de C.V. to 'D' from 'B-' after the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. On June 18, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Lewisville, Texas-based ASP MCS Acquisition Corp. (MCS) to 'D' from 'CCC' after the company missed its June 15 interest payment on its secured term loan due 2024. The nonfinancial sector tends to have a much higher share of companies rated speculative grade, with 60.6% globally as of the beginning of 2020, compared with just 24.7% of financial services companies. S&P Global Ratings does not require all issuers with rated debt to have an issuer credit rating. With an increase in the proportion of downgrades during the year, the number of large rating changes (which we define as more than six notches) increased in 2020. Issuers rated 'AAA' were still rated 'AAA' one year later 87.1% of the time, while issuers rated in the 'CCC'/'C' category retained those ratings just 43.1% of the time. On Oct. 30, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' following the completion of the distressed exchange. Based on quarterly intervals of measurement (nonannualized), default rates in second-quarter 2020 reached their highest point since the second quarter of 2009 (see chart 16). Of the 226 corporate defaults in 2020, the majority (146) were from companies in the U.S. and associated tax havens (Bermuda and the Cayman Islands). The amendment includes a discount on debt for some of its debtholders, which we assess as equivalent to default. The global corporate default tally has increased to 17 after two issuers defaulted since our last report. Otherwise, the methodology was identical to that used for single-year transitions. Three of the large downgrades in 2020 were from Kazakhstan-based Grain Insurance Co. JSC, U.A.E-based NMC Health PLC, and U.S.-based Garrett Motion Inc. that defaulted during the year. On Dec. 22, 2020, S&P Global Ratings raised its issuer credit rating to 'CCC+' from 'SD'. CPK's performance was weak prior to the disruption stemming from the coronavirus pandemic; however, we believe the pandemic contributed additional operating pressure and potentially accelerated the need to restructure its debt. A quantitative analysis of the performance of S&P Global Ratings' corporate ratings shows that they continue to correlate with default risk across several time horizons. Distribuidora Internacional de Alimentacion S.A. On a year-over-year basis, the number of rated defaults globally was higher in every quarter of 2020 relative to 2019 (see chart 14). And as a general rule, the highest proportions of rating changes for any given rating or rating modifier occur at adjacent ratings and rating modifiers. The issuer missed an interest payment of US$8 million on its senior convertible notes due in 2024. At that point, LetterOne owned 89.7% of 2023 notes. Selective defaults accounted for just over half of all defaults in 2020. On Oct. 15, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Spain-based private gaming service provider Codere S.A. to 'SD' from 'CCC' after the scheme of arrangement was approved by the courts, after 99.6% of creditors participating in the scheme voted in favor. Austria, Belgium, British Virgin Islands, Bulgaria, Channel Islands, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, Ireland, Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova Republic of, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the U.K. On Dec. 16, 2020, S&P Global Ratings withdrew the issuer credit ratings at the issuer's request. Moody's Investors Service (MIS) First Quarter Revenue Down 20%. The proportion of defaulters with confidential ratings in 2020 (11.5%) held steady relative to 11% in 2019. On Oct. 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New Hampshire-based specialty apparel retailer Jill Acquisition LLC to 'SD' from 'CC', as the issuer closed its previously announced transaction to extend the maturity on its debt by two years, which we consider distressed and tantamount to default. A 'D' rating is assigned when S&P Global Ratings believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. On May 13, 2020, S&P Global Ratings lowered the issuer credit rating on New York-based youth licensed sports apparel maker Outerstuff LLC to 'SD' from 'CCC'. The Cross Section of Recovery Rates and Default Probabilities Implied The downgrade reflected our belief that continued low crude oil prices, the weak outlook for offshore drilling services, and the distressed level at which Valaris' debt is trading made it likely the company would not make the interest payments within the grace period. On March 27, 2020, S&P Global Ratings lowered its long-term issuer credit rating on China-based business parks developer and operator Yida China Holdings Ltd. to 'SD' from 'CC' after the issuer completed a distressed exchange. Estimated 5-year default probabilities are on average 67% higher than default probabilities obtained using the standard 40% recovery assumption. On Oct. 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Indonesia-based retailer PT Alam Sutera Realty Tbk. On Oct. 15, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC', with a negative outlook, considering the company's ability to improve its liquidity. Performance of project finance bank loans during the pandemic-fueled default cycle in 2020; Key findings for the power, infrastructure, and oil and gas industry sectors . PGS was also in talks with lenders to secure a new capital structure. On Jan. 13, 2020, S&P Global Ratings lowered its long-term issuer credit rating on paper manufacturer Lecta S.A. to 'SD' from 'CC' after failing to pay the interest of 3.8 million due November 2019 on its 225 million senior secured floating notes due 2020. Tables 30, 31, and 32 are broken out by the broadest rating classifications (all rated, investment grade, and speculative grade). to 'SD' from 'B-' after the issuer missed the Oct. 31 coupon payment on its senior secured notes due 2023. The higher default rates for nonfinancial sectors are not surprising, given their higher concentration of speculative-grade issuers. On Dec. 4, 2020, S&P Global Ratings lowered the issuer credit rating to 'D' from 'SD' after the company filed for Chapter 11 bankruptcy. On Oct. 7, 2020, Tennessee-based casual dining operator Ruby Tuesday Inc. filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, which S&P Global Ratings considers a default. Project Finance Bank Loans: Default and Recovery Rates - Moody's Live This transaction was viewed as distressed because the exchange was at a much discounted rate, of about 70 cents on a dollar. On Sept. 23, 2020, S&P Global Ratings lowered its long-term issuer credit rating on France-based media and entertainment company Technicolor S.A. to 'SD' from 'CC' after the group completed its financial restructuring plan. The only exceptions to the correspondence between lower ratings and higher default rates occur when the number of defaults is low or when the underlying number of issuers is very small--such as at the rating modifier level among the higher rating categories (see table 26). 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). As laid out in the American Recovery and Reinvestment Act, the plan would cost $825 billion On May 27, 2020, Texas-based retailer Tuesday Morning Corp. defaulted as the company filed for Chapter 11. Defaults reached a multiyear high in 2020, but this was largely limited to nonfinancial corporates. On July 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based specialty apparel retailer Tailored Brands Inc. to 'D' from 'CCC+', reflecting interest payment default on its senior notes due 2022. Corporate Defaults Slow, Lifting Debt Market - WSJ As a supplement to many of the averages and time series presented in this study, standard deviations are also shown to provide a gauge of the dispersion of data behind these averages. In other words, the use of a rating category suggests that transitions, for example, to 'AA' from 'AA-' or to 'BBB+' from 'BBB-', are not considered to be rating transitions because the rating remained within the rating category. On June 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based natural gas compression services and equipment provider CSI Compressco L.P. to 'SD' from 'CC'. On Sept. 9, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Luxembourg-based global airport ground handler Swissport Group S.a.r.l to 'SD' from 'CCC' after the issuer completed issuing 230 million super senior secured debt for liquidity purposes and was planning to issue another 70 million. Despite this increase, the default total in 2020 was still lower than the peak of 235 in 2009. 0 ratings 0% found this document useful (0 votes) 2 views. PDF China Banking System Credit trends amid policy-led recovery and a 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. Esma50 165 2229 TRV 2 22 | PDF | Inflation | Monetary Policy The negative outlook reflects the possibility that we could lower the rating if we believe a near-term conventional default, restructuring, or transaction that we view as tantamount to a default becomes a near certainty. On July 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Mexican commercial aviation services provider Grupo Aeromexico S.A.B. Corporate downgrades also increased, to near an all-time high. Many practitioners use statistics from this default study to estimate the "probability of default" and "probability of rating transition." Earlier, on March 20, 2020, we lowered the ratings to 'CC' from 'CCC-' based on our view that the issuer has an unsustainable capital structure and weak liquidity. Often these are issuer-weighted averages. PDF An Empirical Analysis of Bond Recovery Rates: Exploring a Structural This is slightly higher than the post-Lehman Bros. default (2009 onward) annual average of $1.4 billion. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com. In addition, average default statistics become less reliable at longer time horizons as the sample size becomes smaller and the cyclical nature of default rates has a bigger effect on averages. The transaction was viewed as distressed because the remaining US$42 million will now become subordinated, while the noteholders who agreed to the exchange will receive US$850 per US$1,000 principal amount. 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. Subsequently, on June 29, 2020, S&P Global Ratings withdrew its ratings on the issuer. Europe followed with 42 defaults, emerging markets with 28, and the other developed region (Australia, Canada, Japan, and New Zealand) with 10. On Oct. 2, 2020, S&P Global Ratings raised its issuer credit rating to 'CCC+' from 'SD'. On April 20, 2020, we raised the rating to 'CCC+' on account of liquidity the company maintained. For example, if an entity was rated 'A' on Jan. 1, 2020, and was downgraded to 'BBB' in the middle of the year and then upgraded to 'A' later in the year (with no other subsequent rating changes), this entity would be included only in the percentage of issuers that began the year as 'A' that ended the year as 'A'. On Jan. 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based shoes and accessories seller TOMS Shoes LLC to 'D' (default) from 'CCC' after the company restructured substantially all of its debt and its term loan lenders took ownership of the company. Consider the following example: An issuer is originally rated 'BB' in mid-1986 and is downgraded to 'B' in 1988. In turn, this can result in a relatively fast descent into default (see chart 11). 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 principal liquidity sources for the issuer involves US$48 million cash on hand and about US$35 million to US$55 million available in revolving credits. The majority (94%) began the year rated in the 'B' or 'CCC'/'C' category (57% 'CCC'/'C' and 37% 'B'). 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. Note: Excludes confidentially rated defaults. Therefore, we believe Serta Simmons' capital structure remains unsustainable, especially amid an uncertain economic environment that could continue to pressure operating performance and cash flow. Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. The issuer entered into a forbearance agreement with its first-lien lenders and missed the quarterly interest payment on second-lien debt. On June 15, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Calfrac to 'D' from 'CCC-' after the issuer missed an interest payment due on June 15 and entered into the grace period. Note: Descriptive statistics for regions other than U.S. calculated from 1996 to 2020 due to sample size considerations. In 2021, we rated over $6 trillion of issuance and served more than 1,100 issuers who accessed the markets for the first time. On Aug. 7, 2020, we lowered the issuer credit ratings to 'D' from 'SD' following GFamsa's bankruptcy filing in both Mexico and the U.S. On Dec. 12, 2020, we withdrew the issuer credit ratings on the company at its request. content 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. All companies included in the study are assigned to one or more static pools. Following a year marked by one of the deepest recessions in the past 100 years, 2021 proved to be a year of better-than-expected economic recovery, despite the lingering COVID-19 pandemic. On April 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Plano, Texas-based department store operator J.C. Penney Co. Inc. to 'D' from 'CCC' after the company announced it would not make an interest payment. On May 29, 2020, we raised the issuer credit rating to 'CCC+' from 'SD' following the distressed debt exchange. As the Gini ratios show, corporate ratings also serve as effective measures of relative risk over time, particularly in low-default years. Such rating categories with smaller populations will experience high rating transition rates when even a small number of issuers are upgraded or downgraded. However, in most of the relatively benign period since the financial crisis, the two series have diverged somewhat, as they did in 2004-2007. Before 2010, the majority of newly assigned European issuer credit ratings were investment grade, but since then, roughly 73.6% of newly assigned ratings have been speculative grade annually. PDF The Economic Impact of the American Recovery and Reinvestment Act On May 20, 2020, S&P Global Ratings lowered its issuer credit rating on Oklahoma-based casino resort operator Downstream Development Authority (DDA) to 'SD' from 'CCC'. *Or Dec. 31, 1980, whichever is later. Strains between the U.S. and China in their ongoing trade dispute eased at the end of the year with the signing of the "Phase 1" trade deal, which helped markets close the . This small sample size can, at times, result in historical default rates that seem counterintuitive. The issuer also amended the terms of its first- and second-lien credit agreements to extend the maturity of revolving credit and temporary allow itself to make partial PIK interest payments. 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. 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). Adriana Matos Measured on a dollar volume basis, Moody's global speculative-grade Senior Associate bond default rate ended 2008 at 5.8%, up from 2007's year-end level of Richard Cantor 0.6%. PDF An Update on Proposed C1 Bond Factors - National Association of On Aug. 19, 2020, we raised the issuer credit rating to 'CCC-' from 'SD' after the issuer resumed interest payments on senior secured notes issued by its subsidiary. NPC is the largest franchisee of Pizza Hut and Wendy's restaurants operating nearly 1,600 locations in the U.S. On July 1, 2020, S&P Global Ratings lowered the ratings on the issuer to 'D' from 'SD' following its Chapter 11 bankruptcy filing, following which, on Aug. 5, 2020, the ratings on the issuer were withdrawn. articles The average amount of debt per defaulter in 2020 was the same as in 2019: $1.6 billion. On Aug. 5, 2020, we raised our issuer credit rating on SMLP to 'CCC' from 'SD' on completion of the distressed exchanges. A bankruptcy filing or legal receivership by the debt issuer or obligor that will . On June 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Alta-based frac sand producer and supplier Source Energy Services Ltd. to 'D' from 'CCC-' after the issuer missed the interest payment due on June 15, and we believed the company was unlikely to make the interest payment within the 60-day grace period. On April 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Chicago-based printing and digital media company LSC Communications Inc. to 'D' from 'CC' after the issuer filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. On Oct. 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on the Netherlands-based self-service retail and coffee services company Selecta Group B.V. to 'SD' from 'CC' after the England and Wales High Court sanctioned the scheme of arrangement proposed by pan-European vending machine operator Selecta Group B.V. and backed by the group's creditors. Many events over the long term have contributed to the decline of global 'AAA' rated issuers. On March 18, 2020, S&P Global Ratings raised its ratings on the issuer to 'CCC' from 'SD', reflecting our view that there was a possibility of additional debt restructuring. In a year marked by the worst economic contraction since the Great Depression, our ratings performed well, with all rated defaults in 2020 beginning the year with speculative-grade ratings. On April 17, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Arizona-based retailer Mister Car Wash Holdings Inc. to 'SD' from 'CCC+'. On Dec. 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on France-based car rental service provider company Europcar Mobility Group S.A. to 'SD' from 'CC' after the issuer elected not to pay the interest due on its 2024 and 2026 corporate senior notes prior to the end of the 30-day grace period. Initial ratings for these companies are those immediately following a prior default in 2020. The regions covered in this study are: U.S. and tax havens: On May 11, 2020, we withdrew the ratings on the issuer. On Dec. 8, 2020, we raised our rating on Outerstuff to 'CCC' from 'SD', reflecting its restructured debt and licensing agreements, though it still has high leverage and less than adequate liquidity. On July 22, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based media and satellite-based connectivity provider Global Eagle Entertainment Inc. to 'D' from 'CCC-' after the issuer filed for petitions under Chapter 11 of U.S. Bankruptcy Code. On Feb. 12, 2020, S&P Global Ratings lowered its long-term issuer credit rating on RentPath LLC to 'D' after the issuer defaulted and filed for Chapter 11 bankruptcy. According to S&P, at the end of 2020, their 12-month trailing default rates amounted to 6.6% for U.S. speculative-grade. PDF NAIC - Supporting Insurance, Regulators, & Public Interest In line with expectations, the Gini coefficients decline over time because longer time horizons allow for greater credit degradation among higher-rated entities. In 2020, 216 of the 226 defaults, or 96%, were from companies originally rated speculative grade, which is nearly eight percentage points higher than the long-term average of 88.3%. Each issuer is likely to be captured multiple times, in line with its migration from one rating to another, so the total count in table 13 is different from that in table 12. For example, three-year transition matrices were the result of comparing ratings at the beginning of the years 1981-2018 with the ratings at the end of the years 1983-2020. On July 17, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Noble to 'D' from 'CCC-' as the company skipped the interest payment on its 7.75% senior notes due 2024. Over that period, seven sectors have displayed average times to default that are lower than the overall average of 5.9 years: energy and natural resources; financial institutions; health care/chemicals; high technology, computers, and office equipment; leisure time and media; real estate; and telecommunications (see table 17).