Quality of Credit Dropped Sharply In '90, S&P Says
NEW YORK -- Deteriorating conditions affecting financial institutions, particularly an increasingly depressed real estate market, sharply reduced corporate and municipal credit quality in 1990, Standard & Poor's Corp. said.</br></br>Based on preliminary figures, the credit-rating concern said downgrades of corporate and municipal issues it rates reached a record both in number and volume in 1990.</br></br>"The decade of the '80s was one where corporations became enamored of leverage," said Leo O'Neill, president of S&P's ratings group, in an interview. "Hopefully, 1990 was the bottom," he added.</br></br>Mr. O'Neill predicted the major problems for 1991 would be focused on the high-yield or junk-bond sector, which is more sensitive to recession. "Defaults will be worse" this year, he said. S&P expects defaults on corporate issues to rise to between $15 billion and $20 billion this year from $14 billion in 1990.</br></br>The number of downgrades of corporate issues increased to 768 last year from the previous record 419 in 1989. The volume of downgrades on corporate debt last year was $510.1 billion, of which $14 billion went into default. That was sharply higher than the $174.4 billion volume of downgraded corporate debt in 1989, S&P said.