OREANDA-NEWS. The downgrade of Brazilian corporate ratings (following the sovereign downgrade) and downgrades in the energy (oil and gas) and natural resources sectors drove over 40% of non-financial corporate downgrades for the fourth quarter, according to Fitch Ratings. Continued rating changes are expected to be concentrated in these segments of the portfolio into 2016.

Nonfinancial corporate (corporate) downgrades exceeded upgrades by 2.1 to 1 for fourth-quarter 2015 (or 2.0x for the full year). The downgrade to upgrade ratio attributed to changes in the operating/industry profile was 1 to 1 for the fourth quarter (1.2x for the year).

Fitch's two downgrades of Brazil's sovereign rating during the fourth quarter drove 80% of sovereign-related downgrades. Brazil's Negative Rating Outlook reflects the risk of further deterioration in the credit. Relative to the size of Fitch's portfolio, a disproportionate number of downgrades continued to emanate from Brazil, 30% for 4Q15 (23% of 2015 downgrades). These actions have been across all rating levels, reflecting the perfect storm of political uncertainty, rising interest rates, domestic downturn, unhedged US dollar-denominated debt for certain issuers, currency weakness negatively affecting non-exporters and weak economies in neighbouring Venezuela and Argentina. Fitch expects the Brazilian economy to remain weak for the next two years.

Exploration and production (E&P) companies and related service providers remain under pressure as persistently weak oil prices have continued to lead to capex reductions or delays and weakened credit profiles. Fitch does not expect the situation for E&Ps to improve significantly in the next 12 months. Sufficient liquidity resources continue to be a key rating factor at all rating levels.

For more information on this topic, please see Fitch's "Corporate Upgrade/Downgrade Dashboard 4Q15," which is available on our website at www.fitchratings.com.