Negative watch8 Jun 2023 12:35
Never heard of it, apart from "might fail to perform compared to peers" not sure how this relates to LBG, after all , it is a bank ?
From Investopedia
When one of the three major credit-rating agencies places a company on negative watch, it indicates that the agency has noted a circumstance or circumstances that might cause it to downgrade the company's credit rating in the near future.
It is not a sure thing. Once a rating agency places a company on negative watch, there is a 50% chance that the company’s rating will be lowered sometime in the next three months.
Understanding Negative Watch
In addition to its credit rating, the agencies attach an outlook to a company, reflecting the agency's conclusion about the ability of that company to repay its debt. The outlook may be stable, under review, negative watch, or negative. No company or nation ever wants to be placed on a negative watch. They would rather be stable, or, even better, to be placed on positive watch, which is the path to a credit rating upgrade.
KEY TAKEAWAYS
A company's rating is an indication of its ability to repay its debt.
A negative watch indicates that its ability to repay may be deteriorating.
A company's outlook may be stable, under review, negative watch, or negative.
Having its credit rating downgraded, or being under a negative watch, is a big blow for a company. It means it will have to pay a higher rate of interest to borrow money from a bank or issue bonds on the market for the foreseeable future.
Moreover, it is a signal that the company is likely to underperform compared to its peers. Stock investors will read it as a harbinger of bad news about a company. The news could negatively impact the company's reputation with all stakeholders including with the general public.
The Rating Agencies' Role
The three credit ratings are Standard & Poor's (S&P), Moody's Investors Service, and Fitch Ratings. Their role is to evaluate the creditworthiness of companies, and the ratings they assign directly determine the interest rates a company must pay its bondholders.
A negative watch is the result of an analysis of a company's current financial condition.
When a rating agency downgrades a company's credit rating, it is a signal that the company will likely underperform compared to its peers.
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