At the same time, the Fed s actions may backfire on healthy companies that choose to borrow now, because an improving economy could increase demand for capital and raise borrowing rates, making it costly to refinance. Nevertheless, companies are selling less short-term debt. Since October, Moody s, a credit rating agency, has downgraded 66 companies short-term ratings and upgraded just 11.
Downgrades ordinarily make it more costly for companies to raise cash.
Downgrades to even lower levels often shut companies out of the short-term market. This year, Moody s said, weakening same-store sales growth has contributed to seven downgrades of retailers, including Dillard s Inc., Gap Inc., J.C. Penney Co. and Saks Holdings. Problems in Lucent Technologies vendor finance portfolio led to a downgrade, it said. Slower earnings growth, equity buybacks and merger activity caused several other downgrades this year, Moody s said. That worm could turn, though, if the U.S. economy strengthens, Puchalla said.