While global economic growth moderated during the first quarter of 2007, credit market conditions remained firm, says Fitch Ratings.

Global corporate finance upgrades by Fitch continued to outpace downgrades, resulting in a ratio of downgrades to upgrades of 0.5 to one, according to a report published by the firm. “Upgrades remained especially strong among global banking and finance companies, exceeding downgrades by five to one through March,” says Charlotte Needham, senior director, Fitch Credit Market Research. “Global rating activity among Fitch-rated industrials was, in contrast, more balanced and practically on par quarter-over-quarter, with upgrades outpacing downgrades 1.3 to 1.0.”

Positive rating activity continued to surface among issuers experiencing strong top-line and profit growth amid still robust global economic conditions.

“Favorable macro trends also contributed, albeit indirectly, to downward pressure on credit quality by continuing to facilitate shareholder-oriented transactions,” says Mariarosa Verde, managing director, Fitch Credit Market Research. “In particular, approximately half of Fitch’s global industrial downgrades in the first quarter resulted from such activities, including leveraged buyouts and stock buybacks.”

The vast majority (82%) of Fitch global corporate finance rating outlooks remained stable at the end of Q1 2007, just shy of the 84% recorded a year earlier. Furthermore, 11% of Fitch global corporate finance ratings carried Positive Outlooks compared with 6% carrying Negative Outlooks.

Once more, differences in the distribution of outlooks were evident across regions and sectors, most notably among industrial issuers. “Importantly, the mix of Positive to Negative Outlooks remained tilted to the downside for North American and European industrial issuers,” added Needham.

At the end of March, 11% of North American and European industrial issuer ratings carried Negative Outlooks, while 8% and 10%, respectively, benefited from Positive Outlooks.

Approximately 5% of Fitch’s global corporate finance rated universe is on Rating Watch, which is an indication of expected near-term rating actions. Quarter-end data suggests that Negative Watch had the edge over Positive Watch in terms of assignments across all geographic regions and broad sectors by two to one, the firm said. Again, the data diverged upon examination at the various sectors levels.

http://www.fitchratings.com