Courtesy of the credit analysts at UBS, who are on the look-out for would-be tappers of the capital markets amid a host of ratings downgrades.
That chart will likely become more crowded by the end of this year. In fact, UBS analysts Daniel Stillit and Dilyara Khabrieva have placed 31 European firms on a watch list for what they call “would-be” issuance. The thrust of their argument:
Numerous companies in Europe will face — and be motivated to issue equity by — a late-cycle credit phenomenon: they are highly sensitive to their credit ratings at a time of poor ratings momentum, combined with the underlying fact that credit ratings are sticky and will likely lag earnings.
In other words, European companies will be proactively or correctively raising capital to avoid or amend ratings downgrades or fallen angel status — that is, becoming the issuers of corporate bonds that were investment-grade when they were first sold but have since been reduced to junk.
Companies do not want to be fallen angels for a number of reasons. For a start it can knock their share and CDS prices. It also increases their funding costs and means there are fewer buyers for their debt. Small wonder then, that companies would be seeking to avoid the not-so-celestial status.
For those interested, then, UBS’s list of ‘would-be’ issuers in its entirety is as follows: Akzo Nobel, Alcatel-Lucent, ArcelorMittal, Barratt Developments, BT Group, CGG Veritas, Fiat, ITV, National Express, Petroplus, Peugeot, Porsche AG, Q-Cells, Sandvik AB, Marks & Spencer, SBM Offshore, WPP, Seadrill, SSAB, United Utilities, Veolia Environnement, Volvo, Wienerberger, Yell Group and YIT.
Phew.
Related links:
Any angels left in heaven? – FT Alphaville
‘Fallen angels’ total highest since 1997 – FT