As high-yield issuers faced growing financial pressure, credit rating downgrades continued outpacing upgrades among North American corporate issuers in the second quarter, says Fitch Ratings.
There were 1.3 downgrades for each upgrade in the quarter, a report from the rating agency said, sustaining a trend that has prevailed since the third quarter of 2022 among the North American companies Fitch rates.
In Q2 2024, the negative trend in credit quality was due entirely to high-yield issuers, Fitch said. There were 1.7 downgrades for each upgrade among high-yield firms.
The overwhelming majority of downgrades in the second quarter were due to changes in the issuers’ financial profile, Fitch noted. About one-third of the downgrades were for industrial sector companies, followed by 20% in tech and 18% in the retail sector.
“Rating actions could continue to trend slightly more negative than positive,” Fitch said, noting that 12% of its rating outlooks were negative, versus 10% positive and 78% stable for North American corporates.
The outlook mix was even more negative for high-yield issuers, with 15% negative outlooks, 11% positive and 74% neutral.
For investment grade companies, the mix was marginally positive: 8% positive, 7% negative and 85% stable.