S&P: Corporate Downgrades Reaching Recession Levels

How Will Telecom Fare?

Feeling like you’re in a John Steinbeck novel yet? The economic news just keeps getting worse and soon we might all be living our own versions of “The Grapes of Wrath.”

On Friday, ratings service Standard & Poor’s reported that recession – the dreaded R word that could lead to the dreaded D word – is here.

"We believe the economy is in a recession and project real GDP to grow only 1.6 percent in 2008 before falling 0.1 percent in 2009," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "We expect an increase in negative rating actions and defaults as the economy continues to weaken and corporations and consumers deleverage."

S&P said there have been 462 financial and nonfinancial downgrades since the beginning of 2008. The firm expects downgrades to peak in mid-2009. Historically, those negative changes have peaked at or within one quarter of the bottom in real GDP growth, analysts said.

Cisco Systems Inc. (CSCO), Verizon Communications Inc. (VZ), AT&T Inc. (T) and Consolidated Communications Holdings Inc. (CNSL) are among the North American telecom companies S&P has downgraded so far this year.

But people in the communications industry keep expressing optimism that their companies will weather this economic storm. After all, they’ve done it before. To quote Ma Joad: “We're the people that live. They can't wipe us out; they can't lick us. We'll go on forever ... 'cause we're the people.”

Share this article: Email, Slashdot, Digg, Del.icio.us, Yahoo!MyWeb, Windows Live Favorites, Furl
Add this article feed to: RSS, My Yahoo, Newsgator, Bloglines