The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.

Commercial paper issuers are busy bouncing back

Short-term rating downgrades to upgrades by commercial paper (CP) issuers have improved to 11 to one in 2003 from the historic peak reached in 2002 of 15 to one, the first year of improvement in the downgrade to upgrade ratio seen since 1999. What's more, the improving trend has continued through 2004 with only three downgrades for every upgrade registered from January to August in 2004. CP is popular with large corporates with high credit ratings to finance daily working capital management requirements with a typical maturity range from two to 270 days. Money market funds, banks, institutional investors and corporates are typical buyers of CP

?The downgrade-to-upgrade statistics show just how severe the deterioration in short-term credit quality was,? notes Sharon Ou, analyst and lead author on the report. ?The US short-term ratio increased from less than 1:1 in 1995 to 15:1 in 2002. The historical average downgrade-to-upgrade ratio is about 2:1, so the last credit cycle was severe indeed.?

The report, entitled ?Short-term rating performance and commercial paper defaults, 1972-2004? also notes a significant increase in fallen angels ? an investment grade name that has fallen to junk status ? and a parallel increase in concern over CP issuance, citing this as the main reason why CP issuance has fallen from a high of $986 billion in November 2000 to an outstanding level of $571 billion.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree