The rating action followed the issuer's completed exchange of its unsecured notes of cash and PIK. On July 8, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Indonesia-based property developer PT Modernland Realty Tbk. Europe followed with 42 defaults, emerging markets with 28, and the other developed region (Australia, Canada, Japan, and New Zealand) with 10. On July 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Delaware-based footwear provider Never Slip Topco Inc. to 'D' from 'CCC' after the issuer entered a distressed exchange to amend first- and second-lien credit agreements. In fact, only four sectors had default rates in 2020 that were lower than their long-term averages (aerospace/automotive/capital goods/metal, forest and building products/homebuilders, financial institutions, and insurance) (see chart 2). Throughout the 40-year span, only eight companies initially rated 'AAA' have ever defaulted. Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. When an issuer defaults, we assign that default to all of the static pools to which the issuer belonged. Back in December, Moody's Investors Servicepegged the 2017 default rate for speculative-grade debt in the U.S. at 4% by year-end, down from 5.6%. S&P Global Ratings had previously withdrawn the issuer credit ratings at the issuer's request. In 2005, the speculative-grade share of European corporate ratings peaked near 21%, and once the cycle turned, the European speculative-grade default rate peaked at 9.9% in November 2009. As 2020 wore on, default rates fell across most regions, with fourth-quarter figures generally less than half the rates in the second quarter. moody's probability of default table 2021 This study limits the reporting of default rates to the 15-year time horizon. The negative outlook reflects the risk of a lower rating if operating performance continues to deteriorate and the company fails to meet our expectations. For example, leisure and media has a much higher proportion of speculative-grade ratings than financial institutions or insurance (see chart 20). On Nov. 25, 2020, we lowered the issuer credit rating to 'SD' from 'CCC+' after the issuer disclosed it had repurchased a significant portion of senior unsecured notes due in 2022 and 2024 below par. This preview shows page 40 - 41 out of 49 pages. Earlier, on July 2, 2020, S&P Global Ratings lowered the issuer credit rating to 'CC' from 'CCC+' after the issuer defaulted on its unrated asset-backed lending credit facility. On July 1, 2020, S&P Global Ratings lowered its issuer credit rating to 'D' following the company's missed interest payments on its first-lien and second-lien debt and entrance into another forbearance agreement until Sept. 30, 2020. On July 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Ohio-based oil and gas exploration and production company Chaparral Energy Inc. to 'D' from 'CCC-' after the issuer elected not to make interest payments of US$13.1 million due on its unsecured notes due 2023. However, since the financial downturn of 2008, many high-rated companies have been downgraded, leaving, for example, exceedingly few 'AAA' rated issuers at the start of 2020. Broadly speaking, the average and median times to default for each rating category are longer when based on the initial rating than when based on subsequent ratings, particularly for speculative-grade ratings. Average and standard deviation for Europe calculated for the period 1996-2020 due to sample size considerations. On July 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based oil and gas exploration and production company Lonestar Resources U.S. Inc. to 'D' from 'CCC-' after the issuer elected to skip an interest payment on its unsecured notes due 2023, and was not likely to pay within the 30-day grace period. As has been the case for an extended period, the leisure time and media sector has by far the highest proportion of speculative-grade ratings, with 83.3% of its issuers in this rating category in 2020. This reflects our forward-looking opinion post the reduction in outstanding gross debt by approximately $127 million. Some countries can be included in multiple regions, and S&P Global Ratings does not have corporate ratings within every country. On Dec. 8, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' following debt repurchases. On Aug. 26, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Virginia-based travel assistance provider KCIBT Holdings L.P. to 'SD' from 'CCC+' after the issuer deferred a cash interest payment on its second lien-term loan. Initial ratings, or those as of Dec. 31, 1980. But in a report issued today, the credit ratings. On Nov. 17, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' on lower refinancing risk. Historically, a growing concentration of speculative-grade ratings often precedes a period of increased defaults. Table 8 provides a list of all the publicly rated companies that defaulted in 2020. Some methods for calculating default and rating transition rates might charge defaults against only the initial rating on the issuer, ignoring more recent rating changes that supply more current information. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. On April 17, 2020, we raised the issuer credit ratings to 'CCC-' after the issuer was able to shift a huge portion of debt maturing in the second quarter of 2020 to the next quarter. CLO Myth-Busting: The Top Three Misconceptions On Nov. 17, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Colorado-based exploration and production company Jonah Energy LLC to 'D' from 'CCC-' after the issuer elected not to make its full US$30 million reserve-based lending facility deficiency payment for September. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. On June 25, 2020, we withdrew the issuer credit rating on Unit Corp. at its request. Earlier, on Dec. 30, 2019, S&P Global Ratings lowered its long-term issuer credit rating on Constellis to 'CC' from 'CCC+' after the company entered into a new $110 million priority first-lien term loan. On March 27, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Colorado-based cyber security provider Optiv Inc. to 'SD' from 'CCC+' after the issuer completed a distressed exchange, repurchasing about US$47 million of second-lien debt for about US$23 million. 17 Jan 2023 | Moody's Investors Service. Broadly consistent with 2019, almost 54% of defaults in 2020 came from two sectors: consumer services and energy and natural resources (with 122 defaults combined). On Sept. 25, 2020, we withdrew our 'D' long-term issuer and issue credit ratings at the issuer's request. Static pool methodology. *Fallen angels that survived to Jan. 1 of the year after they were downgraded. S&P Global Ratings does not require all issuers with rated debt to have an issuer credit rating. Often these are issuer-weighted averages. The default rates that we refer to as weighted averages in this study use the number of issuers at the beginning of each year as the basis for each year's weight. On Sept. 10, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based business process outsourcing and product support services provider iQor Holdings Inc. to 'D' from 'CC' after the issuer filed petition under Chapter 11 of the U.S. Bankruptcy Code. On June 24, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Salt Lake City-based drilling services provider and manufacturer Boart Longyear Ltd. (BLY) to 'SD' from 'CC'. The issuer also deferred on principal payments. On Nov. 25, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC-' from 'SD' following the debt repurchases. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. On June 29, 2020, S&P Global Ratings withdrew its ratings on Intelsat. The issuer used 43 million of cash proceeds to repurchase 51 million of notes. The issuer's operation was suffering from weak crude oil prices and depressed demand. If the rating on the issuer was withdrawn in the middle of 1991, it would be included in the column representing transitions to NR in the 1991 transition matrix. We would include this hypothetical company in the 1987 and 1988 pools with the 'BB' rating, which was the rating on the issuer at the beginning of those years. As one measure of ratings performance, the cumulative share of defaulters was plotted against the cumulative share of issuers by rating in a Lorenz curve to visually render the accuracy of its rank ordering (for definitions and methodology, refer to Appendix II). Selective defaults accounted for just over half of all defaults in 2020. On April 23, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Canadian diamond company Northwest Acquisitions ULC to 'D' from 'CCC+' after the issuer's subsidiary, Dominion Diamond Mines ULC, announced filing for insolvency protection under The Companies' Creditors Arrangement Act. On Dec. 7, 2020, the issuer credit rating on the company was raised to 'CCC+'. This small sample size can, at times, result in historical default rates that seem counterintuitive. Earlier, on May 29, 2020, we lowered our ratings on BLY from 'CCC+' to 'CC' and placed them on CreditWatch with negative implications following the company's announcement of a proposal to convert the interest payments due on its senior secured notes in 2020 to PIK interest payments. Tables 30, 31, and 32 are broken out by the broadest rating classifications (all rated, investment grade, and speculative grade). The MarketWatch News Department was not involved in the creation of this content. This compares with a Gini of 88.3% and a default rate of 2.5% in 2019. For example, the one-year default rate column of table 24 is equivalent to column 'D' of the average one-year transition matrix in table 21, as well as the cumulative average in the "Summary statistics" of the one-year column in table 32. This figure includes new ratings subsequent to a prior default--such as after distressed exchanges. The depressed commodity prices, the company's liquidity position, and the ongoing capital needs to maintain production were the main factors behind the decision. Defaults in 2020 came from all sectors, but--consistent with recent years--were heavily represented by two sectors: the energy and natural resources sector (with 62 defaults) and the consumer services sector (with 60 defaults). Meaningfully lower yoy default rates in 2021 are expected for the energy and retail industries, which produced a significant volume of defaults over the prior five years. In a small number of cases, we use the subordinated debt rating or the senior secured rating as the proxy. On Aug. 3, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Missouri-based motion picture exhibitor AMC Entertainment Holdings Inc. to 'SD' from 'CC' after the issuer completed the distressed exchange of its subordinated debt at 70%-75% of its par value. In this case, we compared the rating at the beginning of the multiyear period with the rating at the end. In a theoretical exploration of recovery rates in a structural Research & Ratings: Default & Ratings Analytics - Moody's We expect the company will not be able to pay most of its obligations as they come due, unless a major debt restructuring it is working on allows it to extend major debt maturities, including the $350 million Eurobond repayment due in September 2021. N/A--Not available. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated. Our data on defaulted corporate issuers globally shows that defaults among speculative-grade entities tend to be clustered in the third year after the initial rating, particularly in the 'B' rating category (see chart 9). In large part, this reflects the private nature of the leveraged finance market before the financial crisis in 2008. Earlier, on Feb. 9, 2020, we lowered the issuer credit rating on Speedcast to 'CCC' from 'B-' after the issuer announced lower 2019 earnings, which intensified pressure on the group's liquidity. For each rating listed in the matrix's leftmost column, there are nine ratios listed in the rows, corresponding to the ratings from 'AAA' to 'D', plus an entry for NR (see table 22). Throughout most of the year, the U.S. accounted for the majority of the debt (see chart 14). Default, Transition, and Recovery: 2021 Annual Global Sovereign Default "The default outlook for 2022 will continue to depend on the pace of economic growth . Source: Moody's Investors Service, "Moody's Corporate Default & Recovery Rates Study 2019" Senior Secured Loans Equity Unsecured Debt (ie, high yield bonds) Subordinated Bonds Senior Unsecured Bonds Loans 28.0% 47.0% 80.0% Recovery Rate 100% 80% 60% 40% 20% 0% 1 Source: S&P Global Market Intelligence, Wells Fargo, March 31, 2020 No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poors Financial Services LLC or its affiliates (collectively, S&P). On average, there is a negative correlation between the initial rating on an entity and its time to default, if a default occurs. On Dec. 17, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC-' from 'SD', which reflects the completion of the distressed exchange and significant risks over the next few months given looming debt maturities and very high leverage. An obligor is considered in default unless S&P Global Ratings believes that such payments will be made within five business days of the due date in the absence of a stated grace period, or within the earlier of the stated grace period or 30 calendar days. Nick W Kraemer, FRM, New York+ 1 (212) 438 1698; Nivritti Mishra Richhariya, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai, Sundaram Iyer, CRISIL Global Analytical Center, an S&P affiliate, Mumbai, Lyndon Fernandes, CRISIL Global Analytical Center, an S&P affiliate, Mumbai, Abinash Meher, CRISIL Global Analytical Center, an S&P affiliate, Mumbai, Shripati Pranshu, CRISIL Global Analytical Center, an S&P affiliate, Mumbai, APAC, United States of America, Latin America, Canada, EMEA, APAC. On Sept. 4, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based action sports apparel company Boardriders Inc. to 'SD' from 'CCC+' after the issuer completed a distressed transaction to increase its liquidity and fund operations. On April 6, 2020, we raised the issuer rating to 'CCC-' from 'SD' to reflect the risk of a conventional default or restructuring, which was likely in the following six months. The rating action followed Covia's announcement that its domestic subsidiaries filed voluntary petitions for restructuring under Chapter 11 of the U.S. Bankruptcy Code. For the purposes of this study, a corporate rating may also be withdrawn as a result of mergers and acquisitions. On Aug. 30, 2020, Ohio-based automotive components manufacturer Shiloh Industries Inc. defaulted after the issuer filed for Chapter 11 of the U.S. Bankruptcy Code. The amount of the senior secured notes is half of the original 600 million, and the senior unsecured noteholders had not received any of the 150 million they invested. Credit quality declined in 2020, with increasing default and downgrade rates, while the upgrade rate fell to an all-time low of 2.8%. Note: Excludes confidentially rated defaults. On Sept. 9, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Missouri-based printing equipment designer and manufacturer MAI Holdings Inc. to 'SD' from 'CCC-' after the issuer completed the partial exchange of its senior secured notes. On Feb. 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Kansas-based Pizza Hut restaurants franchise operator NPC International Inc. to 'SD' from 'CCC-' after the company decided not to make interest payments due Jan. 31, 2020. The key model inputs Moody's uses in its analysis, such as par, rating factor, and the recovery rate assumptions, are based on its published methodology and could differ from the trustee's reported numbers. On Aug. 24, 2020, S&P Global Ratings lowered the issuer credit ratings to 'D' from 'SD' after Travelex completed its restructuring plan, including the write-off of 225 million of debt. With its highly developed financing markets, the U.S. also has a considerably higher share of speculative-grade companies than other regions--it accounted for 52.6% of speculative-grade companies globally at the beginning of 2020. Only in longer time frames do companies with higher original ratings surface among the defaulters. Moody's Corporation Reports Results for First Quarter 2022 On June 8, 2020, we lowered our issuer credit rating to 'D' from 'SD' after the issuer's announcement of a reorganization petition filed under Chapter 11 of the Bankruptcy Code. The issuer submitted a prepackaged plan. During 2020, the company increased its stake in V.E from 69.2% to 99.8%. Difference between last four quarters and weighted average, Largest corporate defaulters by outstanding debt amount, Texas Competitive Electric Holdings Co. LLC. Each static pool is followed from that point forward. Note: Numbers in parentheses are standard deviations. On June 24, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Houston-based Summit Midstream Partners L.P. (SMLP) to 'SD' from 'CCC'. On June 23, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Doraville, Georgiabased leading U.S. bedding manufacturer Serta Simmons Bedding LLC to 'SD' from 'CC' as the company completed its distressed debt exchange, swapping $992 million first-lien debt and $300 million of second-lien debt for $851 million of super-priority second-out debt, and issued $200 million new super-priority first-out debt provided by the debt-exchange lenders. In the one-year global Lorenz curve, for example, 96.6% of defaults occurred in the speculative-grade category, while these ratings constituted only 39.9% of all corporate ratings (see chart 26). The trailing-12-month and annual default rates have become standard measures, but default rates measured over shorter time frames give a more immediate picture of credit market conditions. These marginal averages are then used to calculate the cumulative average default rates in the row directly beneath them, as explained in the "Average cumulative default rate" section above. On Dec. 9, 2020, we raised the issuer credit rating to 'CCC+' from 'SD' following the distressed conversion of term loans to PIK toggle. Financial services had some defaults, but at a lower rate than in 2019 (see table 16). Default, Transition, and Recovery: Global Corporate Defaults Drop
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