financial corporates in Europe, the Middle East and Africa (EMEA) is likely to continue the gradual stabilizing trend seen throughout 2010, Moody's Investors Service said Thursday in a new report entitled "Corporates in EMEA: 2011 Outlook - Continued Progress Towards Credit Stabilization, But Challenges Along the Way". The forecast is in line with Moody's macroeconomic forecast of a sluggish rebound in advanced economies in 2011. However, the rating agency says that this stabilizing trend could be hampered by the exposure of corporates to the ongoing sovereign turmoil, and their dependence on the speed and depth of the economic recovery at global and regional levels. "Moody's expects ratings of investment-grade EMEA corporates to remain stable with few, if any, upgrades, while some speculative-grade corporates should continue to strengthen their financial profiles by using free cash-flow to reduce debt," said Jean-Michel Carayon, a senior vice president within Moody's Corporate Finance Group. "This trend could lead to upgrades at the very low end of the rating scale, and also among issuers whose ratings have fallen from investment grade to speculative grade." Throughout 2010, Moody's has seen an easing in the negative pressure on the ratings and outlooks of corporates in EMEA. As a result, the proportion of stable rating outlooks (71 percent) among EMEA corporates is now at its highest level in two years. Although the number of downgrades of EMEA corporates has gradually come down in 2010, Moody's points out that it is still far from matching the number of upgrades. A significant proportion of corporate downgrades involved government-related issuers (GRIs), reflecting the downgrades of sovereign ratings during the year.
