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Management Side
Technical Side
Fitch: Corporate Credit Quality Continues Negative Turn in Early 2008
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New York, New York, USA 06 March 2008 -- Global corporate finance rating activity continues to show increased signs of stress thus far in 2008 after turning negative in the second-half of 2007 (2H'07) under the weight of rapidly deteriorating housing market conditions, according to a Fitch Ratings review, which also points to further credit weakness for the remainder of the year.

'What began as a series of financial market events has begun to take a
toll on credit conditions in the broader economy,' said William May,
Senior Director, Fitch Credit Market Research 'This evolving story is
reflected in corporate rating activity, which illustrates the expanding
nature of the credit crisis.'

Globally, the downgrade to upgrade ratio was 0.4 for the full year 2006
and then rose steadily over the first three quarters of 2007 before hitting 0.9:1.0 in fourth-quarter 2007 (4Q'07). In Western Europe and North America the downgrade to upgrade ratio for the full year 2006 was 0.5:1.0 and 0.8:1.0, respectively, before rising to 1:1 in both regions for the full year 2007. For the 4Q'07, the downgrade to upgrade ratio in Western Europe and North America was 3:1 and 1.1:1, respectively.

'Through the first two months of 2008, Fitch's global rating activity
indicates further deterioration in credit quality as downgrades exceeded
upgrades by a ratio of 1.6:1', said Charlotte Needham, Senior Director,
Fitch Credit Market Research. This decline was driven largely by activity in North America and Western Europe where the downgrade to upgrade ratios through February were 5.5:1 and 2:1, respectively.

The most significant deterioration between 1H'07 and 2H'07 credit
quality occurred in the financial sector as the ratio of global
downgrades to upgrades among financial institutions rose to 0.9:1 in
4Q'07, up from 0.4:1 in the 3Q'07 and 0.3:1 for 1H'07.

The effects of the credit market meltdown continued to exact a toll on
North American and Western European financial firms in early 2008.
Through February, the downgrade to upgrade ratio among North American
and Western European financial institutions was 3.7:1 and 2.3:1,
respectively.

While financial institutions bore the brunt of the sub-prime related
credit market meltdown in the latter half of 2007, ratings deterioration
in late 2007 and early 2008 extended into the industrial sector as well.
In the first two months of 2008, there were a total of 35 downgrades
among North American industrials versus only 4 upgrades (a ratio of 8.8:1).

Looking ahead, the majority of Fitch's Rating Outlooks remain Stable.
However, the mix of Negative to Positive Rating Outlooks across industrial and financial credits in some regions - North America in particular - indicates the likelihood of meaningful deterioration in 2008. At the end of February 2008, for example, 20% of ratings on U.S. banks and financial institutions had a Negative Outlook, versus only 12% with a Positive Outlook.

Across U.S. industrials, the mix of Negative to Positive Rating Outlooks was also negatively skewed but more balanced at 11% versus 8%,respectively.However, within some sectors, notably the building and construction industry and the basic materials industry, the Rating Outlook mix was more heavily tilted towards Negative.


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