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Activist Investor Efforts Increasingly Lower Credit Ratings

Here’s an additional rationale for finance chiefs to be wary of shareholder activist campaigns: increasingly, they guide to downgrades or other damaging credit rating score steps, primarily for corporations with already weak credit rating scores.

To be distinct, most activist campaigns do not guide to changes in credit rating scores, credit rating outlooks, or the putting of the enterprise on “credit observe.” But in accordance to a report unveiled by S&P World-wide Scores on Wednesday, when campaigns do guide to scores steps, the bulk of the time all those steps are damaging. Twenty-one particular of the 26 score steps brought on by trader campaigns in 2020 were damaging, up from only seven 5 many years back.

Activists specific generally financial commitment-grade corporations in 2020. But corporations in the “BBB” score categories, the tiers just higher than “junk,” noticed the best variety of score steps and downgrades.

Shareholder activist M&A or

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