Rise in Upgrades Signals Hope for European Non-Financial Sector

Although rating downgrades continued to outnumber upgrades in western Europe in the second quarter of 2003, the non-financial sector experienced not only a fall in the number of downgrades, to 28 from 36 in 2003 Q1, but also an increase in upgrades, to 11, according to a new Moody’s report. The increase represents the highest quarterly total since records began at the start of 1995. This easing of the decline in non-financial sector creditworthiness was largely a result of an absence of rating downgrades in the telecoms sector and a fall in the number of utility sector downgrades, said Moody’s. ‘Even in the event that an economic recovery is not forthcoming in western Europe in 2003, the total number of non-financial sector downgrades is likely to be lower for the year as a whole than in 2002,’ said Alice Keegan, a London-based economist . Refinancing costs remain low, the pace of debt accumulation has decelerated and costs cuts and asset disposals have helped to shore up profit margins.

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