Bloomberg News

NEW YORK — Company credit ratings are starting to rise, braking a three-year slide and signaling lower borrowing costs within six months.

The ratio of rating upgradings to downgradings, a measure of credit quality, has risen so far in the second quarter from the first quarter’s 10-year low, Moody’s Investors Service said in a report. It has raised ratings on 4.2 companies for every 10 it cut since April 1, compared with 2.9 per 10 cuts in the first quarter. The ratio was 1-1 in 1998.

“Risk already may have bottomed out,” said James Glascott, a managing director who underwrites industrial and utility bonds at Deutsche Banc Alex. Brown in New York. “The negative earnings surprises that we will have are probably already in the ratings.”

Credit ratings are important because companies pay less to borrow when upgraded by an agency such as Moody’s. It has increased ratings on 28 companies so far in the second quarter and cut them on 60.

Upgradings went to HCA, an operator of hospitals, and the communications company L-3 Communications Holdings Inc. Among the downgradings were clothing retailer Gap Inc., telecommunications company Winstar Communications Inc., and defense contractor Raytheon Corp.

“We could be hitting a trough of some sort,” said Kamalesh Rao, statistical economist at Moody’s, who added that the rating company doesn’t expect the ratio to get any worse and that upgradings could surpass downgradings before yearend.

Corporate bond defaults reached $10.6 billion in February, the most since July 1999.

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