On Dec. 22, 2020, S&P Global Ratings raised its issuer credit rating to 'CCC+' from 'SD'. The issuer had also obtained a commitment for $1 billion in debtor-in-possession financing. 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. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated. 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. Moody's Corporation Reports Results for First Quarter 2022 Some methods for calculating default and rating transition rates might charge defaults against only the initial rating on the issuer, ignoring more recent rating changes that supply more current information. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. 16 FEB 2023. Over the long term (1981-2020), heightened ratings stability is broadly consistent with higher ratings (see table 21). We included such subsidiaries for the period during which they had a distinct and separate risk of default. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. In this case, we compared the rating at the beginning of the multiyear period with the rating at the end. The analysis excludes public information ("pi") ratings and ratings based on the guarantee of another company or government entity. However, given that machine learning currently receives a lot of attention in the credit risk community, further reviews and benchmark studies would certainly be welcome. Default rate calculation. 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. The defaulters are: Argentina-based oil and gas company YPF S.A., and Cayman Islands-incorporated (China-based) real estate developer Sunshine 100 China Holdings Ltd. We have also revised our default tally in a monthly reconciliation process to include Oregon-based digital media and . 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. As a result, the noteholders received less than the original promise. Moody's Investors Service analysts use this . On June 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Missouri-based propane distributor Ferrellgas Partners L.P. to 'SD' from 'CC' after the issuer decided to not make the final maturity payment on its US$357 million unsecured notes and entered into a forbearance agreement with its debtholders until July 31, 2020. 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. These include industrials, utilities, financial institutions, and insurance companies around the world with long-term local currency ratings. 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). 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 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'. 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. Fitch Ratings provides forward-looking credit opinions, as indicated by its ratings, that reflect its expectations of credit behavior over a range of scenarios. 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'. We calculated conditional default rates by dividing the number of issuers in a static pool that default at a specific time horizon by the number of issuers that survived (did not default) to that point in time. 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. 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. 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. 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 . 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. 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. Multiplying 92.81% by 96.77% results in a 89.82% survival rate to the end of the third year, which results in a three-year average cumulative default rate of 10.18%. Through Dec. 31, 2020, 198 defaults have come from the 2020 pool of financial and nonfinancial companies, and 94% of these were from the lowest rating categories--'B' and lower. Default, Transition, and Recovery: The 2021 Global Corporate Default 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. On Sept. 14, 2020, we withdrew the issuer credit ratings on the company at its request. As a result, the trustee placed the issuer into receivership (with KordaMentha as receivers). N/A--Not available. On July 27, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based party goods retailer and wholesaler Party City Holdings Inc. to 'SD' from 'CC' after the issuer completed a distressed exchange, at 33.5% of par value for the debt exchanged. On July 9, 2020, S&P Global Ratings withdrew its issuer credit rating at the company's request. 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 Lonestar Resources U.S. Inc. to 'D' from 'CCC-' after the issuer elected to skip an interest payment on its unsecured notes due 2023, and was not likely to pay within the 30-day grace period. On Feb. 21, 2020, S&P Global Ratings lowered its long-term issuer credit rating on China-based high technology service provider Tunghsu Group Co. Ltd. to 'SD' from 'CCC-' after the issuer missed interest and principal payments on three onshore bonds. Similarly, if it defaulted in the middle of 1991, it would be included in the column representing transitions to 'D' in the 1991 one-year transition matrix. The regions covered in this study are: U.S. and tax havens: With an increase in the number of defaults in 2020, the total amount of affected debt also rose, to $353.4 billion from $183.2 billion in 2019 (see chart 6). On June 24, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Salt Lake City-based drilling services provider and manufacturer Boart Longyear Ltd. (BLY) to 'SD' from 'CC'. Yet each of the four pools in which this company was included (1987-1990) would record its 1993 default at the appropriate time horizon. 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 Oct. 9, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Brazil-based telecom operator Oi S.A. to 'SD' from 'CC' after the issuer announced that the judicial court ratified the amendment to the company's judicial reorganization plan, which was approved by the majority of its creditholders on Sept. 8, 2020. The links between transition matrices and average cumulative default rates are best illustrated through tables 30-32. Cross-Sector: The . After experiencing high downgrade and default rates in 2020, ratings were much more stable in 2021. 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. 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. We calculated standard deviations for Gini ratios in this study as the standard deviations of a sample, and not those of a population. On May 6, 2020, Techniplas LLC filed for Chapter 11 protection under the U.S. Bankruptcy Code with a bondholders' offer of US$105 million, which involves exchanging equity for debt. The company finalized a tender offer to repurchase $213 million of its outstanding $255 million 12% senior secured notes due 2022. The issuer was engaged in discussions with creditors for a debt restructuring. Default Trends and Rating Transitions | Moody's 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 are expecting that the issuer will be able to generate sufficient cash for debt repayment, though times are challenging. Over the long term, defaults in nonfinancial sectors have tended to be more cyclical than defaults in the financial sectors. 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 COVID-19 pandemic and lockdowns in 2020 led to one of the deepest recessions since the Great Depression roughly 90 years ago. The number of defaulters that began the year with active ratings more than doubled in 2020, to 198 from 94 in 2019. content 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. This transaction was viewed as distressed because the exchange was at a much discounted rate, of about 70 cents on a dollar. On June 8, 2020, we lowered our issuer credit rating to 'D' from 'SD' after the issuer's announcement of a reorganization petition filed under Chapter 11 of the Bankruptcy Code. On April 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based hamburger restaurant chain Steak n Shake Inc. to SD from 'CCC-' after the issuer completed a distressed exchange by retiring a portion of its term loan. On May 27, 2020, we lowered our ratings on the issuer to 'D' from 'SD' after it filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code, and subsequently on June 26, 2020, we withdrew our credit ratings. On Aug. 26, 2020, we withdrew the issuer credit ratings on the company at its request. On Oct. 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based transportation company Toro Private Holdings I Ltd. to 'SD' from 'CC' after the company completed the announced debt exchange and restructuring, which we view as distressed and tantamount to default, as lenders receive less than the original promise of the debt instruments. The issuer entered into a forbearance agreement for deferring the interest payments on its second lien-term loan until June 30, 2020. Europe followed with 42 defaults, emerging markets with 28, and the other developed region (Australia, Canada, Japan, and New Zealand) with 10. Ten of the defaulters in 2020 were initially rated investment grade, and the other 216 (96% of the total) were initially rated speculative grade. However, despite posting the 10th-highest annual default rate in 2020, the global Gini ratio finished closer to the middle of the annual distribution (18th), based on 40 years of observations. On June 18, SMLP announced it repurchased approximately $90 million of its 2022 senior unsecured notes and 2025 senior unsecured notes for approximately $50 million in cash. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. KIS Research and revenue from providing ESG research, data and assessments. Default & Recovery Database | Moody's Analytics Since 1981, the 'B' rating category has accounted for 1,735 defaults (56% of the total from initial rating), well more than double the number of defaulters from the 'BB' category (see tables 10 and 12). We believe this bankruptcy filing is due to the combined effect of the coronavirus pandemic and the company's weak performance in 2019. On June 4, 2020, S&P Global Ratings lowered its issuer credit rating on Los Angeles-based restaurant operator California Pizza Kitchen Inc. (CPK) to 'D' from 'CCC-' because the company missed its interest payments due at the end of May 2020 and entered into a forbearance agreement with its lenders. 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. "ESPP" means the Company's 2020 Employee Stock Purchase Plan, . The issuer was unable to raise capital to maintain the regulatory minimum, and subsequently the principal and interest payments to the depositors were suspended. 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. The negative outlook reflects the risk of a lower rating if operating performance continues to deteriorate and the company fails to meet our expectations. Default & Recovery Analytics - Moody's Investors Service Higher ratings show a negative correspondence with the observed frequency of default. 'R' (regulatory intervention) indicates that an obligor is under regulatory supervision owing to its financial condition. In table 13, the times to default are from the date that each entity received each unique rating in its path to default. There were no downgrades among the eight 'AAA' rated companies in 2020. This compares with a Gini of 88.3% and a default rate of 2.5% in 2019. We use rating modifiers (plus and minus signs) to calculate upgrade and downgrade percentages, as well as the magnitude of rating changes, throughout this study. 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 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. 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. Over the long term, the global weighted average Gini coefficient was 82.8% over the one-year horizon, 75.3% over three years, 71.5% over five years, and 69.2% over seven years (see table 27). Annual corporate bond issuance reached an all-time high in 2020, largely after the Fed and European Central Bank both created massive liquidity facilities in March, in response to the pandemic. It is expected to reduce debt by US$500 million. Note: Numbers in parentheses are standard deviations. The issuer was also planning for a comprehensive debt restructuring involving debt-for-equity swaps. On April 29, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. 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%. 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. On Nov. 18, 2020, S&P Global Ratings lowered the issuer credit ratings to 'D' from 'CCC-' after the issuer missed interest payments due on Oct. 15, 2020, and announced that it had entered into a restructuring support agreement, which it intended to file for bankruptcy. Earlier, on Feb. 7, 2020, we lowered the long-term issuer credit rating to 'CCC-' from 'CCC' after it reported some operational missteps, resulting in a covenant violation. 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). On April 24, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. 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. Many events over the long term have contributed to the decline of global 'AAA' rated issuers. On June 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Mexican retailer Grupo Famsa S.A.B. For the purposes of this study, a corporate rating may also be withdrawn as a result of mergers and acquisitions. 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. On Aug. 6, 2020, S&P Global Ratings withdrew the ratings on the issuer. For this study, the Lorenz curve is plotted with the x-axis showing the cumulative share of issuers, arranged by rating, while the y-axis represents the cumulative share of defaulters, also arranged by rating. de C.V. to 'D' from 'B-' after the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. Seven others also had default rates in 2020 that exceeded their long-term averages--leisure time/media, transportation, telecommunications, health care/chemicals, real estate, utilities, and high technology/computers/office equipment. (For a detailed explanation of our data sources and methodology, see Appendix I.). CLO Myth-Busting: The Top Three Misconceptions (EDGAR Online via COMTEX) -- NETSCOUT SYSTEMS INC false 0001078075 0001078075 2023-02-22 2023-02-22 In addition, the company exchanged US$307.5 million of its existing first-lien term loan for a new super-priority second out term loan. NAIC - Supporting Insurance, Regulators, & Public Interest Among all Moody's-rated Although defaulters that are not rated (NR) are not always captured in the default rate calculations for the year of default, we do capture them in the longer-term cumulative default rate statistics, which are tied back to the year in which defaulters were last rated. We consider this exchange as tantamount to default. The majority (94%) began the year rated in the 'B' or 'CCC'/'C' category (57% 'CCC'/'C' and 37% 'B'). 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. 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. On July 20, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. On Oct. 5, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD'. On Dec. 23, 2020, S&P Global Ratings raised its issuer credit rating to 'CCC+' from 'SD' based on the company's recent operating performance, improved cash flow, and financial transactions, which helped in improving its maturity profile and lowering interest rates. On June 15, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Colorado-based oil and gas exploration and production company SM Energy Co. to 'SD' from 'CC' after the issuer announced the results of its previous exchange offer. 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. On June 5, 2020, we raised the rating on the issuer to 'CCC+' from 'D' on revised credit agreements, which reduced its annual cash interest payments by $10 million, which, in turn, alleviated near-term liquidity concern. 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. We considered the transaction to be a distressed exchange and tantamount to a default on the notes because the noteholders were not adequately compensated and received less than they were originally promised under the securities. On Aug. 26, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based fitness club operator Town Sports International Holdings Inc. to 'SD' from 'CC' after the issuer failed to pay its US$14 million outstanding revolver balance. articles Selective defaults accounted for just over half of all defaults in 2020. These factors, combined with asset managers' growing tolerance for investing in lower-rated companies, leave just a handful of the highest-rated entities. On July 20, 2020, we raised the issuer credit rating to 'CCC+' from 'SD' after the issuer announced an improvement in leverage, which brought the borrowing base down to US$215 million from US$250 million. The holders of the existing notes will receive $750 principal amount of the new notes for every $1,000 of existing notes, and $50 of cash as a consent fee if they agree to an early tender. The average amount of debt per defaulter in 2020 was the same as in 2019: $1.6 billion. The downgrade followed the completion of the partial repurchase of senior secured notes. On May 15, 2020, S&P Global Ratings lowered its issuer credit rating on Colorado-based oil and gas exploration and production company Extraction Oil & Gas Inc. to 'D' from 'CC' after the issuer missed the interest payment on its 7.375% senior notes due 2024. As has been the case for an extended period, the leisure time and media sector has by far the highest proportion of speculative-grade ratings, with 83.3% of its issuers in this rating category in 2020. Noteholders validly tendered about 69% of the total outstanding principal amount of the notes through the exchange. Rising stars. 2 Annualized volatility and return based on the period between 2005 and 2022. The global corporate default tally has increased to 17 after two issuers defaulted since our last report. The issuer has limited refinancing options owing to the disruptions caused by the coronavirus and the presence of foreign currency-denominated debt, about 40%. On Jan. 29, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based engineered components manufacturer and marketer Doncasters Group Ltd. after the issuer received lender support for financial restructuring. On Aug. 26, 2020, we raised the issuer credit rating to 'CCC' from 'SD'. On June 18, 2020, we raised the issuer credit rating on Forum to 'CCC-' from 'SD', reflecting our forward-looking opinion on its creditworthiness. On Dec. 8, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' following debt repurchases. Earlier on Feb. 13, 2020, we withdrew the ratings at the issuer's request. Preferred stock is not considered a financial obligation; thus, a missed preferred stock dividend is not normally equated with default. The cumulative value of the repurchase represents nearly 9% of the term loan debt outstanding compared with the value in fiscal 2019. We consider companies reemerging from prior defaults to be separate entities, and their rating histories begin with the post-default rating. 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. 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 Sept. 17, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. Project Finance Bank Loans: Default and Recovery Rates - Moody's Live We then divide this by the ratio of the total number of nonzero weights minus one and the total number of nonzero weights. 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 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. The median rating for all recently defaulted entities was solidly in the speculative-grade category in the seven years preceding default, and for all of that period, it was at least one notch below that of the long-term equivalent. Esma50 165 2229 TRV 2 22 | PDF | Inflation | Monetary Policy On April 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Tennessee-based health care service provider Quorum Health Corp. to 'D' from 'CCC-'. 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. 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 the same day, we withdrew the issuer ratings. PFS also announced an agreement to merge with Animal Supply Co. On May 6, 2020, S&P Global Ratings lowered its ratings on the issuer to 'D' from 'SD' upon missed interest payments, following which, on May 14, 2020, the ratings on the issuer were withdrawn.
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