Global credit quality worsens in first quarter 2008

Overall credit quality for corporate, sovereign, and banking debt issuers on a global basis worsened as downgrade-to-upgrade ratio rose to about 3:1 from about 2:1 in the previous quarter, says Moody's Investors Service in a new report. The pace of deterioration has been rapid since as recently as the second quarter of 2007, the number of upgrades and the number of downgrades were approximately equal.

"The environment continues to be cautious, with a greater percentage of issuers on review for downgrade than upgrade, as well as more issuers holding negative outlooks than positive ones," says Moody's Analyst Jennifer Tennant.

Specifically, Moody's reports that the end of the first quarter of 2008, 3.8% of rated issuers were on review for downgrade, compared with 1.8% on review for upgrade. Similarly, 13.1% of rated issuers were given negative outlooks, compared with 6.1% with positive outlooks.

The rating actions, reviews and outlooks also show investment-grade issuers facing a slightly more positive credit outlook than do the speculative-grade issuers, continuing a trend from the previous quarter. While both categories had more issuers on review for downgrade than for upgrade, investment-grade issuers show more stability, and speculative-grade issuers were more likely than investment-grade issuers to experience downgrades and upgrades in the first quarter of 2008. Speculative-grade issuers were also much more likely than investment-grade issuers to hold negative outlooks.

The Middle East, Africa and Latin American regions have more issuers on review for upgrade than on review for downgrade, says Moody's. For Asia Pacific (ex Japan), negative outlooks outnumbered positive outlooks whereas for Japan, there were still more positive outlooks than negative outlooks though the gap has narrowed.

Additionally, more European issuers are on review for downgrade than review for upgrade, and three times as many issuers in the United States and Canada have negative outlooks as opposed to positive outlooks.

Among industries, Real Estate & Construction and Finance, Securities & Leasing had the largest proportion of downgrades in the first quarter of 2008. The Building Materials and Real Estate and Construction industries have substantially more issuers with negative outlooks than positive ones.

The title of this Moody's Special Comment is "Moody's Rating Actions, Reviews and Outlooks: Quarterly Update -- First Quarter 2008."

(This is press release of Moody's Investors Service)

Current challenges in the global financial markets

Losses resulting from mortgage fraud in US will reach $2.5 billion in 2008
Highest levels of political and economic uncertainty in 2008
No immediate threat to financial stability in India

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