Tax overhaul will lead to as many ratings downgrades as upgrades, says S&P

The U.S. tax bill signed into law in December will likely lead to as many ratings downgrades as upgrades, as companies will spend most of the savings on shareholder returns or mergers and acquisitions, S&P Global Ratings said Thursday.

While corporate borrowers are still working to evaluate the full impact on their business, S&P is not expecting them to use much of the extra cash to permanently reduce debt, leaving leverage tolerance levels unchanged.

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“As a result, we believe reform-related ratings changes of more than one notch will be rare, and upgrades and downgrades are both equally likely,” said analysts led by Michael Altberg and David Tesher in a new report.

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