The number of companies rated in the 'BBB' category has grown by 27% since the beginning of 2008, to roughly 1,847 at the end of 2020. On Aug. 21, 2020, we withdrew the issuer credit ratings on the company at its request. Normally, recessions include, or are followed shortly by, marked increases in corporate defaults. On May 8, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Bermuda-based diamond miner Petra Diamonds Ltd. to 'D' from 'CCC+' following the issuer's announcement to enter into a grace period of 30 days for interest payment on it US$650 million debt. to 'D' from 'CCC-'. This restructuring was viewed as a distressed exchange because it would delay the interest payments. On Sept. 16, 2020, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. S&Ps opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. Note: Numbers in parentheses are weighted standard deviations, weighted by the issuer base. 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. 3Q 2021 . Therefore, each annual default study is self-contained and effectively supersedes all previous versions. On Feb. 21, 2020, S&P Global Ratings raised the issuer ratings to 'CCC-' from 'SD', after the issuer reached a settlement on the US$350 million notes via a partial exchange, and the new shareholder Beijing Energy Group Co. Ltd. can provide credit enhancements. Many events over the long term have contributed to the decline of global 'AAA' rated issuers. Data Report. Recovery rate is essential to the estimation of the portfolio's loss and economic capital. Later, on Oct. 15, 2020, we withdrew the ratings at the issuer's request. This small sample size can, at times, result in historical default rates that seem counterintuitive. 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. Earlier, on April 10, 2020, we lowered the rating on the issuer to 'CC' from 'CCC-' after it was unable to obtain mezzanine debt lenders' consent to extend the loan and had insufficient liquidity. On Nov. 20, 2020, S&P Global Ratings withdrew its ratings on the issuer. On July 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Mexican lodging company Grupo Posadas S.A.B. The company separately raised a bridge loan in April 2020 that required it to file a restructuring support agreement by June 15, 2020. If the rating on an entity is withdrawn after the start date of a particular static pool and the entity subsequently defaults, we will include the entity in that static pool as a defaulter and categorize it in the rating category of which it was a member at that time. On Dec. 23, 2020, we raised the issuer credit ratings to 'B-' from 'D'. Our updated 2021 energy default rate forecasts are 8% and 6% for LL and HY . On Aug. 19, 2020, we raised our issuer credit rating on Forum to 'CCC+' from 'SD' following the completion of its debt exchange for the majority of its 6.25% senior unsecured notes due 2021. On April 22, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Massachusetts-based department store operator Neiman Marcus Group Ltd. LLC to 'D' from 'CCC-' after the issuer missed paying interest due on unsecured notes maturing October 2021. *This column includes companies that were no longer rated one year prior to default. The buyback worth was around US$76 million between March 13 and March 17 and at a discount, and these buybacks were considered distressed, rather than an opportunistic attempt. to 'SD' from 'CCC+' after the company missed interest payment on its 510 million senior secured notes due November 2023. Rating transition rates may be compared with the marginal and cumulative default rates described in the previous sections. The Content shall not be used for any unlawful or unauthorized purposes. 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. It is expected to reduce debt by US$500 million. This would be considered a default since S&P Global Ratings believes the second-lien noteholders will receive less than they were originally promised. Data provided in table 13 also differ from default rates in table 24 owing to the use of the static pool methodology. 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). 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. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. A default is assumed to take place on the earliest of: When an issuer defaults, it is not uncommon for S&P Global Ratings to subsequently withdraw the 'D' rating. On May 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New Jersey-based vehicle renting and leasing service provider Hertz Global Holdings Inc. to 'SD' from 'CCC-' after the issuer missed lease payments on some of its asset-backed securities. 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 Denbury Resources Inc. to 'D' from 'CCC+'. 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 Dec. 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based payroll software provider Zellis Holdings Ltd. to 'SD' from 'CCC+'. 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 3, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Canada-based theatrical and live entertainment company CDS Group to 'D' from 'CCC-', reflecting payment default after the issuer didn't made interest and principal payments on first lien-debt and interest payment on second-lien debt, both of which were due March 31, 2020. The largest gap between the two was in financial institutions, which had a five-notch difference: The 233 financial institutions that defaulted had a median original rating of 'B+', compared with a sector median of 'BBB'. *U.S., Bermuda, and Cayman Islands. This is slightly higher than the post-Lehman Bros. default (2009 onward) annual average of $1.4 billion. Second Party Opinions & Transaction Evaluations, U.S. Local Governments Credit Scenario Builder, Annual Global Trends: Defaults Reach Their Highest Level Since 2009, Lower Ratings Are Much More Vulnerable To Default, Industry Variations: Energy And Consumer Services Lead Again, But Defaults Were Widespread In 2020, Speculative-Grade Ratings Represent About Half Of Corporate Issuers, Transition And Cumulative Default Rates Demonstrate Ratings Performance, Criteria For Assigning CCC+, CCC, CCC-, And CC Ratings, U.S. Recovery Study: Clouds Loom As Defaults Rise. Cross-Sector: The . On Aug. 19, 2020, we withdrew our issuer credit ratings on the company at its request. On May 26, 2020, S&P Global Ratings lowered its issuer credit rating on Oklahoma-based oil and gas exploration and production company Unit Corp. to 'D' from 'CC' after the issuer reorganized under Chapter 11 of the U.S. Bankruptcy Code. Of the 10 that were initially investment grade, the average time to default--the time between first rating and date of default--was 21.8 years, with an associated standard deviation of 14.1 years. 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%. The notable exception was Europe, which continued to see historically elevated defaults through the third and fourth quarters. We understood that the company was making those amendments to preserve cash because customers have had to suspend their mining operations or delay their project spending due to the coronavirus pandemic. This study analyzes the rating histories of 21,693 companies that S&P Global Ratings rated as of Dec. 31, 1980, or that were first rated between that date and Dec. 31, 2020. Default, Transition, and Recovery: Growing Strains Could Push The U.S. Speculative-Grade Corporate Default Rate To 4% By December 2023. 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. The issuer was also in talks with its lenders and noteholders for a comprehensive financial restructuring. S&P Global Ratings had previously withdrawn its ratings on Techniplas. On April 12, 2020, Pace Industries Inc. filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. 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. Although MCS had sufficient liquidity to make the interest payment, S&P Global Ratings believed that the company was unlikely to pay it within the five-day grace period, given its unsustainable capital structure. On Sept. 4, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based apparel designer and manufacturer Premier Brands Group Holdings LLC to 'SD' from 'B-' after the issuer announced that it received a waiver for reducing excess cash flow payment of about US$11 million, which was due in April 2020. Selective defaults accounted for just over half of all defaults in 2020. On Oct. 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Sweden-based passenger flight transportation services company SAS AB to 'SD' from 'CC' after the issuer completed a distressed debt restructuring of its SEK2,250 million senior unsecured bond due 2022 into about 547 million common shares, at SEK1.16 per share. On June 29, 2020, S&P Global Ratings withdrew its ratings on Intelsat. On Jan. 8, 2021, S&P Global Ratings withdrew its issuer credit rating. On April 3, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based clinical toxicology laboratory services provider New Millennium Holdco Inc. to 'D' from 'CC'. For the transition matrices in tables 21-23 and 33-44, the standard deviation for each cell in a given matrix is a weighted standard deviation, calculated using the data from each of the underlying cohort years that contribute to the averages, weighted by that cohort year's issuer base for each rating level. We held over 13,000 customer engagement meetings, a 12% increase over 2020. The differences between each rating category's minimum and maximum times to default are in the last column, under "range." (PDF) Analyzing and Explaining Default Recovery Rates - ResearchGate For the purposes of this study, we form static pools by grouping issuers (for example, by rating category) at the beginning of each year, quarter, or month that the database covers. On Nov. 16, 2020, Libbey announced that it had successfully emerged from Chapter 11 by completing its financial restructuring. 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. All 1981 static pool members still rated on Jan. 1, 2020, had 40 one-year transitions, while companies first rated on Jan. 1, 2020, had only one. Over the long term (1981-2020), heightened ratings stability is broadly consistent with higher ratings (see table 21). The issuer had also obtained a commitment for $1 billion in debtor-in-possession financing. Default, Transition, and Recovery: The U.S. Speculative-Grade Corporate IssuanceEconomist For 2019's offerings of US$-denominated corporate bonds, The negative outlook reflects our view of a potential risk from a prolonged decline in customer's mining and drilling activity and slower-than-expected recovery, which could lead to further liquidity pressure and leverage remaining above 10x ahead of the large debt maturities in 2022, increasing the risk of another distressed transaction. We treated this as distressed because the issuer did not meet its contractual obligation to pay principal and interest in a timely manner, and did not adequately compensate lenders for agreeing to temporarily waive their rights. The share of management teams citing labor shortages, now at less than a third of the peak in 3Q 2021, indicates loosening in the jobs market. On May 25, 2020, S&P Global Ratings lowered the issuer credit rating on U.K.-based foreign-exchange service provider Travelex Holdings Ltd. to 'D' from 'CCC' after the issuer failed to make the interest payments on its senior secured notes. Static pool methodology. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. On June 26, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Irving, Texas-based CEC Entertainment Inc. to 'D' from 'CC' as the company filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. On Nov. 2, 2020, Tennessee-based real estate company CBL & Associates Properties Inc. defaulted after the issuer filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In 2020, the share of new speculative-grade issuers rated 'B-' and lower reached 56.8%. On Oct. 15, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' following completion of the distressed exchange. Fitch Ratings: Credit Ratings & Analysis For Financial Markets N/A--Not available. The issuer, doing business as Elara Caring, completed the exchange of its US$195 million second-lien debt for US$186 million new junior 1.5-lien debt. All speculative-grade categories had higher default rates in 2020 than their long-term averages, though in the cases of the 'BB' and 'B' categories, these increases were relatively small. *This total does not match table 1 because it excludes confidentially rated defaults. The pandemic, low demand, and oil prices crisis pushed the company into a weaker liquidity position, making it difficult for the company to repay the amount. Project Finance Bank Loans: Default and Recovery Rates - Moody's Live The company eliminated its prepetition debt during the bankruptcy process. But over the past three years--now that more than a decade has passed since the financial crisis of 2008-2009--financial services defaulters show a median rating in the 'B' category five years prior to default. On Nov. 6, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Florida-based health care service provider CDRH Parent Inc. to 'SD' from 'CCC+' because of the distressed nature of its credit agreement amendment, where the issuer amended its credit agreement to provide covenant relief and improve liquidity. While these payments would have a higher interest rate, we considered this modification a selective default since investors were receiving less than they were originally promised under the security, partly because the amendment would delay the timing of the interest payments. 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'. Sources: High yield spreads, default rate and unemployment assumptions sourced from Moody's Investors Service . Default, Transition, and Recovery: 2019 Annual Global Corporate Default to 'D' from 'CC' after the issuer completed a distressed debt exchange for both its US$115 million notes due in April 2021 and US$370 million notes due in April 2022. The lenders could accelerate the payment of the outstanding term loan balance, which as of December 2019 was about US$178 million. The issuer entered into a forbearance agreement with its first-lien lenders and missed the quarterly interest payment on second-lien debt. On May 12, 2020, S&P Global Ratings lowered the issuer credit rating on Texas-based oil and gas exploration and production company Fieldwood Energy LLC to 'D' from 'CCC' after the issuer failed to make the interest payments on its first- and second-lien term loans. S&P Global Ratings subsequently withdrew the ratings at the issuer's request. Specifically, 87.6% were rated 'CCC+' or lower just prior to default, which is much higher than the 69.4% long-term average. We did not expect the company to make the interest payments due June 30 and anticipated that it could complete a comprehensive debt restructuring with its debtholders prior to Sept. 30, 2020, which is when its latest forbearance agreement would expire and its next interest payments come due. Following Acharya et al. Each static pool can be interpreted as a buy-and-hold portfolio. Our ongoing enhancement of the database used to generate this study could lead to outcomes that differ to some degree from those reported in previous studies. moody's probability of default table 2021 Ex-2.1 On July 7, 2020, we lowered the issuer credit rating on Forum to 'CC' from 'CCC-' following the issuer's announcement to exchange its remaining $328 million of 6.25% senior unsecured notes due October 2021. Ratings stability decreased in 2020, to 69.2%, largely the result of the downgrade rate of 18.5%, which was the highest since 2009. On June 24, 2020, S&P Global Ratings withdrew its issuer credit rating at the company's request. This compares with a Gini of 88.3% and a default rate of 2.5% in 2019. On May 28, 2020, S&P Global Ratings withdrew its ratings on the issuer. On March 12, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New Jersey-based apparel retailer Ascena Retail Group Inc. to 'SD' from 'CCC' after the issuer repurchased US$122 million debt in two tranches, at approximately 37% below par. On Nov. 4, 2020, S&P Global Ratings withdrew its ratings on the issuer. Exploring Industry-Distress Effects on Loan Recovery: A Double Machine On Jan. 9, 2019, S&P Global Ratings lowered its issuer credit rating on Missouri-based retailer Moran Foods LLC (SAL Acquisition Corp.) to 'SD' from 'CCC' after the company elected not to make an interest payment due Dec. 31, 2019, while entering into a forbearance agreement. The upgrade rate fell to 2.8% in 2020--the lowest annual rate since 1981. In this new report, Moody's forecasts that the rate will peak at 7.3% in March 2021, and then decline to 4.7% by December. That is, when default pressure is high, economic conditions are such that the likelihood of companies from across the rating spectrum suffering a more rapid deterioration of credit quality is higher. 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. The outlook is negative, reflecting the company's unsustainable leverage and the risk that liquidity could deteriorate without an improvement in sector conditions. The company noted that the filing resulted from the financial strain from the prolonged COVID-19 restaurant closures. On May 27, 2020, S&P Global Ratings withdrew its ratings on the issuer. These factors, combined with asset managers' growing tolerance for investing in lower-rated companies, leave just a handful of the highest-rated entities. Over each time span, lower ratings correspond to higher default rates (see chart 4 and chart 25), and this relationship holds true when broken out by rating modifier (see tables 24 and 26) and by region (see table 25). Of the rated companies that defaulted in 2020 (and that were rated as of Jan. 1, 2020), 79% were rated 'B-' or lower at the start of the year. On Jan. 7, 2021, S&P Global Ratings raised the rating on the issuer to 'CCC+' from 'SD' based on its response to a decline in revenue by significantly reducing costs and capital investments. Likewise, it would be included in the 1989 and 1990 pools with the 'B' rating. On Aug. 6, 2020, S&P Global Ratings withdrew the ratings on the issuer. 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. Later, on Aug. 11, 2020, we withdrew our issuer credit ratings on the company at its request. The new approval includes transfer of ownership to Alloy Topco Ltd. On Oct. 26, 2020, S&P Global Ratings withdrew its ratings on the issuer. The issuer announced that it voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Investment-grade ratings are proportionately more prevalent among financial services companies as well (relative to nonfinancials). Acharya: Credit Risk - Introduction 7 Moody's Definition Of Default: "Credit Events" 1. It would not be part of the 1986 pool because it was not rated as of the first day of that year, and it would not be included in any pool after the last day of 1990 because the rating had been withdrawn by then. On May 12, 2020, S&P Global Ratings lowered the issuer credit rating on New York-based beauty and personal care manufacturer and distributor Revlon Inc. to 'SD' from 'CC' after the issuer completed refinancing its 2016 term loan. At times, however, some of these subsidiaries might not yet have been covered by a parent's guarantee, or the relationship that combines the default risk of parent and subsidiary might have come to an end or might not have begun. The date S&P Global Ratings revised the rating(s) to 'D', 'SD', or 'R'; The date a distressed exchange offer was announced; or. Overall, ultimate recovery rates for project finance bank loans are similar to those for senior secured corporate bank loans and overall corporate bank loans. PDF China Banking System Credit trends amid policy-led recovery and a . Moody's publishes the 30th annual default study; forecasts a lower On March 12, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Illinois-based engineered fastener distributor Optimas OE Solutions Holding LLC to 'SD' from 'CCC+'.

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