For the first time since the end of 2008, Moody's Investors Service has reported more upgrades than downgrades in a quarter by number and par value.
In the fourth quarter in United States public finance Moody's raised ratings on 91 issuers associated with $16.8 billion in debt and cut them on 87 issuers associated with $7.9 billion in debt. The healthcare, housing, states, and infrastructure sectors received more upgrades than downgrades, while the opposite was the case for the local government and higher education sectors.
As recently as the second quarter of 2013, downgrades swamped upgrades, accounting for 83% of Moody's actions.
For 2014 Moody's downgraded 564 issuers and upgraded 360 issuers.
"While downgrades continued to exceed upgrades in 2014, the percentage of downgrades decreased quarter-over-quarter, save one," said Moody's analyst Mark Lazarus, the author of a Moody's report on the quarter and the year in its ratings. "We attribute the growing share of upgrades to economic and financial stabilization across most public finance sectors and expect the favorable trend to continue."
In the local government sector there were 64 upgrades associated with $9.5 billion and 73 downgrades associated with $5.3 billion. Lazarus said he expected continued "stabilization" in the sector with "pockets of stress" in Northeast, Midwest, and Florida.
Over the course of the year, Moody's upgraded 272 local issuers and downgraded 384 issuers. About 25% of the upgrades were due to a new local general obligation methodology.
In the healthcare sector Moody's upgraded 10 issuers associated with $2.4 billion in par value and downgraded three associated with $864 million. Lazarus said increased consolidation was the key factor in the sector, contributing to upgrades of All Children's Hospital in Florida and Oakwood Obligated Group in Michigan.
Yet Moody's is predicting more downgrades than upgrades in the healthcare sector in the current year. The prediction is based on an expectation of pressure on revenues that will cut reduced operating margins.
In the fourth quarter the infrastructure sector saw 10 upgrades associated with $4.1 billion in par value and 4 downgrades associated with $644 million.
Moody's biggest rating action in the quarter was an upgrade to Los Angeles Lease Revenue bonds to A1 and A2 from A2 and A3, affecting $2.8 billion. The second biggest was a downgrade to Detroit bonds to C from Ca, affecting $1.4 billion. The third biggest was an upgrade to the New York State Authority bonds to Aa1 from Aa2 affecting $1.1 billion.
