"Fitch currently has three times more BBB-/negative rating outlook issuers than potential near-term upgrades at BB+, implying more downgrades than upgrades among these issuers over the intermediate term," the ratings agency states in "Crossing Over," a special report whose inaugural issue was released late last month. Fitch plans to update the report going forward.
Although upgrades have outpaced downgrades in the borderline category so far this year, Fitch points out that those upgrades have been due either to M&A activity or to the termination of a leveraged buyout and adoption of investment grade financial policies and capital structure.
"Over the past few years Fitch has downgraded substantially more BBB- issuers than upgraded potentially rising stars," the ratings agency notes. "In particular, over the past couple of years there was a significant volume of downgrades associated with reviews triggered by the severity of the global economic downturn as well as Fitch's outlook for a relatively weak and prolonged recovery."
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