Rating agency Moody’s on Monday said six India-based companies exited the list of potential fallen angels following the change in India's outlook to stable in early October and easing of Coronavirus (Covid-19) pandemic effects. Fallen angels are firms most at risk of losing their investment-grade ratings.
Six Indian companies which have been removed from the potential fallen Angels list are - Oil and Natural Gas Corp, Oil India Ltd, Indian Oil Corp, Hindustan Petroleum Corp, Petronet LNG, and UltraTech Cement.
Five of them are government-owned oil-and-gas companies whose outlooks changed to stable following India's return to a stable outlook, reflecting their state ownership or close links with the government, it said.
"The easing of the Covid-19 pandemic fallout and strengthening economic recovery support a decline in potential fallen angels among rated Asian (ex: Japan and Australia) companies," the rating agency said in a statement.
As of October 31, the number of Asian companies most at risk of losing their investment-grade ratings – potential fallen angels – fell to the long-term average of 12 since 2018, from 19 as of September 30.
Annalisa Di Chiara, vice president, Moody’s, said that potential fallen angels account for around 5 per cent of Asian investment-grade companies, down from a high of 9.7 per cent (20 companies) during the height of the Covid-19 pandemic in 2020.
"The 12 potential fallen angels have around $28 billion of bonds outstanding, with around $3.2 billion due by the end of 2022," she added.
The total number of fallen angels since January 2020 is five, similar to that during the commodity crisis. Most fallen angels have remained in the high-yield space, largely in the Ba1/Ba2 category. A few have been downgraded even further. Of the 30 fallen angels in Asia since 2008, only two companies climbed back to investment grade, the rating agency said.
Refinancing would likely be more-costly for potential fallen angels if their ratings were downgraded to high yield. Moreover, fallen angels could crowd out lower-rated companies, which would raise debt-service costs and refinancing risk for weaker and highly leveraged companies.
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