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. To avoid overcounting, we exclude subsidiaries with debt that is fully guaranteed by a parent or with default risk that is considered identical to that of a parent. This default and rating transition study includes industrials, utilities, financial institutions (banks, brokerages, asset managers, and other financial entities), and insurance companies globally with long-term local currency ratings from S&P Global Ratings. Across sectors, the average difference between an industry's median initial rating and the median initial rating of its defaulters was about 1.5 notches. (For a detailed explanation of our data sources and methodology, see Appendix I.). We combined these percentages to obtain cumulative default rates for the 40 years the study covers (see tables 24-26 and 30-32). On Feb. 24, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Mississippi-based consumer products supplier VIP Cinema Holdings Inc. to 'D' from 'CCC-' after the issuer filed for Chapter 11 bankruptcy. This growth of the publicly rated speculative-grade market in Europe has resulted largely from newly assigned speculative-grade ratings (in addition to downgrades). On Dec. 8, 2020, S&P Global Ratings assigned a 'CCC+' issuer credit rating to CPK after the issuer emerged from bankruptcy, where it was able to restructure US$200 million of reported prepetition debt. Over the long term (since 1981), financial services defaulters show a median rating of 'BB+' five years prior to default. 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. Posted on . There were three additional defaults in 2021 following our last report on Dec. 9, 2021: Malaysia-based engineering and construction company Serba Dinamik Holdings Bhd., China-based (Cayman Island incorporated) real estate company China Evergrande Group, and One confidential issuer. 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. Forest and building products/homebuilders. The one-year Gini ratio remained high in 2020, at 86.1% (see chart 3). Earlier, on March 3, 2020, we lowered our long-term issuer credit rating to 'CCC-' from 'BB' after the issuer announced the financial statement discrepancies and asked its lenders to support an informal standstill request. On June 5, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based fitness service provider 24 Hour Fitness Worldwide Inc. to 'D' from 'CCC+' after the issuer missed interest payments on its senior notes due 2022 and entered into the grace period. S&P Global Ratings lowers its rating on an obligor to 'D' or 'SD' if the obligor is conducting a distressed exchange offer. 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. In periods of high defaults, there tends to be greater variation in the distribution of ratings prior to default, which reduces the Gini. The leisure and entertainment default rate finished at 9.9% in 2020 and could approach 30% in 2021. 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 issuer has limited refinancing options owing to the disruptions caused by the coronavirus and the presence of foreign currency-denominated debt, about 40%. This brought the downgrade-to-upgrade ratio to a new high of 6.6. In table 13, the times to default are from the date that each entity received each unique rating in its path to default. Once again, the default rate in the 'AAA' rating category was zero, consistent with historical trends. The issuer was engaged in discussions with creditors for a debt restructuring. 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. For example, the share of speculative-grade ratings increased in the U.S. beginning in 2002. The company extended the maturity on its revolving credit facility of US$135 million by one week. On Nov. 20, 2020, S&P Global Ratings withdrew its ratings on the issuer. In the summary section at the bottom of tables 30-32, the first row shows the issuer-weighted averages of the marginal default rates. 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. As an example, if 'CCC'/'C' rated entities made up 10% of the total population of issuers at the start of the time frame examined (x-axis) and 50% of the defaulters (y-axis), then the coordinate (10, 50) would be the first point on the curve. This report does not constitute a rating action. 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. However, the data was gathered for 40 years, and all calculations are based on the rating experience of that period. The global trailing-12-month speculative-grade default rate rose to 5.5% at the end of 2020--above its annual average of 4% (since 1981)--from 2.5% in 2019. 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 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. 21, 2020, S&P Global Ratings assigned its point-in-time 'BB-' issue-level rating to the $100 million debtor-in-possession facility provided to Fieldwood, which filed for Chapter 11 protection under the U.S. Bankruptcy Code on Aug. 3, 2020. 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. esgSubNav, Discover more about S&P Globals offerings. In our view, continued supply-demand rebalancing will be necessary to slow wage . The global corporate default tally has increased to 17 after two issuers defaulted since our last report. On Oct. 13, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' following the completion of the exchange. Earlier, on April 14, 2020, we lowered the issuer credit ratings on the company to 'CCC-' from 'CCC' as it was contending with the disruption and recessionary conditions stemming from the coronavirus pandemic, the challenging trends facing department stores, and an unsustainable capital structure. de C.V. (GFamsa) to 'SD' from 'CCC-' .The company missed its interest and principal payments on its 7.25% senior unsecured notes on June 1, 2020. But in a report issued today, the credit ratings. Defaults increased in many sectors in 2020, though the consumer services and energy and natural resources sectors once again led the global default tally, together accounting for almost 54% of the total. to 'SD' from 'B-' after the issuer missed the Oct. 31 coupon payment on its senior secured notes due 2023. Investment-grade-rated issuers globally tend to exhibit greater ratings stability (as measured by the frequency of rating transitions) than those rated speculative grade (see table 20). The higher default rates for nonfinancial sectors are not surprising, given their higher concentration of speculative-grade issuers. We believe that COVID-19-related fitness club closures have materially impaired the company's liquidity position. This also followed the issuer's missed $65.6 million principal payment on its 8.375% unsecured notes due on May 10, 2020. However, the two-year default rate column in table 24 is not the same as column 'D' of the average two-year transition matrix in table 34. On May 19, 2020, S&P Global Ratings lowered the issuer credit rating on Argentine airport operator Aeropuertos Argentina S.A. 2000 to 'SD' from 'CC'. Earlier, on April 1, 2020, we lowered our issuer credit rating on Gavilan to 'CCC-' from 'CCC+' after the issuer drew the full amount on the US$200 million reserve-based lending facility, which was up for redetermination in April 2020. This helps explain the resemblance between the annual default rates of nonfinancial entities and those of the speculative-grade segment as a whole, which certainly contributes to the vast differences between cumulative default rates across financial and nonfinancial sectors (see table 16). 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. Earlier on Feb. 13, 2020, we withdrew the ratings at the issuer's request. 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). On April 16, 2020, S&P Global Ratings lowered the issuer credit ratings on Cyprus-based real estate market investor O1 Properties Ltd. to 'D' from 'CC' after the issuer missed a coupon payment on US$350 million Eurobonds. A major difference between financial and nonfinancial companies is the incidence of default. Data Report. However, defaults from most other sectors increased as well. Among all Moody's-rated On March 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Connecticut-based telecom operator Frontier Communications Corp. to 'SD' from 'CCC-' after the issuer missed interest payments of about US$322 million. On June 29, 2020, S&P Global Ratings withdrew its ratings on Intelsat. The issuer missed the interest and principal payment on its term loan of outstanding value of US$557 million, which was originally US$600 million. 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. 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. expect solid corporate bond issuance and low defaults. On May 22, 2020, S&P Global Ratings lowered its issuer credit rating on Illinois-based generic pharmaceutical manufacturer company Akorn Inc. to 'D' from 'CC' after the issuer petitioned for reorganization under Chapter 11 of the U.S. Bankruptcy Code. On May 14, 2020, we withdrew the ratings on the issuer. On Feb. 18, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based home dcor and furniture retailer Pier 1 Imports Inc. to 'D' from 'CCC-' after the issuer filed for Chapter 11 bankruptcy. On Nov. 16, 2020, Libbey announced that it had successfully emerged from Chapter 11 by completing its financial restructuring. 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. The company aimed to restructure its debt, capital structure, and business model to adapt to post-COVID-19 prospects. PGS was also in talks with lenders to secure a new capital structure. On Aug. 27, 2020, Texas-based oil and gas exploration and production company SAExploration Holdings Inc. defaulted after the issuer filed for reorganization under Chapter 11. Includes investment-grade and speculative-grade entities. 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. A mere 0.88% of the approximately $500 billion of U.S. CLOs issued from 1994-2009 that were rated by S&P Global Ratings experienced defaults, and no defaults were recorded among the AAA- and AA-rated tranches rated by Moody's. 7 In fact, default rates among CLOs were not only lower than those of CDOs, but also lower than those of similarly . This page provides a central resource for Moody's research on default risks, impairment and loss rates, . 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. Moody's Seasoned Baa Corporate Bond Yield-Moody's Seasoned Aaa Corporate Bond Yield. 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%. As the Gini ratios show, corporate ratings also serve as effective measures of relative risk over time, particularly in low-default years. 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 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). On April 15, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Luxembourg-based telecom service provider Intelsat S.A. to 'SD' from 'CCC+' after the issuer failed to pay semiannual interest payments on unsecured debt. 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+'. On Oct. 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Massachusetts-based foodservice equipment and supplies distributes TMK Hawk Parent Corp. to 'SD' from 'CCC' after the issuer completed a recapitalization transaction and issued a new US$120 million super-priority first out term loan, which was provided by a majority of its first-lien lenders. On Aug. 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based midstream energy company Martin Midstream Partners L.P. to 'SD' from 'CC' after the issuer announced the completion of the distressed exchange of US$364.5 million senior unsecured notes due in 2021. 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). to 'SD' from 'CC' following its distressed exchange. On April 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based exploration and production (E&P) company Gavilan Resources LLC to 'D' from 'CCC-'. 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 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 relationship between higher ratings and higher ratings stability holds even over longer time horizons (see table 21) and when broken out by region (see table 22). For example, 'AA+' rated issuers were still rated 'AA+' one year later 79.3% of the time, and 'AA' rated issuers were still rated 'AA' one year later 80.9% of the time. The rating action followed the issuer's exchange of its senior secured notes due 2027 for the new notes, including the PIK of the four quarterly principal and interest payments in the next 12 months, which are repaid pro rata during the remaining term of the notes. Since the beginning of 2020, secured debtholders had received 95% of par, on average, in the form of cash, preferred stock, and common equity for US$130 million of secured notes due 2023. to 'D' from 'CCC-'. On Oct. 1, 2020, S&P Global Ratings lowered the issuer credit rating to 'CCC-' from 'CCC+' on liquidity concerns, as audience attendance remained weak after reopening and major release dates were delayed.