We believed conditions for GNC were deteriorating substantially due to the coronavirus pandemic, the anticipated macroeconomic downturn, and the limited access to capital markets. The drilling market was under stress, and the drop in oil prices and the pandemic furthered worsened the problem. Later, on May 2, 2020, the issuer entered into standstill agreement with the lenders of the notes due 2021 and the term loan due 2023, until July 31, 2020. We viewed the proposed transaction, if completed, as distressed and tantamount to a selective default because the proposed transaction involved debt exchange at a discount. While the one-year default rate for nonfinancial companies has climbed above 3.5% in four cyclical peaks (1991, 2001-2002, 2009, and 2020), the annual default rate for financial services has remained below 2% since 1990 and below 1% for the past 11 years (see chart 18). On May 26, 2020, we raised the issuer credit rating on Equinox to 'CCC' from 'SD'. Issuer credit ratings can be either long-term or short-term. The company entered into a forbearance agreement with its senior debt lenders and is expected to pursue a debt restructuring. On Oct. 15, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' following completion of the distressed exchange. Because errors, if any, are corrected by every new update and because the criteria for inclusion or exclusion of companies in the default study are subject to minor revisions as time goes by, it is not possible to compare static pools across different studies. Earlier in the month, on Feb. 5, 2020, American Commercial Lines Inc. announced it would execute a restructuring, after which S&P Global Ratings lowered the long-term issuer credit rating to 'CC' from 'CCC'. The company had a $135 million interest payment due in mid-July and a $208 million debt maturity in August 2020, and its bonds traded at less than $0.10 on the dollar. On April 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Wisconsin-based industrial products manufacturer Jason Inc. to 'SD' from 'CCC'. Tables 30, 31, and 32 are broken out by the broadest rating classifications (all rated, investment grade, and speculative grade). . Moody's Economy.com January 21, 2009 The new president and Congress are working to implement a large fiscal stimulus plan to mitigate the severe economic downturn. PGS was also in talks with lenders to secure a new capital structure. Australia, Canada, Japan, and New Zealand. On Feb. 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Commercial Barge Line Co. to 'D' from 'CC' after its subsidiary, American Commercial Lines Inc., filed for Chapter 11 bankruptcy with the Southern District of Texas. On July 7, 2020, we withdrew our long-term issuer credit rating at the issuer's request. The study introduces two kinds of models of distribution, Beta distribution estimation and kernel density distribution estimation, to simulate the distribution of recovery rates of corporate loans and bonds. On May 11, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. For example, leisure and media has a much higher proportion of speculative-grade ratings than financial institutions or insurance (see chart 20). We believe the company is unlikely to make this interest payment within the 30-day grace period as it has pursued a comprehensive capital restructuring or bankruptcy filing. In contrast, table 21 reports transition-to-default rates using the static pool methodology, which calculates movements to default from the beginning of each static pool year. Export PDF Export CSV Email . The issuer was looking for alternatives while remaining operational through bankruptcy, with the help of operational free cash flows and debtor-in-possession financing, approximately US$100 million. Earlier, on May 1, 2020, we lowered our issuer credit rating on Chesapeake Energy to 'CC' from 'CCC'. 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'. All rating changes that took place are reflected in the newly formed 1982 static pool through the ratings on these entities as of 12:00:01 a.m. on Jan. 1, 1982. On July 30, 2020, S&P Global Ratings withdrew the ratings on the issuer. The number of 'AAA' rated issuers globally declined to just eight by the end of 2020 from 89 at the beginning of 2008. Uploaded by Dimitris Vrachoritis. On April 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based oilfield services company KCA DEUTAG Alpha Ltd. to 'SD' from 'CCC+' after the issuer announced it would use the grace period for interest payments. Each one-year transition matrix displays all rating movements between letter categories from the beginning of the year through year-end. 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. The 2021 corporate default tally of 72 is the lowest since 2014--down nearly 70% from the previous year's total . Therefore, each annual default study is self-contained and effectively supersedes all previous versions. The Default & Recovery Database provides access to the most comprehensive default dataset in the market. Earlier, on April 2, 2020, we lowered our long-term issuer credit rating to 'CCC+' from 'B-' because of weaker operating performance projections in 2020 owing 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. On April 6, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-headquartered home health provider BW Homecare Holdings LLC to 'SD' from 'CCC'. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. Earlier, on April 22, 2020, we lowered our issuer credit rating on Revlon to 'CC' from 'CCC-' after the company announced it was pursuing a recapitalization transaction to extend the maturity of its existing 2016 $1.8 billion term loan, term out its unrated $200 million term loan issued in 2019, and enhance its liquidity position. 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. Later, on Aug. 11, 2020, we withdrew our issuer credit ratings on the company at its request. On Sept. 21, 2020, S&P Global Ratings lowered the long-term issuer credit rating on Norway-based oilfield services provider PGS ASA to 'SD' from 'CCC' after it missed a principal repayment. Over the long term (since 1981), financial services defaulters show a median rating of 'BB+' five years prior to default. Our analysis is conducted at the bond level with RAD as the recovery rate measure. On April 30, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Australia-based airline company Virgin Australia Holdings Ltd. to 'D' from 'CC' after the company filed for Chapter 15 bankruptcy and announced it would not pay the coupon on its US$425 million senior unsecured notes because of a moratorium on all creditor payments. 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. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Average cumulative default rate calculation. On Dec. 9, 2020, S&P Global Ratings withdrew its 'D' issuer credit rating at the issuer's request. *This total does not match table 1 because it excludes confidentially rated defaults. On Aug. 26, 2020, we raised the issuer credit rating to 'CCC' from 'SD'. . We consider this exchange as tantamount to default. This influx of new speculative-grade issuers has contributed to the growing share of speculative-grade ratings globally, with the U.S. and European regions accounting for roughly two-thirds of the total since 2010. Our updated 2021 energy default rate forecasts are 8% and 6% for LL and HY . U.S., Bermuda, and the Cayman Islands, Other developed: 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. This nonpayment was considered a general default, and the company was not expected to be able to pay most of its obligations. Earlier, on Jan. 17, 2020, we withdrew our ratings on the issuer due to insufficient information. The CreditWatch negative reflected Avianca's weakening liquidity and that the absence of extraordinary financial support from shareholders or the Colombian government could force the company to default on the repayment of its 8.375% senior unsecured notes due 2020. 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. expect solid corporate bond issuance and low defaults. The amendment includes a discount on debt for some of its debtholders, which we assess as equivalent to default. 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. Many events over the long term have contributed to the decline of global 'AAA' rated issuers. Rating transition rates may be compared with the marginal and cumulative default rates described in the previous sections. 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. On April 24, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based contract drilling services Diamond Offshore Drilling Inc. to 'D' from 'CC' after a review of market conditions for contract drilling services. The sovereign downgrades of China in 2017, the U.K. in 2016, France in 2012, and the U.S. in 2011 have factored into the downgrades of many higher-rated financial services companies. On May 11, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Chinese furniture maker Yihua Enterprise (Group) Co. Ltd. to 'SD' from 'CCC' after the issuer failed to make interest payment on its domestic medium-term notes due 2022. 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%. An administrator was appointed by the court, after the lenders moved to court. Weights are based on the number of issuers in each static pool. In the summary section at the bottom of tables 30-32, the first row shows the issuer-weighted averages of the marginal default rates. The Gini ratio is a measure of the rank-ordering power of ratings over a given time horizon, from one through seven years. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. On July 23, 2020, S&P Global Ratings raised the rating on the issuer to 'CCC-' from 'SD', as the new priming loan is at a senior collateral position relative to the existing debt. The majority of the company's revenue comes from airports, depending on airline passenger travel, which has declined sharply because of the pandemic. These tables can also be constructed for each rating category. On Oct. 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Argentina-based Banco Hipotecario S.A. to 'SD' from 'CC' after the issuer announced that 46.7% of the bondholders of its outstanding US$279.8 million series 29 notes due on Nov. 30, 2020, accepted the exchange offer originally launched in early September. We considered the transaction as distressed given the company's weak operating performance, negative cash flow generation, and near-term debt maturities. Of the 28 defaults from companies that were not rated at the beginning of 2020, 11 were companies that had ratings withdrawn before the beginning of 2020 and 17 were companies that were first rated by S&P Global Ratings after Jan. 1, 2020. In 2020, speculative-grade rating categories had higher default rates than in 2019, with an increase in the 'BB' category to 0.93% from 0.00%, 'B' category to 3.5% from 1.5%, and 'CCC'/'C' category to 47.5% from 29.8% (see table 3). Of the rated defaulters at the beginning of 2020, none began the year with an investment-grade rating. An S&P Global Ratings issuer credit rating is a forward-looking opinion about an obligor's overall creditworthiness. The issuer expects to exchange US$447 million for US$612 million of its senior notes and US$107 million of its old convertible notes. In cases where an issuer emerges from a prior default (including distressed exchanges), we consider it a separate entity, and the original rating is the first after the default event. IssuanceEconomist For 2019's offerings of US$-denominated corporate bonds, 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 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 April 24, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. On July 13, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based frac-sand and logistics company Hi-Crush Inc. to 'D' from 'CC' after the issuer filed for bankruptcy under Chapter 11 and entered into a restructuring support agreement with noteholders who control 94% of the company's senior unsecured notes due in 2026. The eligible holders of second-lien notes received 97.5 cents on the dollar of the principal amount, whereas first-lien notes holders received 90 cents on the dollar of the principal amount. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated. On May 14, we lowered the ratings on the issuer to 'D' after it filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. On Sept. 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on French trade show organizer Cassini SAS to 'D' from 'CCC' after the issuer entered into safeguard procedures because of losses caused by COVID-19-related show cancellations and postponements. On May 14, 2020, we withdrew the ratings on the issuer. Many of the tables and charts in this study display averages of default rates, transition rates, and Gini ratios. Otherwise, the methodology was identical to that used for single-year transitions. de C.V. to 'D' from 'B-' after the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. On Dec. 28, 2020, S&P Global Ratings withdrew its rating at the issuer's request. Despite a rising default rate in 2020 (see chart 21), risk tolerance among lenders has remained near the post-financial crisis high. However, defaults from most other sectors increased as well. On July 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based oil and gas exploration and production company California Resources Corp. to 'D' from 'CC'. On Nov. 20, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Minnesota-based exploration and production (E&P) company Northern Oil and Gas Inc. to 'SD' from 'CCC+' after the issuer disclosed debt exchanges, which over the past few quarters represent a meaningful amount of the original principal. The fixed rate loan and the floating rates loans were repurchased at 85% and 84.875% of the original price, respectively. On Oct. 9, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Florida-based glass packaging producer company Anchor Glass Container Corp. to 'SD' from 'CC' after the issuer closed its previously announced exchange offer for its second-lien term loan at a discount to par, which was considered to be distressed and tantamount to default. At the end of September, the trailing 12-month default rate for U.S. corporate issuers of speculative-grade bonds and loans was 8.5%, according to Moody's Investors Service. Transition studies have repeatedly confirmed that higher ratings tend to be more stable and that speculative-grade ratings ('BB+' or lower) generally experience more volatility over a given time frame. On Nov. 9, 2020, we withdrew the issuer credit ratings on the company at its request. Earlier, on June 10, 2020, we lowered our issuer credit rating on Serta Simmons to 'CC' from 'CCC-' following the company's announcement that it entered into a transaction support agreement with a majority of its first- and second-lien term loan lenders to recapitalize the company. As a result, the noteholders received less than the original promise. If, however, S&P Global Ratings withdrew the rating prior to Jan. 1 of the year of default, we do not include the issuer in the default rate calculation in that year. Credit deterioration was significant in 2020, with a new historical low upgrade rate (2.8%) and one of the highest annual downgrade rates (18.5%). Earlier, on April 20, 2020, we lowered our issuer credit rating on Valaris to 'CCC-' from 'CCC+' following the collapse in oil prices that led to a sharp drop in demand for all oilfield services, and the offshore activity that was expected to be weak over at least the next two years, given the higher cost, higher operating risk, and longer payback periods for offshore projects relative to onshore plays. Annual speculative-grade default rates increased in all major regions in 2020, relative to 2019. On June 25, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Pittsburgh-based retailer of health and wellness products GNC Holding Inc. to 'D' from 'CC' as the company commenced a voluntary prearranged Chapter 11 bankruptcy filing on June 23, 2020. On Dec. 22, 2020, S&P Global Ratings raised its issuer credit rating to 'CCC+' from 'SD'. 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. On Oct. 9, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC-' from 'SD'. Nearly 88% of sovereign ratings were unchanged in 2021, and this was the . 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. On Oct. 15, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' because the issuer had enough liquidity to pay the remainder of the bond's maturity. An 'SD' rating is assigned when S&P Global Ratings believes that the obligor has selectively defaulted on a specific issue or class of obligations but will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. On Aug. 18, 2020, S&P Global Ratings withdrew its ratings on the issuer. The company aimed to restructure its debt, capital structure, and business model to adapt to post-COVID-19 prospects. Earlier, on April 16, 2020, we lowered our long-term issuer credit rating on Diamond Offshore Drilling to 'CC' from 'CCC+' after the issuer missed an interest payment due on April 15 on the senior notes due 2039, and hired advisers to evaluate alternatives for its capital restructuring. On Jan. 21, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Panda Green Energy Group Ltd. to 'SD' from 'CC' on completion of a distressed exchange offer on its U.S. bonds due in January 2020. On March 19, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Singapore-based Geo Energy Resources Ltd. to 'SD' from 'B-' after the issuer completed debt buybacks. 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). This figure includes new ratings subsequent to a prior default--such as after distressed exchanges. 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. S&P Global Ratings withdraws ratings when an entity's entire debt is paid off or when the program or programs rated are terminated and the relevant debt extinguished. In 2021, we rated over $6 trillion of issuance and served more than 1,100 issuers who accessed the markets for the first time. In 2019, the issuer derived about 41% of its revenue from the food service segment and about 32% from the retail segment. 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). 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. This included two main components: first, the conversion of about 1,234 million of debt into a new 574 million facility and 660 million of equity on Sept. 22, 2020, and second, the issuance of 457 million of new debt to repay the US$110 million J.P. Morgan bridge facility and to support Technicolor's liquidity needs, undertaken in July and September 2020. It had other coupon payments of US$8 million each in August and October. The downgrade came after the issuer failed to make the term loan principal and interest payment due March 31 and subsequently decided to enter into a forbearance agreement with lenders on April 6. 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. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. Earlier, on March 20, 2020, we lowered the issuer credit rating to 'CCC' from 'B' because the gaming operator and gaming equipment sectors were facing an unprecedented decline in revenue resulting from the temporary closures of casinos across the U.S. On May 20, 2020, S&P Global Ratings lowered its issuer credit rating on New York-based fitness club operator Equinox Holdings Inc. to 'SD' from 'CCC' after the issuer completed an amendment to its partial guarantee on affiliate company SoulCycle Inc.'s credit facility that will allow it to delay a mandatory payment, which we view as tantamount to a default. The issuer used 43 million of cash proceeds to repurchase 51 million of notes. Post the transaction, the company will have new senior secured three-and-half-year US$171.4 million notes due in 2024 and five-year US$251 million notes due in 2025. When comparing default rates across sectors, we note some key differences between the industries. On Oct. 19, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Oklahoma-based home security and monitoring company Central Security Group Inc. to 'SD' from 'CCC-' after the issuer completed a distressed debt exchange on the first-lien credit facility, in which lenders will exchange about US$396 million of their respective claims for a new US$200 million first-lien term loan due 2025 and most of the reorganized equity, and the second-lien lenders will exchange 100% of their US$50 million claim for 1% of the company's reorganized equity. The company filed for Chapter 11 bankruptcy with a prepackaged plan to equitize around US$300 million of unsecured notes. Lower-rated companies also exhibit lower survival rates over time. In light of our expectation of a continued economic recovery and accommodative funding conditions in the coming year, Moody's Analytics Credit Transition Model projects the global default rate will fall to 1.7% at the end of this year.