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The Downgrade Massacre Has Started

The Downgrade Massacre Has Started

Just astounding. So many downgrades in just of a couple of days. And zero upgrades. Here’s who got hit.

I get “Moody’s Daily Alert” in my inbox, which lists Moody’s ratings actions for the day. The Alerts are usually a mix of a few upgrades and a few downgrades. Many times, there are no downgrades. Earlier this year, it became obvious without counting that the downgrades were starting to outnumber the upgrades by a large margin. But this week, the three Alerts were a torrent of 69 downgrades and zero upgrades. This is something I haven’t seen since I started subscribing to this service years ago. Some of the downgrades were by multiple notches in one fell swoop.

This ratio of zero upgrades to 69 downgrades by Moody’s this week is a hair-raising deterioration of the already downgrade-heavy ratings actions so far this year. Moody’s has now downgraded over 180 companies this year, 69 of which I got in my inbox just this week!

In addition, these Alerts contained a torrent of warnings about “ratings on review for further downgrade” or “negative outlook,” meaning downgrades, or additional downgrades are to come.

The analysts at Moody’s must be working overtime putting together their downgrade reports, and they’ve fallen behind, and it’s going to take them a while to catch up. Meanwhile, they issue warnings about what they’ve got in their downgrade pipeline.

For example, this week, Moody’s downgraded Ford’s senior credit rating one notch deeper into junk (to Ba2). Ford’s corporate family rating is already Ba2. Moody’s warned that it placed the ratings under review for further downgrade. Moody’s said the ratings “reflect what is an already-stressed credit profile and a very long-term restructuring program. The company is now additionally burdened by the prospect of a severe and prolonged decline in automotive markets precipitated by the coronavirus.”

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