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Announcement:

Moody's Liquidity-Stress Index Tracking Back to Record Low

Global Credit Research - 19 Apr 2013

New York, April 19, 2013 -- Moody's Liquidity Stress Index (LSI) returned to its record low of 3.0% as of mid-April, down from 3.2% at the end of March, Moody's Investors Service says in its latest edition of SGL Monitor. The LSI has bounced around the low-to-mid 3% range for several months now.

Moody's Liquidity-Stress Index rises when corporate liquidity appears to weaken and falls when it appears to improve.

"The improved reading is a sign that most US speculative-grade companies continue to avoid liquidity problems, despite slow economic growth and other potential stresses," says Vice President -- Senior Credit Officer John Puchalla. "Modest corporate earnings growth and extremely accommodating credit markets remain key supports for liquidity."

Although speculative-grade liquidity has been solid, it could weaken if cash flows or access to the credit markets were to come under pressure, Puchalla says. "A pullback in US corporate earnings, slowdown in China, a worsening of Europe's economy and the impact of US fiscal policy choices are all things that could give investors and consumers pause and undermine the advantageous credit environment."

Despite the strong liquidity readings, liquidity rating downgrades continue to outnumber upgrades. In the first half of April rating activity has been modest, with two downgrades and one upgrade, while in the first quarter there were 22 downgrades and 18 upgrades.

"Downgrades continue to reflect company-specific issues with debt maturities and cash flow, rather than any broader inflection in liquidity conditions," Puchalla says. "Despite the modest prevalence of downgrades, our Liquidity-Stress Index has been a better indicator of historically low default rates and continues to give very benign readings."

Moody's Covenant Stress Index, which measures the extent to which speculative-grade companies are at risk of violating their debt covenants, hit a record low of 1.7% in March, down from 1.9% in February. The low reading indicates a low risk of covenant violations over the next 12-15 months for most companies.

Moody's research subscribers can access this report at http://www.moodys.com/research/SGL-Monitor-Liquidity-Stress-Index-Tracking-Back-to-Record-Low--PBC_152971.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

John E. Puchalla
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Tom Marshella
MD-US and Amer Corporate Fin
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Liquidity-Stress Index Tracking Back to Record Low
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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