Xerox Downgraded to Junk by Moody’s, Joins Growing Number of Fallen Angels

Xerox Corp. is the newest addition to the set of companies downgraded to junk from investment grade.

After being downgraded by Fitch Ratings in August, Moody’s Investors Service followed suit Friday, citing an uncertain revenue base amid a decline in demand for copy and printing services as well as intense global competition.

The company is also on review for a downgrade by S&P Global Ratings, with their watch period ending within the next 10 days.

The company’s notes due in 2021 widened 56 basis points to 300 above Treasuries in Friday’s session, according to Trace price data, and were the most active in the investment-grade market. The cost to protect against losses on Xerox debt also jumped, reaching the highest level since 2009. Credit-default swaps on the company widened 33 basis points to 349, data from CMA show.

Investors are worried about a flood of “fallen angels,” or investment-grade credits that fall into junk. There are concerns that a number of BBB rated companies, the lowest-rated rung of the high-grade space, may become subject to downgrades when the cycle turns as several have spent much of the last decade issuing debt to take advantage of low borrowing costs.

In October, Bloomberg Intelligence analysts Robert Schiffman and Mike Campellone cited concerns over secular declines and execution challenges at Xerox that were unlikely to dissipate in the near-term. “Ratings pressure is likely to persist, with additional non-investment grade risk growing each quarter,” they said.

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.