234.33 0.00 (0.00%)
After hours: 5:18PM EDT
|Bid||233.85 x 1300|
|Ask||237.90 x 1800|
|Day's range||233.41 - 239.44|
|52-week range||186.06 - 312.94|
|Beta (5Y monthly)||1.02|
|PE ratio (TTM)||27.25|
|Earnings date||29 Apr 2020 - 03 May 2020|
|Forward dividend & yield||2.68 (1.09%)|
|Ex-dividend date||24 Feb 2020|
|1y target est||283.36|
(Bloomberg) -- An unprecedented amount of leveraged loan downgrades could wreak havoc on collateralized loan obligations.Take the once high-flying Cirque Du Soleil Inc. Within weeks of the acrobatic-entertainment company canceling Las Vegas and touring shows, Moody’s Investors Service and S&P Global Ratings slashed ratings on about $1 billion of the company’s debt, the majority of which is held by CLOs, according to data compiled by Bloomberg.While an individual loan downgrade likely wouldn’t damage a CLO’s ability to pay investors, a deluge of them around the same time certainly could. S&P has cut or put on negative watch at least $45 billion of the average portfolio of leveraged loans in CLOs since late February amid the fallout from the coronavirus which has shuttered businesses, according to a recent report by Bank of America Corp.Read more: Twenty two classes from 15 U.S. CLOs placed on creditwatch: S&PThe pile of downgrades could leave portfolio managers two unpleasant options: Dump lower-rated loans at fire-sale prices or cut interest payments to some of their investors and face having CLO bonds downgraded themselves.For the $670 billion CLO market, the fall of Cirque Du Soleil and other companies highlights how quickly the long-feared specter of a barrage of downgrades is materializing. The worry has expanded beyond loans rated B3 by Moody’s, those on the cusp of the lowest CCC tier, because credit graders are axing some issuers by multiple notches.Moody’s cut Cirque Du Soleil by four notches to Ca from B3 while S&P downgraded by three notches to CCC- from B-.CCC BucketsAt the heart of concerns is a key CLO feature that limits the amount of CCC rated loans that most can hold to 7.5%. Already 30% of CLOs likely exceed that maximum capacity, a sharp rise from about 8% earlier in the year, according to the Bank of America report published last week.That figure is likely to worsen, given the current pace of downgrades, and more so if efforts to contain the spread of the coronavirus push the economy into a recession as some Wall Street economists predict. These securitized vehicles operate under strict ratings-based criteria and tests that are designed to protect the investors of the bonds -- but those constraints can also have painful consequences for those that hold the equity or lower-rated tranches.Read more: CLO slices cut as distressed loans pile upRatings firms have been very aggressive with multiple notch downgrades and negative watches, so the CCC baskets are overflowing, said one US CLO manager, who notes how tough it is to trade through all this. If this keeps up, lots of CLO tranches may be downgraded and equity cash flows in some deals will be reduced or shut off, the manager said.Adding to worries, leveraged loan prices may be set to fall. The S&P/LSTA leveraged loan index has recovered back to the 80s, but Barclays Plc expects leveraged loan prices go as low as 67 cents, close to financial crisis nadirs of 2008.“It’s very difficult for CLO managers to exit out of the positions unless they realize a large loss,” said Pratik Gupta, a research analyst at Bank of America in an interview. “If the portfolio quality continues to deteriorate at this pace, there is a high possibility that some BBB bonds will get downgraded.”Signs of downgrade stress are already apparent. Lower-tier CLO bonds, those rated investment-grade BBB and non-investment grade BB tranches, have seen yields blow out and prices tumble. BBBs are quoted as low as 60 cents on the dollar and BBs are quoted as low as 40 cents on the dollar, according to people familiar with the matter who aren’t authorized to speak publicly.Lower-rated loans in the single-B category have started to underperform higher quality ones, according to the Credit Suisse Leveraged Loan Indexes.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- China needs banks to open the credit taps to get the economy back on its feet after the sudden stop caused by the coronavirus outbreak. The trouble is that they’re in far worse shape than in 2008, when a government-mandated lending boom helped revive growth. That’s why a cut in the deposit rate is long overdue.The People’s Bank of China is in discussions to lower the interest rate banks pay on deposits for the first time since 2015 and a decision could be announced within days, the Financial Times reported last week, citing people familiar with the deliberations. A reduction would shore up banks’ profitability, buying lenders breathing room as authorities lean on them to support companies that are struggling to stay afloat after a shutdown that affected two-thirds of the economy.It can’t come a moment too soon. The government is pushing banks to extend relief by rolling over debts, lowering loan rates and keeping credit lines open. It has allowed them to refrain from collecting interest from virus-affected companies until June 30 and has loosened the criteria for classifying loans as nonperforming. To encourage lending, regulators have also reduced the percentage of deposits that lenders must lodge with the central bank, known as the required reserve ratio.All these measures will increase pressure on a state-controlled banking system that is already undercapitalized and having its net interest margins squeezed. What will really help is a reduction in banks’ funding costs. While the rate on demand deposits is a puny 0.35%, the amount paid on time deposits is far higher — as much as 1.5% on sums locked up for one year.On Monday, the PBOC reduced the interest rate that it charges on loans to commercial banks by the most in five years. The seven-day reverse repurchase rate was cut to 2.2% from 2.4%. While that lowers funding costs, it also signals an impending reduction in lending rates. Analysts say a cut in the central bank’s medium-term lending facility rate, its main policy tool, isn’t far away. That in turn will influence the loan prime rate, set by 18 banks once a month.Smaller banks — outside the big four of Industrial & Commercial Bank of China Ltd., Bank of China Ltd., China Construction Bank Corp. and Agricultural Bank of China Ltd. — will be the biggest beneficiaries of lower rates for time deposits. These account for a large portion of customer accounts at lenders such as Bank of Communications Co. and Ping An Bank Co., according to to CGS-CIMB Securities Ltd. analyst Michael Chang. Such banks have more small and medium-size enterprises among their loan clients and also lend out more of their deposits.Even the big four could do with some relief. While they’re better capitalized and more profitable than the rest, they bear the burden of being the government’s principal policy tool, requiring them to hand out low-interest loans and help out struggling smaller banks.The bigger question is how much difference even lower deposit rates will make given the scale of the challenge the economy faces. A prolonged health emergency will cause the nonperforming loan ratio to triple to 6.3%, S&P Global Inc. estimates.In 2008, China’s banks were still flush from recapitalizations and initial public offerings conducted earlier in the decade, and their shares were trading above book value. Now, most are at discounts: Bank of China’s Hong Kong-listed stock trades at a price-to-book ratio of less than half. At the same time, the financial system has ballooned in size and leverage has soared. The ratio of debt to gross domestic product jumped to 276% at the end of 2018 from 162% at the end of 2008, according to Bloomberg Economics.China’s banks “make just enough in profits to keep pace with growth and keep capital ratios stable so they can’t afford to do a lot more than they’re doing now,” said Grace Wu, Fitch Ratings head of Greater China bank ratings.Regulators could relax capital ratios at mid-size lenders such as China Minsheng Banking Corp. and China Guangfa Bank Co. Still, that would risk storing up bigger problems down the road. Consumer defaults are already piling up, with overdue credit-card debt swelling last month to 50% from a year earlier. Qudian Inc., a Beijing-based online lender, said its delinquency ratio jumped to 20% in February from 13% at the end of last year.Cutting deposit rates also punishes consumers, the very people the government needs to help get the economy back up and running. Lower rates could also compound banks’ challenges by encouraging depositors to pull out money, though a crackdown on shadow banking has reduced the range of alternatives.There are no easy answers. Whatever their limitations or unwanted side effects, the need to keep banks in some semblance of health suggests lower deposit rates are coming soon. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- It’s more than a month since the sell-off began.In that time, tens of trillions of dollars of value was wiped off global stock gauges, corporate borrowing costs exploded, and access to short-term funding all but evaporated.It was nothing to what was happening in the real world. On Feb. 19, when the S&P 500 Index was at its peak, the U.S. had about a dozen confirmed cases of the coronavirus. Now America has the highest number of infections in the world and more than 1,000 dead.That global markets just had a decent week despite all that can make chronicling their progress seem like a callous undertaking. Asset prices move according to their own logic -- maybe the best thing that can be observed right now is they are often clues to the future. Just like in the real world, extreme measures have been taken to contain their fallout. This week investors got their first clues as to whether it is working.Based on coverage from across Bloomberg News, this is the story of another five days of history unfolding on Wall Street and beyond.‘Sell Everything’Monday 23 March: The Senate is stuck. Republicans are trying to rush through an emergency package to rescue the American economy from the impact of the pandemic and the measures needed to contain it. Democrats argue the bill as presented delivers a corporate bailout with poor oversight and not enough cash for hospitals.All the while, confirmed virus cases climb alongside the death toll. With the rescue bill stalled, U.S. equity futures fall the most allowed in Asian trading hours. Most stock gauges in that region follow suit, as do those in Europe. Treasuries and the yen gain.“A lot of what advisers are dealing with right now are clients saying why don’t we just sell everything and wait this out,” says Jeff Mills, chief investment officer for Bryn Mawr Trust in Berwyn, Pennsylvania. “Can we get back in when the dust settles? This is the question that we get every single week.”Washington may be paralyzed, but Jerome Powell and his colleagues are not. At 8 a.m. in New York, as many on Wall Street are arriving at their now-virtual desks, the Federal Reserve unleashes another wave of support for America’s battered economy. For the first time, the central bank says it will directly finance U.S. companies, and it promises to buy unlimited amounts of Treasury bonds and mortgage-backed securities.The scale of the pledge is mind-boggling. It will take time for the markets to absorb it, but there are encouraging early signs. Funding tensions cool in the U.K. and euro area. There’s a decline in credit-default swaps, which provide protection in case a country or company fails to repay its debt.It’s not much, but even glimmers of hope are important at this point. Everything the Fed has tried before today has failed to stop the pain spreading through the financial world. It has now reached the $16 trillion market for U.S. mortgages, which was at the heart of the last crisis.Back then, these loans were exporting trouble as risky mortgages went bad -- it was a financial crisis that spread to the real world. Now they’re on the receiving end, as the virus threatens both residential and commercial repayments and nervous investors try to pull cash from funds and vehicles that invest in the debt.It is a real world crisis spilling into finance, and it is unquestionably getting worse. The U.K. bans all unnecessary movement of people for at least three weeks, joining the list of countries initiating lockdowns across Europe. The global death toll tops 16,000 as confirmed cases approach 400,000.The collapse in consumer demand has been almost instantaneous, and today the line of companies slashing forecasts and cutting workers grows by the hour. A gauge of worldwide earnings revisions crashes to its all-time low. Economists say the U.S. faces the worst quarterly economic contraction on record.This is why the Fed response has no precedent. In another first, the central bank says it will buy exchange-traded funds that invest in bonds. Those ETFs are going to have a very good day.The notion of stimulus without end also spurs appetite for an asset that has proved its ability to store value for millennia, and gold jumps the most since 2016.It seems nothing can lift the mood in stocks, however. By the end of the day, both the Dow Jones Industrial Average and an MSCI Inc. gauge of global stocks have posted a signal known as a death cross.Technical analysis is a touchy subject in the financial markets; some swear by it, others at it. The main thing to note about these crosses is quite simple though -- the 50-day moving average for each gauge is falling faster than the 200-day, which is also falling. In other words, the gloomy long-term trend has been accelerating.One sliver of good news for those equity investors who need it: For the second trading day in a row, the index of expected stock volatility known as the VIX has fallen alongside the S&P 500. It could mean the most frenzied days of selling are behind us.Lockdown, Limit UpTuesday 24 March: They call it “turnaround Tuesday” for a reason. S&P 500 futures are limit-up as the day begins, and it looks like being the third week in a row that the U.S. stocks will rebound strongly from a Monday slide.That pattern could be important. It tells investors two things: First, there is no guarantee today’s move is the start of a meaningful rebound. Second, it isn’t necessarily being driven by the day’s news.The headlines are supportive, however. China announces an intention to end the lockdown of Wuhan, the epicenter of the coronavirus. Despite bickering and delay, U.S. lawmakers are close to agreeing the rescue package for the world’s largest economy.These are market positive, for sure. But there is evidence to suggest other, more technical processes could be behind this bounce.Short covering is one. This occurs when investors rush to close their bets against equities, which they may be apt to do if more than $2 trillion in fiscal stimulus is hours away.Another is a weakening of the loop by which price swings cause volatility-sensitive investors to adjust their portfolios, thereby creating more swings. The Fed actions have reassured some traders about what lies ahead. Selling has slowed. Expectations of more volatility are decreasing.All of these and the promise of more stimulus help settle nerves. The dash to cash abates, relieving upward pressure on the dollar which in turn eases stress across a host of asset classes. The same feedback loops that helped fuel the violent sell-off in recent weeks begin to work in the opposite direction.Pockets of market dysfunction live on, however. Both the S&P 500 and gold record their best day since 2008. Safe havens typically don’t rally on days when risk appetite is high.Once again, thank the Fed. As well enhancing gold’s appeal as a store of value, the central bank’s actions are starting to alleviate the funding strains that had prompted traders to sell whatever they could to raise dollars. Investment flows have turned back toward the yellow metal.At the same time, price discrepancies in the Treasury market are lessening. Even credit markets appear to be coming back from the brink, with new bonds being sold and measures of risk recording the first back-to-back declines since the meltdown began.The Fed’s success is prompting calls for the European Central Bank to do more. Europe’s policy makers have acted, but not on the same scale, and tensions in the market and beyond are very high.Data shows the amount of cash circulating in the euro area has increased by the most since the crisis. Back then it was believed to be people hoarding notes and coins in case of a bank collapse, but now the ECB puts it down to increased spending as they stockpile because of the virus.Italy is worst hit, and now has the highest death toll in the world. Fabrizio Fiorini is working from his home in Modena after his office in Milan was closed. The chief investment officer of Pramerica SGA SpR lives close to the park, which not too long ago was full of families and happy children but is now empty.“Coping with the tragedy that’s going on in Italy is far, far more difficult than dealing with the volatile market,” he says.But Fiorini is feeling optimistic on both fronts. The Fed and ECB actions were the right ones, he reckons, and opportunities are emerging for money managers. The recession forecasts going around may be too pessimistic. Late on Monday Italy reported a decline in deaths for the second day running.“The fall in the death rate in Italy is encouraging,” he says. “It gives hope that the tough measures taken by the government, painful as they might be, are starting to work. The Italian markets will probably recover soon. That will be a good message to others.”Other investors share his optimism, it seems. Somehow equities shrug off data showing the biggest economic crisis in the euro zone’s history is underway, and European stocks post the largest gain since 2008.It’s only after the markets close that Italy delivers the news that will be heart-breaking to Fiorini: The rate of deaths is rising again.At about the same time, President Donald Trump is talking about re-opening the world’s largest economy within a month, against the advice of health professionals.And the Dow Jones Industrial Average has its best day in more than eight decades.‘No One Rings a Bell’Wednesday 25 March: One question dominates every corner and conversation in the market: Have we bottomed out?An extraordinary amount of focus is about to be expended on whether the S&P 500 can finish in the green for a second day, something it hasn’t done in six weeks -- a lifetime ago, before this turmoil started.“You don’t know when the dust settles, that’s the problem,” says Mills in Pennsylvania. “No one rings a bell at the bottom. It’s very difficult to make that call to get back in.”This is the human side of markets, plain and simple. It doesn’t really matter much in the scheme of things whether U.S. stocks can rise for two days in a row. But psychologically speaking it has become important.Equities have a lot of reasons to gain today. More than 2 trillion, in fact, which is the size in dollars of the rescue package agreed by U.S. lawmakers. No one knows if it is enough, but there has never been stimulus on this scale before.Read more: What’s in Congress’s $2 Trillion Coronavirus Stimulus PackageThe deal reverberates across assets. Big companies are issuing fresh debt as credit risk gauges extend a retreat. Municipal bonds, which started a rebound when the Fed pledged support earlier in the week, surge the most in three decades. The currency market looks like it is headed for calm.Volatility in the world’s safest assets is declining, too. European equities cap their biggest back-to-back rally since the crisis. Bonds in the region also rally as the ECB scraps most of the limits of its bond-buying program to boost its firepower to fight the virus fallout.“Things have calmed down,” says Athanasios Vamvakidis, head of G-10 currency strategy at Bank of America Merrill Lynch. “It’s too early to tell if this is a start of a turning point. We have to wait to see if the containment measures really work. It will be very important to see infection and death rates dropping.”The signs are not encouraging. Spain suffers its deadliest day of the outbreak, with hospitals overloaded. Britain’s Prince Charles becomes the latest high-profile infection. German health authorities warn this is just the beginning as Europe’s largest economy mulls an additional stimulus plan.There are tiny warning lights still flashing lights deep in the world’s financial machine. Those places that seem hard to reach, like the Japanese repo market, where rates hit a record. Or the high-yield market in Europe, which hasn’t seen a single new bond sale in a month. Or emerging markets, where investors stuck in illiquid bonds are dashing to protect themselves.Demand for the greenback remains elevated. The three-month London interbank offered rate for dollars -- a benchmark for securities around the world better known as Libor -- rises for the ninth session in a row to the highest in three weeks.The Fed’s measures were always going to take time to filter through the system. But right now the spread of U.S. high-yield bonds to Treasuries remains more than 1,000 basis points. The amount of debt trading at levels that most consider distressed has quadrupled in a week to nearly $1 trillion.Late in the evening, the credit rating of Ford Motor Co. is cut to below investment grade by S&P Global Ratings because of turmoil in both production and demand within the auto industry. The 116 year-old American corporate icon and pioneer of mass manufacturing now falls into a category generally known in investment circles as “junk.”Less than an hour earlier, the S&P 500, of which Ford is a member, closed in the green for a second day.Three Days, 3 MillionThursday 26 March: It’s claims day, when the U.S. government reports the number of people seeking jobless benefits. State filing systems have seen an exponential surge in applications, so investors are braced for bad news.The price of containing the coronavirus is a blow to the economy the like of which has never been seen before -- that is what central bankers and government are racing to cushion against. Yet with their trillions in stimulus and promises of unlimited support, they have created a dislocation between financial markets and the real world.This will surely be the only day in history when the number of Americans claiming unemployment benefits is confirmed to have surged by 3 million in a single week and the S&P 500 finishes up 6.2%, capping the best three day gain since 1933.“Call it a rally of hope,” says Robert Greil, chief strategist at Merck Finck Privatbankiers AG. “It’s predominantly driven by sentiment supported by central bank and government aid measures. It’s also partly a technical rebound like we’ve seen in the past in extreme crises.”Read more: Technically Speaking, the Dow Just Rocketed Out of a Bear MarketThe defiantly upbeat tone goes beyond stocks. The credit market sees 34 issuers in the U.S. and Europe selling a combined $64.8 billion of debt. Mortgage-backed securities are rebounding as the Fed scoops them up. The central bank is buying corporate bonds, too, fueling a dash for credit ETFs. A knock-on effect of this support in one part of the market is that selling pressure eases elsewhere, and spreads on some collateralized loan obligations are cut in half.But in the age of the coronavirus there are some areas where neither monetary policy nor stimulus is likely to help. After three days of modest gains oil turns lower when the head of the International Energy Agency describes global demand as in “freefall.”It’s not surprising -- by some estimates about a third of the world’s population face restrictions on movement right now. Industry and travel have come to a standstill in many major economies. Crude producers are starting to run out of places to put the excess supply.Demand for goods and services is cratering in virtually every industry and economic sector thanks to the pandemic. As a result, S&P Global Ratings and Moody’s Investors Service are downgrading U.S. companies at the fastest pace in more than a decade. That means higher debt costs and rising odds of a wave of defaults.Late in the evening, the U.S. surpasses China as having the most confirmed infections in the world.And the S&P 500 just closed at about the highest in two weeks.What Goes UpFriday 27 March: Most stocks in Asia rally following the third day of gains on Wall Street, but this is hollow stuff. Futures for the American gauges are down and Treasuries are up. Fatigue is setting in and appetite for risk is waning.It looks like unlimited central bank support and $2 trillion stimulus will only go so far when U.S. virus cases are overtaking those in China and the economy is in turmoil. Investors don’t need a consumer confidence survey to tell them where things stand, but they get one anyway.Read more: Consumer Sentiment in U.S. Slumps by Most Since October 2008Updates on the virus are dreadful. In Italy, the deadliest day yet as almost 1,000 are lost to the outbreak. The U.K. reels as Prime Minister Boris Johnson and his two most senior health officials go into isolation with symptoms and the country’s death rate jumps 30%. Workers in the world’s food supply chain are falling ill. Mayor Bill de Blasio of New York, which accounts for about a quarter of U.S. cases, says new infections will be “astronomical.”On and on. Portugal cases up 20%. The World Health Organization warns of looming catastrophes in Libya and Syria, which have limited capacity to respond to an outbreak.In this torrent of miserable news, Congress approves the largest stimulus package in U.S. history and sends the measure for Trump’s signature. It causes hardly a stir in the stock market, which has been front-running the passing of the rescue package for days.Credit risk gauges tick up again. Activity in the options market points to doubt over the Fed’s plan to prop up the commercial paper. Libor rises for an 11th day. These are not the signs of a market at peace.Still, the charts will show this week was a win for the bulls, and for the policy makers who matched the market’s velocity with action that pulled it back from the brink.In spite of the downbeat finish, the S&P 500 gained 10% and the Dow added 13%. Measures of corporate credit risk eased the most in years amid a deluge of new issues. The dollar had the worst week in a decade as the race to liquidate everything ended.And the bears? They will shrug and recount the rallies just like this that have occurred in most major downturns. And perhaps they will point to the weekly gains that arguably matter most: Global coronavirus cases have more than doubled in seven days to well over half a million. The number of dead is up about 150%, to 25,000.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
S&P Global (SPGI) looks strong on the back of strategic acquisitions, which have helped it innovate, increase differentiated content and develop new products.
(Bloomberg) -- S&P Global Ratings and Moody’s Investors Service are downgrading U.S. companies at the fastest pace in more than a decade as debt-saddled corporations and entire industries struggle with a dramatic slump in demand brought on by the coronavirus pandemic.Downgrades are outpacing upgrades at the two biggest credit-rating firms by more than 3 to 1 to start the year, the most on a quarterly basis since the depths of the financial crisis, according to data compiled by Bloomberg. At the same time, risk premiums on investment-grade bonds have surged, while junk yields breached 10% for the first time in more than eight years.From autos to oil, investment grade to high yield, few parts of the American credit landscape have been spared the onslaught of downgrades that has accompanied the Covid-19 outbreak. With an unprecedented number of companies loading up on cheap debt in recent years, it’s likely that more are on the horizon. And concern is mounting that a wave of defaults could soon follow as capital markets remain closed to all but the safest borrowers.“Entities at the lower end of the spectrum, particularly B- and CCC, those types of companies in the sectors that are heavily hit by social distancing are facing an existential crisis,” said Gregg Lemos-Stein, head of analytics and research for corporate ratings at S&P. “We expect defaults to be much higher.”S&P has cut more than 280 long-term ratings so far this quarter, also on pace to be the most since the crisis, the data show. Of them, over 170 have come this month alone. Roughly 75 companies have been upgraded in 2020. Moody’s has downgraded more than 180 companies, including about 20 investment-grade firms and 160 junk-rated borrowers. Fitch Ratings has cut over 100 ratings against just 14 upgrades year-to-date.Investors are particularly concerned about the companies with trillions of dollars of debt sitting on the last rung of investment grade, potential so-called fallen angels. A downgrade to junk status could drive up their borrowing costs even further and fuel a wave of selling from investors who aren’t allowed to hold such low-quality debt.“The situation could be worse as there were many companies who took advantage of the late end of the bull market to refinance,” said Anne Van Praagh, managing director at Moody’s.Ford Motor Co. became the largest fallen angel of the current downgrade cycle on Wednesday after it was cut to junk by S&P. The new speculative-grade designation will remove its $35.8 billion of debt from the Bloomberg Barclays investment-grade index at the end of the month.“We do expect fallen angel volumes to pick up significantly compared to the last fews years,” said Shobhit Gupta, a strategist at Barclays Plc. He noted that this will likely be driven by the energy sector given plunging crude prices.Occidental Petroleum Corp. is the second-largest fallen angel this year after getting cut to junk by Fitch earlier this month. Its $35.2 billion of debt is similarly bound for high-yield gauges.Boeing, CarnivalEven companies with cleaner balance sheets in the A rated tier are at risk of being cut, further bloating the ranks of BBB debt, according to CreditSights strategist Erin Lyons.Boeing Co.’s long-term rating was cut from A- to BBB by S&P last week and was slashed two notches to BBB by Fitch on Tuesday. Carnival Corp. also lost its A grade rating from both Moody’s and S&P this month.“They generate a lot of free cash flow, they have plans to pay down debt and that works great until the options are not there and the cash is not being generated,” Lyons said referring to the A bucket broadly.Far down the rating ladder, the outlook is even bleaker. Industries from travel to retail to entertainment have been brought to a near standstill, while the leveraged loan and high-yield bond markets remain virtually frozen.“This is an extremely severe cycle that will wipe out a lot of very higher leveraged, lower-rated entities,” Lemos-Stein said.(Updates with Fitch data in fifth paragraph, Moody’s quote in seventh paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Delta Air Lines Inc. lost its coveted investment-grade status from one rater as S&P Global Ratings cut the company to junk.“The steep decline in airline bookings due to the coronavirus outbreak will sharply reduce Delta Air Lines Inc.’s revenue and cash flow,” S&P said in a statement Tuesday as it lowered the carrier two notches to BB, or two steps below investment grade. The carrier’s efforts to cut costs probably won’t be enough to offset the lost sales, S&P said.Airlines around the world are contending with what a trade group called the industry’s worst crisis ever, as the coronavirus pandemic torpedoes travel demand. Global carriers may lose $252 billion in sales this year, the International Air Transport Association said, and U.S. passenger counts are down 86% from a year ago as Congress weighs a bailout for the industry.“We expect passenger air traffic to begin to recover in late 2020,” S&P said. “However, any further delays will prolong the weakness in the company’s credit metrics.”If the shutdowns and travel restrictions start to improve by May, airlines should have sufficient cash to weather the storm and will make it through, Raymond James analyst Savanthi Syth said on Bloomberg TV. Anything beyond the summer and Labor Day, however, will require government support for carriers to continue employing at current levels, Syth said.A cut to junk from a second rater will make Delta a so-called fallen angel and its $4.9 billion of debt would leave the Bloomberg Barclays investment-grade index. Moody’s Investors Service said in a statement last week that it was considering cutting the airline to junk from the lowest investment-grade rating. Fitch also rates the company one step above high yield with a negative outlook.The cost to protect Delta’s debt from default for five years has soared over the past month, increasing more than fivefold to above 700 basis points, according to ICE Data Services. It retreated a bit Tuesday amid optimism for government aid. In the same time, its most actively-traded bonds, the 2.9% notes due 2024, have fallen to 80 cents from above par.(Updates with analyst quote from fifth paragraph. An earlier version of this story corrected the credit rating in the second paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The Zacks Analyst Blog Highlights: Toyota, Comcast, S&P Global, Northrop Grumman and Interactive Brokers
Consecutive better-than-expected top- and bottom-line performance, rising demand for business information services and contributions from acquisitions are driving S&P Global (SPGI) stock.
(Bloomberg) -- S&P Global Ratings is taking aim at two cruise lines that have been battered by the coronavirus, as it may cut the ratings of Royal Caribbean Cruises Ltd. and Carnival Corp.Each may be downgraded as the spreading virus batters the tourism industry, affecting everything from airlines to casinos. Royal Caribbean may be cut to junk, while Carnival would join the lowest tier of investment grade.As multiple cruise ships have been quarantined globally in an effort to contain the virus, investors have sold bonds or bought protection against default tied to debt of Royal Caribbean, as well as those of rivals Carnival Corp. and Viking Cruises Ltd. Royal Caribbean also withdrew its first-quarter and full-year forecasts Tuesday, and increased its credit capacity by $550 million to boost liquidity.“It is increasingly likely that the demand for cruises will remain weak even after the virus is contained,” S&P analysts Ariel Silverberg and Melissa Long said in a report.Royal Caribbean’s 5.25% bonds due 2022 fell more than 5 cents to 89.6 cents, according to Trace, while its shares fell as much as 17% to their lowest price in more than six years. Carnival lost as much as 7.1% and Norwegian Cruise Line Holdings dropped as much as 14% as of 11:54 a.m. in New York.The cost to protect Royal Caribbean’s debt against default for five years soared to the highest level since October 2008 on Monday, but retreated a bit Tuesday as the broader market rallied, according to ICE Data Services. The company is still rated investment grade at Moody’s Investors Service, one step higher than S&P’s rating.S&P’s action takes Royal Caribbean one step closer to becoming a fallen angel. With two speculative-grade ratings, its $1.5 billion of debt would leave the Bloomberg Barclays investment-grade index. Carnival is rated A3 by Moody’s, equivalent to S&P’s A- rating.(Updates with bond and share moves in fifth paragraph.)\--With assistance from Courtney Dentch.To contact the reporter on this story: Olivia Raimonde in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Nikolaj Gammeltoft at email@example.com, Molly Smith, Andrew KosticFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Rating agency S&P Global slashed its average Brent oil price assumption for the year to $40 per barrel on Tuesday and warned that some junk-rated oil and gas firms could face multi-notch downgrades to their credit scores. S&P had previously expected Brent to average $60 this year $60 previously. "It's likely rating actions (for oil and gas production companies) in the investment-grade category could be more severe than during the last cycle," S&P said, adding that it would review all its exploration and production and oilfield services ratings over the next several weeks.
The Zacks Analyst Blog Highlights: Alibaba, Toyota Motor, Bristol-Myers Squibb, S&P Global and Uber Technologies
DHT Holdings (DHT) might move higher on growing optimism about its earnings prospects, which is reflected by its upgrade to a Zacks Rank 1 (Strong Buy).
Radian (RDN) has been upgraded to a Zacks Rank 2 (Buy), reflecting growing optimism about the company's earnings prospects. This might drive the stock higher in the near term.
Fiat Chrysler (FCAU) has been upgraded to a Zacks Rank 1 (Strong Buy), reflecting growing optimism about the company's earnings prospects. This might drive the stock higher in the near term.
AC Immune (ACIU) has been upgraded to a Zacks Rank 2 (Buy), reflecting growing optimism about the company's earnings prospects. This might drive the stock higher in the near term.