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In the wake of the COVID-19 crisis, organizations of all types are enacting measures to preserve liquidity, reduce costs and plan for the potentially slow recovery back to pre-crisis levels or, in some industries, a return to a new normal. As a result, corporate risk profiles for the near, medium and long term are facing new scrutiny, including from their auditors when evaluating the “going concern” criteria for their audit reports, and ratings agencies (Moody’s, S&P, Fitch) when stress testing worst-case scenarios for rated corporates.

One result of these evaluations is that certain corporates, particularly those in industries most affected by the COVID-19 crisis, have already or may find their ratings downgraded. As of the end of April 2020, more than 1500 issuers were negatively impacted by COVID-19 and oil prices. In the case of a corporate with Baa3 and BBB- ratings, the resulting downgrade may move them into a sub-investment category, which could have several knock-off effects. In February, the OECD estimated that approximately USD 261 billion of corporate (non-financial)bonds were at risk of losing their investment grade rating by the end of the year. When they added financial institutions to into the mix, the number grew to approximately USD 500 billion.

Corporates that move from investment grade to sub-investment grade are sometimes referred to as “Fallen Angels”. This issue of “In the Know” discusses some of the implications for corporates and their treasury departments (and their advisors) who face this situation, with some considerations and recommendations.



Rob Mathews is a partner in the Firm's Capital Markets Group. Rob's clients benefit from his significant experience in multinational corporate and finance transactions, notably high-yield debt offerings. Clients comment that "Rob is a high yield guru – you know you can rely on his technical advice and market knowledge." (Chambers UK, 2019) and that he is "client-focused, solution-oriented and commercial; he has many years of experience as is able to advise on any issue." (Legal 500, 2019)


Andrew Sagor is the Co-Chair of the Leveraged Finance Practice in North America and a partner in the Corporate & Securities Practice Group based in New York. Andrew mainly focuses his practice on structuring and negotiating market-shaping private equity and debt financing transactions. Andrew is a member of the Firm's Private Equity Steering Committee in North America.


Benjamin is a New York qualified senior associate in the Firm’s Corporate Finance group in London. Prior to joining the Firm in 2019, he worked in a leading US law firm in London. Benjamin has experience advising banks, private clients and borrowers on a wide range of corporate finance transactions, including high yield debt offerings, liability management transactions, syndicated credit facilities and restructuring transactions. Benjamin has also worked on secondment at a leading global investment bank its leveraged finance legal team.