The rated global infrastructure sector has experienced essentially uninterrupted growth over the past 20 years, according to a new report by S&P Global Ratings, with the majority of the sector rated ‘A’ or ‘BBB’ by the company.
However, the proportion of speculative-grade ratings has increased in the past decade.
The report – 25 Years of Rated Infrastructure Corporates and Project Finance – reveals that default rates were highest for infrastructure during the 1990-1991 US recession and again during the 2000-2003 period. The first period saw a broad contraction across most industries, while the second was largely due to the liberalisation of the US power sector in early 2000.
Over the long term, infrastructure credits show a lower likelihood of default and higher ratings stability than the broader non-financial segment.
The report also says that recoveries are generally higher for infrastructure than for non-financial corporates with about 52 per cent of infrastructure instruments having recoveries of 80 per cent or higher, compared with 39 per cent for non-financial corporates.
