The International Monetary Fund warns that the number of small and medium-sized companies facing bankruptcy could triple if there is not enough aid from governments to support the economic recovery after Covid 19. Italy would be at the forefront of the defaults. The organisation’s director, Kristalina Georgieva, believes eliminating prematurely the aid granted by the States could suppose a greater cost in the long-term than the one countries are currently facing with the programmes for reactivating the economies.
Meanwhile, S&P has been taking stock of Q2, the worst ever in terms of rating downgrades in the US (414). Particularly so in world of High Yields, which absorbed 92% of the reductions. And not only that. The bias continues to be towards more downgrades with a record level of 52% of names in negative outlook or negative credit watch in amongst High Yields (a level that exceeds the 90% barrier in the CCC/C ratings). The previous peak of ratings cuts was 331 during Q1’09. That said, the trend has moderated from the April peak (about 260) with the June balance similar to the 2019 average (about 50 downgrades). The automobile sector has the worst balance (83%) in relation to this bias towards new cuts, followed by the energy sector (81%), the media (64%) and retail and restaurants (58%).