Standard & Poor’s had more than two times more upgrades than downgrades in 2014.
The year was the first since 2007 in which both housing and non-housing public finance sectors saw more upgrades than downgrades in every quarter, S&P reported Monday.
Over the year there were 2.68 upgrades for every downgrade for non-housing bonds and 2.57 upgrades for every downgrade for housing bonds, according to Lawrence Witte, S&P senior director.
The upgrade-to-downgrade ratio rose to 3.24 in the fourth quarter in the non-housing sectorfrom 2.15 in the third quarter.
In the fourth quarter all non-housing public finance sectors except for the health care and education sectors had more upgrades than downgrades.
In the quarter the local and state sector, the municipal housing sector, and the utilities sector showed particular strength, with upgrade ratios of over two to one. The local and state sector has seen upgrade ratios above two for seven straight quarters while the utilities sector has had a three-quarter streak.
S&P’s upgrades to the local governments reflected their improved finances and stronger economies.
Over 2014 in the housing sector S&P upgraded 75 issues and downgraded 29 issues. “This resulted almost entirely from increases in the collateral backing housing bonds as opposed to a rating change on a third-party enhancement or investment,” Witte said in his report, “U.S. Public Finance Ratings Continued Their Positive 2014 Trend in the Fourth Quarter.”
The not-for-profit health care sector showed a 0.86 downgrade to upgrade ratio in 2014. The most common cause of downgrades was declining volume that led to operating losses.
In 2014 S&P downgraded 43 higher education bonds and upgraded 19. This was “due to the struggle of higher education institutions to balance the demands of their expenditures while addressing student affordability and access.”
Some of the notable ratings actions that S&P took in the quarter included upgrading California to A-plus from A, downgrading Phoenix (Ariz.) Industrial Development Authority’s series 2013 solid waste disposal facilities revenue bonds to BBB-minus from A-minus, and downgrading Daughters of Charity Health System (Calif.) to CCC from B-minus. DCHS had $288 million of long-term debt outstanding as of Sept. 30.
In the year there were eight defaults of S&P rated public finance bonds, which was less than the 15 defaults found in 2013.
