http://today.reuters.com/misc/PrinterFriendlyPopup.aspx?type=bondsNews&storyID=2006-11-02T220857Z_01_N02197166_RTRIDST_0_ECONOMY-DOWNGRADES-SANDP.XMLNEW YORK, Nov 2 (Reuters) - U.S. corporate credit quality has been on a 25-year decline toward junk status, with almost half of all companies now rated below investment grade, Standard & Poor's said on Thursday.
Liquid financial markets, downgrades in the auto and airline sectors, a spate of takeovers and global competition have contributed to the credit quality erosion, the rating agency said in two reports.
"An aggressive financial posture is necessary for survival in a stiff globally competitive environment," S&P said. "The same dynamics are unfolding in Europe, albeit at a slower pace."
As of September, junk, or speculative-rated issuers, defined as those rated "BB-plus" or below, stood at a record high of 49 percent, up from 48 percent at the end of 2005 and a low of 28 percent in 1992, S&P said.
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Given the present ratings mix, the default rate could exceed 15 percent, the highest since the Great Depression, if the economy goes into a recession, according to Martin Fridson, publisher of independent research service Leverage World.
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