EUROPE – Last year saw a further deterioration in the credit quality of European Union investment grade company bonds, as 122 downgrades against 28 upgrades were recorded, representing some €458bn worth of outstanding debt, against €265bn in 2000, says Standard& Poor’s (S&P).

Diane Vazza, an analyst at S&P says that this is the fourth consecutive year that the European market has followed a downward trend, and that this was due mainly to depressed markets and macroeconomic data. She points out that last year was particularly severe, as the number of downgrades almost doubled. “There were 66 downgrades in 2000, against 122 last year. We put this down to the general market downturn and market sentiment towards the end of the year,” she says.

However, Vazza says S&P is becoming confident there will be a turnaround in fortunes this year. “We feel that the economic cycle has now bottomed out and with a trickle of positive economic data coming through, we expect to see a gradual, and I stress gradual, pick up in the number of companies in the investment grade category in Europe receiving improved ratings.”