Insights

The hospitality industry has suffered from prolonged closures, reduced capacity, supply issues and staff shortages during COVID, damaging an already low margin business. For the UK, Brexit has magnified these effects. Analysis of consensus credit data shows a disparity in recovery between the US and UK.

A potential US Government shutdown is focusing attention on Sovereign credit risk, with a risk to US Treasury bond payments. A missed payment would be a major market event, but the broader issue is how Governments around the world handle the cost of COVID. The latest consensus data examines credit risk trends for Global Sovereign Governments, plus compares consensus vs CRA ratings for 12 major economies.

There are fears that investors in the broader high yield space are not being properly compensated for the risks. Though recent private equity investments have focused on firms that have weathered the pandemic with stable revenues and strong cash flows, which could boost the average credit quality of leveraged loan assets, the latest consensus credit data shows a more mixed picture.

Shipping container unit costs have skyrocketed and delivery times doubled in the past 18 months, with the pandemic causing port closures, trade flow disruptions and capacity reductions. Consensus credit data tracks the credit trend of Global Marine Transportation companies and suggests that the sector may be a leading indicator for broader corporate credit risk.

Air travel is currently running at about 50% of its pre-pandemic peak and the sector still faces uncertainty from new virus variants, patchy tourism traffic and a shift in business travel norms. While many Global Airlines are unrated by traditional agencies, consensus credit risk data shows that 80% of the sector is below investment grade – but some remain good credit risks.

Wildfires are growing in intensity and frequency, and in the US are sometimes attributed to outdated electricity infrastructure, presenting a legal hurdle for companies in the sector. Addressing these issues requires investment, and companies with stronger credit ratings are better placed to fund the necessary capital spending. This note looks at the credit profile and recent trends for 371 US electricity companies.