Fallen angels were nearly twice as likely to default compared with peers that are rated speculative-grade at inception (referred to as original high yield; OHY), according to a study published by Standard & Poor’s Ratings Services.
The study, which is titled “Crossover Credits: A 24-Year Study Of Fallen-Angel Rating Behavior,” also found that default is especially likely in the first three to four years following the fallen angels’ downgrade to speculative grade from investment grade. In addition, on average, fallen angels record a shorter time-to-default than their OHY counterparts on a reasonably consistent basis.
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