Downgrade


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Downgrade

A negative change in ratings for a stock, or other rated security.

Downgrade

A change in the rating of a bond or other security in a downward direction. For example, a bond that had previously been rated AAA may be downgraded to AA. Downgrades are considered detrimental because they mean the ratings agency believes that the issuer of the security is less likely to be able to fulfill its obligations, such as coupon payments. A downgrade increases the cost of funds for the issuer because investors expect a higher return in exchange for the increased risk on the security. See also: Upgrade.
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The largest downgrade on a par basis was Philadelphia School District's $2.
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Additional items such as lower new business profits, and higher financing and collateral costs can be attributed to SCT liquidity issues and ratings downgrades in the summer and fall of 2006.
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