From the ashes of 'junk,' better bond ratings arise


NEW YORK -- The average credit rating for major industrial companies could be restored to investment grade from "junk," where it has languished since the late 1980s, if a few crucial and conceivable upgrades occur this year, analysts at a major credit-rating agency said yesterday.

Defaults on corporate debt, though still high, declined in 1991 by almost $1 billion, the first drop in four years, Standard and Poor's Corp. said. And S&P; predicted the ratio of downgrades to upgrades, heavily weighted toward downgrades in recent years, might come close to parity in 1992 with the prospect of better times ahead.

"A decade of downgrades may be coming to a close," said Leo C. O'Neill, president of S&P;'s rating group.

The potential improvement in the average rating reflects a broad change in attitude on the part of both companies and financial markets. Leveraged buyouts, acquisitions and restructurings, all of which devastated balance sheets throughout the past decade, are no longer in fashion, Mr. O'Neill said.

Similarly, the wave of new debt offerings from companies with lowcredit quality has ceased, and many companies that entered the market during the 1980s with less than investment-grade credit have either gone bust or substantially improved their financial strength.

The trend for municipalities remains in the opposite direction.

"1991 has seen a huge increase in municipal defaults," said Richard Lehmann, president of the Bond Investors Association, a non-profit, Florida-based research organization.

According to the association, the $4.6 billion in municipal defaults last year compares with $1.9 billion in 1990 and $1 billion in 1989.

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