S/P SAYS CORPORATE DOWNGRADES MAY EASE THIS YEAR
Standard and Poor's Corp said it
expects downgrades of corporate debt ratings to ease this year
from the lofty levels of 1986 and 1985.
    However, the rating agency said upgrades will probably stay
at about the same level as in the past few years.
    The narrowing of the gap between downgrades and upgrades
would reflect a calming in takeover frenzy, less volatile
energy markets and slow but steady economic growth, S and P
said.
    In particular, S and P expects that the industrial and
banking sectors would have a less turbulent year than in 1986.
    S and P noted that 60 pct of 1986's downgrades were
concentrated in the industrial sector, where the most negative
factor was takeover fever that led to debt-financed mergers and
acquisitions and costly defenses to fend off takeovers.
    It said takeovers appear to be on the decline this year.
    While S and P noted that the energy markets have stabilized
after last year's collapse, it stressed that 1987 would not
mark a turnaround for this industry.
    In addition, S and P does not expect any big shocks to hit
the junk bond market this year, especially of the magnitude of
1986's unexpected LTV Corp <LTV> bankruptcy filing.
    Utilities, which were a positive influence in the overall
1986 trend, should be a pocket of strength again this year. But
like last year, gas utilities could buck this trend, S and P
said.
    The rating agency said that downgrades would continue to
outpace upgrades among financial institutions. But 1987's
rating changes will not be as skewed as 1986's 2.1 to one ratio
of downgrades to upgrades, S and P predicted.
    S and P said debt ratings for the transportation industry
would remain stable, aside from changes because of mergers. A
detailed report will appear in the March 9 S/P Creditweek.
 Reuter
