Fewer Companies Facing Junk Ratings

The number of companies worldwide having their credit ratings cut to below investment-grade, or junk, will decline for a second straight year as expanding economies boost companies’ ability to meet debt obligations, Standard & Poor’s said.

S&P; said 46 companies might fall to junk status this year, down from 65 in 2003 and 82 in 2002.

Companies with credit ratings below BBB-minus at S&P; are considered junk, or at a greater risk of not being able to repay their debt.

The number of companies with deteriorating credit peaked in 2002, after seven years of increases, amid an economic slowdown and corporate and accounting scandals at companies such as Enron Corp. and WorldCom Inc.

Now, economic expansion is helping companies better manage their debt.

“We’ve seen across the board improving balance sheets and greater profitability,” said Diane Vazza, managing director of bond research at S&P; in New York.

Federal Reserve Chairman Alan Greenspan said Wednesday that the U.S. economy might expand as much as 5% this year, which would be its strongest pace since 1984. For its part, the International Monetary Fund will probably raise its global growth estimate for this year, Managing Director Horst Koehler said this month.

S&P; has lowered ratings on three investment-grade companies to junk this year: Tommy Hilfiger USA, a unit of Hong Kong-based Tommy Hilfiger Corp.; Wayne, N.J.-based Toys R Us Inc.; and certain debt of Southern California Edison Co., a unit of Rosemead-based Edison International.

The companies that may become fallen angels are rated BBB-minus and are on “credit watch negative,” indicating that they are being reviewed for a potential cut, Vazza said.