Fitch Ratings reports that over half a trillion dollars worth of U.S. corporate debt was downgraded in the first quarter.

The rating agency says that the par value of U.S. corporate bonds affected by downgrades in the quarter hit a high of US$522.4 billion, up from US$391.5 billion in the fourth quarter of 2008. This represents a downgrade rate of 14.5%, it notes, citing the continued toll the financial and economic crisis is taking on corporate credit quality.

Overall, downgrades affected 14.5% (US$426.4 billion) of investment grade U.S. bond market volume in the first quarter while upgrades affected 0.3% (US$9.1 billion), Fitch says. As for speculative grade issues, downgrades reached 14.8% (US$96 billion) and upgrades touched 1.7% (US$10.8 billion).

“The first quarter of 2009 also saw another unwelcome milestone as the share of U.S. corporate bonds rated ‘AAA’ fell below 1% of market volume while the share of ‘CCC’ rated issues moved up again to a new high of 6.8%,” it adds. In total, the ‘AAA’ category saw US$176.2 billion in downgrades while the ‘AA’ category featured an additional US$142.1 billion.

Fitch adds that one positive development in the quarter was a strong rebound in issuance, which reached US$184.9 billion following, up from just US$80.8 billion and US$74.4 billion, in the third and fourth quarters of 2008, respectively. “While an impressive turnaround, this strength came from highly rated, defensive industrial names. Financial and speculative grade issuance remained very low,” it cautions.

IE