Companies whose debt is completely and totally without risk now number just three rare and beautiful specimens. But, like the roseate tern and loggerhead sea turtle, they are in danger of disappearing forever, because, in spite of all of the hand-wringing and hair-splitting that goes into dividing the triple-As from the double-As at a ratings agency, the only distinction investors seem to care about is that between investment grade and junk.
Only three companies — Microsoft Corp., Johnson & Johnson and Exxon Mobil Corp. — hold that distinction today, the lowest on record.
Not Jan Siegmund, chief financial officer of Automatic Data Processing Inc. The payroll processor lost the top credit rating on April 10 because it announced plans to spin off its dealer services business, which is focused on marketing for auto dealers and manufacturers….
“There was no fallout,” Mr. Siegmund said. “We feel that double-A is a perfectly fine rating.”
The decline in triple-A ratings reflects a shift in attitude among corporations and investors about the value, cost and risk of bonds. Historically low interest rates and economic growth have scattered investors in search of higher yields and dulled their fear of default. That has led to a steady, downward drift in credit ratings. In fact, 81% of newly rated companies in 2013 got a rating in the single-B category from Standard & Poor’s Ratings Services, which investors call “junk….”
“We’re certainly not lobbying for” a return to triple-A, said Mr. Siegmund. “We’re very happy and content with our rating today.”
Lose Your Triple-A Rating? Who Cares? [WSJ CFO Journal]