The default rate for all Moody's-rated corporate issuers rose to 5.4% at the end of 2009 from 2.0% at year-end 2008. On Oct. 9, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC-' from 'SD'. This also followed the issuer's missed $65.6 million principal payment on its 8.375% unsecured notes due on May 10, 2020. On April 1, 2020, we raised the issuer credit rating on Yida to CCC-' from 'SD' on a reassessment of the company's credit profile. S&P assumes no obligation to update the Content following publication in any form or format. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. As in most recovery periods, defaults fell relative to the prior year, with the S&P Global Ratings global speculative-grade corporate default rate falling below 2% for only the eighth time in the past 41 . 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. Transition matrices that present averages over multiple time horizons are also calculated as issuer-weighted averages. This long-term corporate default and rating transition study uses the CreditPro database of long-term local currency issuer credit ratings. The company entered into a forbearance agreement with its senior debt lenders and is expected to pursue a debt restructuring. PDF 3Q 2021 Investor Presentation 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'. Combined global bond issuance for nonfinancial corporates and financial services companies hit $5.7 trillion--a 27% increase from the high in 2019. On Nov. 23, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Oklahoma-based exploration and production company Gulfport Energy Corp. to 'D' from 'CCC-' after the issuer elected to skip its interest payment on its 6% senior unsecured notes maturing Oct. 15, 2024, and enter into a 30-day grace period. On June 5, 2020, we withdrew our ratings on the issuer. As an example, the standard deviation applied to the seven-year weighted average global Gini ratio in table 2 (5.3%) was calculated from the time series of all available seven-year Gini ratios by cohort. Despite a rising default rate in 2020 (see chart 21), risk tolerance among lenders has remained near the post-financial crisis high. Each one-year transition matrix displays all rating movements between letter categories from the beginning of the year through year-end. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. On Oct. 16, 2020 S&P Global Ratings lowered its long-term issuer credit rating on Chile-based bank holding company Corp Group Banking S.A. to 'D' from 'CC' after the issuer missed its US$16.9 million semiannual interest payment on its bond. CEC expects to achieve a balance sheet restructuring that supports its reopenings and long-term strategic plans. Fourth quarter earnings releases have provided insight into corporate margin pressures, but labor market commentary signals that some of these headwinds may be abating. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. Europe: On April 8, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based exploration and production company SPR Holdings LLC to 'D' from 'CCC+' after the issuer missed an interest payment due April 1, 2020. Earlier, on June 6, 2020, we lowered our issuer credit rating on SMLP to 'CCC' from 'B'. The group issued a US$450 million senior secured term loan and US$111 million senior secured term loan due in May 2024 and refinanced the US$111 million additional RCF that was maturing in December 2020. An improving picture in 2017 . Default activity in 2020 did increase, but to a lesser extent than recent recessions (see chart 1 and table 1). Overall, ultimate recovery rates for project finance bank loans are similar to those for senior secured corporate bank loans and overall corporate bank loans. The depressed commodity prices, the company's liquidity position, and the ongoing capital needs to maintain production were the main factors behind the decision. Default, Transition, and Recovery: 2019 Annual Global Corporate Default It is important to note that S&P Global Ratings' credit ratings do not imply a specific probability of default. But in both cases, defaults and downgrades were largely limited to the lowest rating categories, resulting in generally strong ratings performance in 2020. Despite this increase, the default total in 2020 was still lower than the peak of 235 in 2009. 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. We believe this bankruptcy filing is due to the combined effect of the coronavirus pandemic and the company's weak performance in 2019. Moody's Investors Service (MIS) First Quarter Revenue Down 20%. Defaults US HY default rate: According to Moody's Investors Service, the U.S.' trailing 12-month high-yield default rate jumped from August 2019's 3.1% to August 2020's 8.7% and may average 10.6% during 2020's final quarter. On April 22, 2020, we lowered our issuer credit rating on Serta Simmons to 'CCC-' from 'CCC' as the spread of the COVID-19 pandemic and stay-at-home orders forced retail store closures, which resulted in a severe drop in mattress sales and minimal production. On Aug. 6, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Switzerland-based offshore drilling contractor Transocean Ltd. to 'SD' from 'CCC' after the issuer opted for an exchange of US$356 million due in 2023 for US$ 213 million new debt at a higher interest rate. *This column includes companies that were no longer rated one year prior to default. Rating transition rates may be compared with the marginal and cumulative default rates described in the previous sections. 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+'. Among all Moody's-rated In addition, at the same share price, SAS offset SEK1,500 million of subordinated perpetual capital securities with about 1,164 million of common shares. Later, on May 15, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. It expected the transaction would reduce net debt by $400 million. to 'SD' from 'CCC-' after the issuer missed principal payment on its IDR150 billion domestic notes and entered a 10-day grace period. On Jan. 8, 2021, S&P Global Ratings withdrew its issuer credit rating at the company's request. We viewed the repurchases as distressed and tantamount to a default given lenders participating in the repurchase received substantially less than the original promise of the term loan. The syndicated creditors will now acquire 49% of the capital of the operating business. The issuer halted production at some of its plants because of the impact of the coronavirus pandemic and reached an agreement with its senior secured lenders for a financial restructuring plan. Excludes downgrades to 'D', shown separately in the default column. These were Macy's Inc., Ally Financial Inc., Ambac Assurance Corp., Mutual Benefit Life Insurance Co., Executive Life Insurance Co. CA, Confederation Life Insurance Co., Motors Liquidation Co. (formerly known as General Motors Corp.), and Eastman Kodak Co. Table 13 shows the cumulative defaults over various time horizons from all ratings received subsequent to initial ratings. On April 9, 2020, we raised the ratings on the issuer to 'CCC' from 'D' on the expectation of average leverage above 15x. (PDF) Moody corporate default risk - Academia.edu Research: Rating Action: Moody's upgrades the ratings on approximately 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. Once again, the default rate in the 'AAA' rating category was zero, consistent with historical trends. Low demand, weak macroeconomic performance, and the pandemic led to weakening liquidity and performance. The issuer was going through debt restructuring for a wider capital improvement, but was adversely affected by falling oil prices and the coronavirus pandemic. 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%. On June 24, 2020, S&P Global Ratings withdrew its issuer credit rating at the company's request. The company filed for Chapter 11 bankruptcy with a prepackaged plan to equitize around US$300 million of unsecured notes. The high default rate for commodity sector in 2016 was caused by low oil prices, among other factors, and more than half of last year's 144 defaults documented by Moody's occurred in commodity . In this case, we compared the rating at the beginning of the multiyear period with the rating at the end. On Nov. 9, 2020, we withdrew the issuer credit ratings on the company at its request. To facilitate the proposed exchange, the issuer entered a new term loan facility of US$190 million maturing in 2024. On Oct. 20, 2020, S&P Global Ratings assigned its 'B-' issuer credit rating on the company, with a negative outlook. We deem 'D', 'SD', and 'R' issuer ratings to be defaults for the purposes of this study. One key reason is that financial services companies typically start with investment-grade ratings, while most nonfinancial issuers have speculative-grade initial ratings, particularly over the past 10 years. 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. Default activity in 2020 did increase, but to a lesser extent than recent recessions (see chart 1 and table 1). The pools are static in the sense that their membership remains constant over time. 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 Nov. 4, 2020, S&P Global Ratings withdrew its ratings on the issuer. Earlier, on March 17, 2020, we lowered the long-term issuer credit rating to 'CCC+' from 'B' after the issuer's refinancing prospects were difficult and capital structure was unsustainable. On Feb. 13, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based newspaper publisher The McClatchy Co. to 'D' from 'CC' after the issuer filed for bankruptcy under Chapter 11. 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). If corporate ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated entities, the curve would capture all of the area above the diagonal on the graph (the ideal curve), and its Gini coefficient would be 1 (see chart 31). The global speculative-grade corporate default rate edged up to 2.8% for the 12 months ended in December from 2.6% in November, and will rise to 5.1% by the end of 2023 under our baseline forecasts. On May 22, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based Guitar Center Inc. to 'SD' from 'CCC'. 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). On Oct. 21, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. 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. As a result, certain business units of S&P may have information that is not available to other S&P business units. The issuer announced a restructuring agreement as well as filed petitions under Chapter 11. These include industrials, utilities, financial institutions, and insurance companies around the world with long-term local currency ratings. On Nov. 6, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' on completion of restructuring. The MarketWatch News Department was not involved in the creation of this content. The default rates in table 34 are calculated as not conditional on survival, while those in table 24 are average default rates conditional on survival. On July 7, 2020, we withdrew our long-term issuer credit rating at the issuer's request. On Dec. 9, 2020, we raised our issuer credit rating on Revlon to 'CCC-' from 'SD' after it completed its previously announced 5.75% senior notes exchange, which we viewed as a distressed restructuring. On Aug. 17, 2020, S&P Global Ratings withdrew its ratings on the issuer. We viewed the debt exchange as distressed due to the company's weak operating performance, liquidity constraints, and lack of compensation to existing lenders for the exchange. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. PDF An Introduction to Collateralized Capital Loan Obligations (CLOs - ICG 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. We use the static pool methodology to avoid certain pitfalls in estimating default rates, such as by ensuring that default rates account for rating migration and allowing for default rates to be calculated across multiperiod time horizons. On May 4, 2020, we raised the credit ratings to 'CCC' from 'SD' after the reduction of debt by approximately US$329 million. Table 10 displays the median, average, and standard deviations for the time to default from the original rating. For example, among defaulters that were rated 'B' at origination, the default rate climbs to a high of 18.3% in the third year and decelerates thereafter. This transaction was viewed as distressed because the exchange was at a much discounted rate, of about 70 cents on a dollar. Includes investment-grade and speculative-grade entities. An analysis of transition rates for 2020 suggests that ratings behavior continues to exhibit consistency with long-term trends. The issuer reached an agreement with 78% of its intellectual property notes lender and 71% of its term loan lenders to exchange around US$1.65 billion of debt for equity. The issuer submitted a prepackaged plan. 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. This was especially evident during the global financial crisis, when many highly rated banks defaulted within a short amount of time after initial downgrades. 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. 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. On Dec. 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Louisiana-based oil field services company Superior Energy Services Inc. to 'D' from 'CC'. 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. If an issuer defaults or if the rating on the issuer is withdrawn in the middle of the year, then it would be considered rated 'D' or not rated as of Dec. 31 of that particular year. The global corporate default tally has increased to 17 after two issuers defaulted since our last report. These average matrices are a true summary, the ratios of which represent the historical incidence of the ratings listed in the first column changing to the ones listed in the top row over the course of the multiyear period (see tables 33-40). We considered this exchange as a distressed exchange. Although dollar amounts provide information about the portion of the market that is affected by defaults or rating changes, issuer-weighted averages are more useful measures of the performance of ratings. A major difference between financial and nonfinancial companies is the incidence of default. Default, Transition, and Recovery: 2020 Annual Global Corporate Default And Rating Transition Study, China's Local Governments Are Shedding Their Ties To Struggling SOEs, Instant Insights: Key Takeaways From Our Research, Research Update: Dexus Wholesale Property Fund Outlook Revised To Stable From Positive On Merger Completion; 'A' Ratings Affirmed, Scenario Analysis: Higher Rates Threaten The Credit Quality Of 13 EMEA Retail And Restaurant Companies. As the Gini ratios show, corporate ratings also serve as effective measures of relative risk over time, particularly in low-default years. On Nov. 23, 2020, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. On Aug. 19, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Georgia-based building products producer Omnimax International Inc. to 'D' from 'CCC-' after the issuer announced that it missed a principal repayment due on its US$385 million senior notes. On March 26, 2020, we withdrew our issuer ratings at the company's request. On May 27, 2020, we withdrew the ratings on the issuer. All companies included in the study are assigned to one or more static pools. 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. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. 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 Sept. 15, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Spain-based food products retailer Distribuidora Internacional de Alimentacion S.A. to 'SD' from 'CC' after the issuer completed a distressed exchange. S&P Global Ratings Research conducts its default studies on the basis of groupings called static pools. Because of the extremely small size of the 'AAA' rating category, the downgrade of even one issuer will have a large effect on this segment's stability rate. 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.