of so-called ‘fallen angels’ – as those companies stripped of their investment grade status are known – comes as focus intensifies on whether the current credit cycle, which began after the 2008-2009 financial crisis, is turning.
Pressure on borrowers’ balance sheets has been particularly acute among those exposed to the falling price of commodities.
Moody’s also blamed the travails of the commodities market on the significant swelling in the number of ‘potential angels’, or those companies at risk of being cut to junk.
The increase in the number pushed the amount of debt in ‘potential angel’ camp to $265bn by the end of March.
That is up from just $234bn at the end of the year and $105bn at the end of the first quarter in 2015.
Of the 51 companies that lost their investment grade at Moody’s in the first quarter, those from the oil and mining industries accounted for 22 of them.

This post was published at David Stockmans Contra Corner on April 22, 2016.