Canadian corporate outlook reflects stable credit quality: Moody’s

With bond yields low and rising, what is the price of safety? Keywords Bond When bond ratings slip, investors shrug Canadian corporate credit quality will remain relatively stable in 2012, predicts Moody’s Investors Service in a report covering Canadian non-financial corporates. Following a meaningful reduction in financial leverage in 2011, Moody’s says it expects key credit metrics will improve only modestly in 2012. It reports that median annualized revenue growth for rated Canadian corporates was around 15% in the third quarter of 2011, helped by a concentration of exposure to robust sectors such as oil & gas and mining. But Moody’s says growth will slow significantly, towards 5% by the end of 2012, due to weak global GDP growth and difficult year-over-year comparisons. Facebook LinkedIn Twitter Related news “We expect Canadian corporate performance to be mostly stable in 2012, underpinned by modest domestic real GDP growth of approximately 2%,” says Darren Kirk, a Moody’s vice president and senior credit officer. “Canada’s elevated level of household leverage, continuing strength of the Canadian dollar and the removal of fiscal stimulus due to government budget constraints will provide additional headwinds on corporate performance in 2012,” adds Kirk. Moody’s also warns that fallout from the European sovereign debt crisis could put some pressure on corporate access to credit, and reduce the country’s trade flows with the US, which takes in over 70% of Canada’s merchandise exports. The rating agency says it expects the percentage of rating movements in 2012 will be similar to 2011, when 17% of Canadian ratings moved. Roughly three quarters of Moody’s rating outlooks are currently stable. Share this article and your comments with peers on social media Catastrophe bond market gains momentum James Langton read more

Read More →