On June 25, 2020, we withdrew the issuer credit rating on Unit Corp. at its request. 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. On July 14, 2020, we withdraw our ratings on the issuer. Scribd is the world's largest social reading and publishing site. Combined global bond issuance for nonfinancial corporates and financial services companies hit $5.7 trillion--a 27% increase from the high in 2019. On June 1, 2020, we lowered the credit ratings to 'D' after the issuer commenced Chapter 11 bankruptcy restructuring, and subsequently on June 25, 2020, the ratings were withdrawn at the issuer's request. The date the debtor filed for, or was forced into, bankruptcy. On June 18, 2020, we raised the issuer credit rating to 'CCC+' from 'SD' after the debt exchange was completed. For the full year, there were three large downgrades (and two large upgrades), compared with two downgrades in 2019 (see chart 7). On July 30, 2020, Delaware-based media solutions provider Mood Media Corp. defaulted, as the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. On April 21, 2020, S&P Global Ratings lowered the long-term issuer credit ratings on New Jersey-based advertising agency Engine Holding LLC to 'D' from 'CCC-' after the issuer entered into a forbearance agreement with its lenders on its failure to pay the debt interest and principal payments for the first quarter of 2020. 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. As a result, the trustee placed the issuer into receivership (with KordaMentha as receivers). On Nov. 11, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Spain-based transportation company Bahia de las Isletas S.L. 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. On April 20, 2020, we raised the rating to 'CCC+' on account of liquidity the company maintained. The share of newly assigned issuer credit ratings that are speculative grade has remained elevated in 2020: 78% of newly assigned issuer credit ratings globally were speculative grade. The issuer entered into an agreement with the majority of its lenders for recapitalization of its funded debt. 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. On May 27, 2020, we withdrew all the ratings on Extraction Oil & Gas Inc., including the 'D' issuer credit rating, at the company's request. Date of report (Date of earliest event reported): February 13, 2023. This is an extremely high level, just surpassing 2009, when the ratio hit 56.3% amid a wave of distressed exchanges, which, once completed, often result in 'B-' ratings. 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. 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. 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. On July 23, 2020, S&P Global Ratings lowered its rating on the issuer to 'D' from 'CCC-' upon the company filing for Chapter 11 bankruptcy, following which, on Jan. 5, 2021, the ratings on the issuer were withdrawn. Earlier, on Dec. 5, 2019, we lowered the rating on the company to 'CCC+' from 'B' because it was facing heightened risk in addressing the US$550 million secured notes maturing in November 2022. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. (For a detailed explanation of our data sources and methodology, see Appendix I.). On July 28, 2020, we lowered the issuer credit rating to 'CC' from 'CCC- 'following the company's announcement that it commenced an offer to exchange any and all of its outstanding amounts of 5.75% notes due February 2021 for a combination of new 5.75% notes due February 2024 and an early tender/consent fee. 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. S&P Global Ratings had previously withdrawn its ratings on Techniplas. 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. All of the 198 defaulters that were rated by S&P Global Ratings at the beginning of the year had speculative-grade ratings at that time. We calculated all default rates on an issuer-weighted basis. /ratings/en/research/articles/210407-default-transition-and-recovery-2020-annual-global-corporate-default-and-rating-transition-study-11900573 . The issuer missed the aggregate interest payments on first-, second-, and 1.5-lien term loans due in 2021 and 2022, which was unlikely to be paid in the 30-day grace period. Various forms of bankruptcy accounted for just over 24% of all defaults. 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. Crew Group Inc. to 'D' from 'CCC-' following the company's announced petitions filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Qinghai Provincial Investment Group Co. Ltd. APC Automotive Technologies Intermediate Holdings LLC. For these counts of large downgrades, we include movements to 'D' (default) along with what we normally report as downgrades (that is, downward movements between active ratings). On Dec. 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Houston-based oil and gas exploration and production company Callon Petroleum Co. to 'SD' from 'CC' following a distressed exchange wherein it exchanged US$217 million of new 9% second-lien notes due 2025 for US$389 million of its existing unsecured notes. Once again, the default rate in the 'AAA' rating category was zero, consistent with historical trends. Includes investment-grade and speculative-grade entities. 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 . Our assumptions included average oil prices for the rest of 2020 dropping as much as 55% from 2019 levels, which we believed was going to be a primary driver for Covia's leverage doubling in 2020 from 9.6x at the end of 2019. 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. In years with lower-than-average default rates, often more than 90% of defaulters were initially rated speculative grade, as reflected in the rating path observed for defaulters in the trailing 12 quarters (see chart 10). The company exchanged $315 million of its existing unsecured notes for new 9% convertible secured notes due 2025, which we considered less than the original promise and tantamount to default. We used the same method to form static pools for 1983-2020. 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. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. On Sept. 28, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'D' after the issuer emerged from bankruptcy with a new capital structure comprising a priority exit facility due 2023. Therefore, every update revises results back to the same starting date of Dec. 31, 1980, so as to avoid continuity problems. On May 29, 2020, we raised the issuer credit rating on DDA to 'CCC' from 'SD' based on DDA's reliance on favorable market conditions to generate sufficient cash flow to meet its near-term debt obligations following its reopening. This transaction brought remaining principal balance to US$29 million. These include industrials, utilities, financial institutions, and insurance companies around the world with long-term local currency ratings. The amount of the senior secured notes is half of the original 600 million, and the senior unsecured noteholders had not received any of the 150 million they invested. The issuer had also obtained a commitment for $1 billion in debtor-in-possession financing. The issuer missed an interest payment of US$8 million on its senior convertible notes due in 2024. S&P does not act as a fiduciary or an investment advisor except where registered as such. 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. On April 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on United Arab Emirates-based health care service provider NMC Health PLC to 'D' from 'CCC-' after the issuer missed interest payments on its bank loans. The company effectively converted its existing 270 million first-lien term loans from paying cash interest to paying interest as part-cash, part-payment-in-kind over the next three years and 20 million second-lien term loans from paying cash interest to all payment-in-kind until maturity, with unanimous lender approval. For example, for the entire pool of defaulters in this study (1981-2020), the average times to default for issuers originally rated in the 'A' and 'B' categories were 14.1 years and 5.1 years, respectively, from the initial rating (or from Dec. 31, 1980, the start date of the study), whereas issuers in the 'CCC' rating category or lower had an average time to default of only 2.2 years. PDF | On Jan 1, 2001, Edward I. Altman and others published Analyzing and Explaining Default Recovery Rates | Find, read and cite all the research you need on ResearchGate 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 rating action followed Covia's announcement that its domestic subsidiaries filed voluntary petitions for restructuring under Chapter 11 of the U.S. Bankruptcy Code. 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. The issuer is exploring other strategic alternatives as liquidity remains constrained. On Dec. 7, 2020, S&P Global Ratings raised the issuer credit rating to 'B-' from 'SD' on improved liquidity with constraints from high leverage. 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 Sept. 28, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC-' from 'SD' following the debt exchange. Of the 226 defaults in 2020, 198 were from companies rated as of the beginning of the year. We then divide this by the ratio of the total number of nonzero weights minus one and the total number of nonzero weights. The default rates in the columns of these tables, associated with each static pool year, are calculated in the same way as they would be for individual years' one-year transition matrices. 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. On Aug. 18, 2020, S&P Global Ratings withdrew its ratings on the issuer. 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. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. We view the nonpayment of interest as akin to default on the senior secured notes. Growth during the year partially reflected temporarily heightened demand due to stay-at-home activities. 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. 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. Default activity in 2020 did increase, but to a lesser extent than recent recessions (see chart 1 and table 1). Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. The issuer also received a waiver on its total leverage ratio through June 12, 2020. . On June 18, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Lewisville, Texas-based ASP MCS Acquisition Corp. (MCS) to 'D' from 'CCC' after the company missed its June 15 interest payment on its secured term loan due 2024. Speculative-grade bond spreads in the U.S. widened to 991 basis points (bps) on March 23, but finished the year at 434 bps. 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. Each issuer is likely to be captured multiple times, in line with its migration from one rating to another, so the total count in table 13 is different from that in table 12. ACLI C-1 Bond Factor WG - 03-26-2021 3 Scope: Moody's Analytics to provide default probability term structures for each Moody's corporate rating and resulting C1 Bond Factors, with articulated limitations providing transparency using data and methodologies accessible and repeatable to the NAIC and industry on an ongoing basis. The issuer's operation was suffering from weak crude oil prices and depressed demand. Amid the fast and robust economic rebound, the speculative-grade rating bias has rapidly recovered, but the number of upgrades has not yet matched the magnitude of downgrades seen last year. 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. On March 16, 2020, S&P Global Ratings raised its rating on the issuer to 'CCC-' from 'SD'. On May 11, 2020, we withdrew the ratings at the issuer's request. Normally, recessions include, or are followed shortly by, marked increases in corporate defaults. Multiyear transitions were also calculated for periods of two up to 20 years. 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. On Jan. 8, 2021, S&P Global Ratings withdrew its issuer credit rating at the company's request. On Sept. 22, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based hydraulic fracturing services provider FTS International Inc. to 'D' from 'CC' after the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. On average, there is a negative correlation between the initial rating on an entity and its time to default, if a default occurs. This small sample size can, at times, result in historical default rates that seem counterintuitive. This study limits the reporting of default rates to the 15-year time horizon. The local currency senior unsecured rating is the preferred debt rating used for the proxy because it is usually consistent with the issuer credit rating. The amendment includes a discount on debt for some of its debtholders, which we assess as equivalent to default. 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. It also reported weak financial performance over the past 12 months that was insufficient to meet the net leverage covenant ratio as of Dec. 31, 2019, and increased the risk of payment default. On May 28, 2020, SMLP closed the acquisition of Summit Midstream Partners LLC (Summit Investments), the owner of its general partner (Summit Midstream Partners Holdings LLC [SMP Holdings]), in a simplification transaction. All companies included in the study are assigned to one or more static pools. 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. For both axes of the Lorenz curve, the observations are ordered from the low end of the ratings scale ('CCC'/'C') to the high end ('AAA'). On Oct. 30, 2020, Luxembourg-based offshore drilling contractor Pacific Drilling S.A. filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, which S&P Global Ratings considers a default. On Aug. 21, 2020, we withdrew the issuer credit ratings on the company at its request. 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. 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. This brought the downgrade-to-upgrade ratio to a new high of 6.6. CEC expects to achieve a balance sheet restructuring that supports its reopenings and long-term strategic plans. This nonpayment was considered a general default, and the company was not expected to be able to pay most of its obligations. 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'. Average cumulative default rate calculation. 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. 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). On May 11, 2020, we withdrew the ratings on the issuer. Earlier, on April 8, 2020, we lowered the issuer credit rating on Fieldwood to 'CCC' from 'B-', reflecting the issuer's weak credit metrics, constrained liquidity, and the potential that it may breach covenants on its first-lien term loan. On Nov. 26, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based cinema operator Cineworld Group PLC to 'SD' from 'CCC-' following its distressed debt issuance transaction. 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). 2 Annualized volatility and return based on the period between 2005 and 2022. Later, on May 15, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. Higher ratings show a negative correspondence with the observed frequency of default. Earlier, on May 5, 2020 we lowered the issuer credit rating on Avianca to 'CCC-' from 'CCC' and kept the ratings on CreditWatch with negative implications. Such rating categories with smaller populations will experience high rating transition rates when even a small number of issuers are upgraded or downgraded. This is slightly higher than the post-Lehman Bros. default (2009 onward) annual average of $1.4 billion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. On July 20, 2020, S&P Global Ratings lowered its issuer credit rating to 'D' from 'SD' after the company filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. 17 Jan 2023 | Moody's Investors Service. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. Subsequently, we withdrew the ratings due to insufficient information. Earlier, on Feb. 27, 2020, we revised our outlook on the issuer to negative from stable because of high refinancing risks given the high leverage and significant portion of debt maturing in 2022. bp by year-end 2020. 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. Corporate downgrades also increased, to near an all-time high. The fixed rate loan and the floating rates loans were repurchased at 85% and 84.875% of the original price, respectively. Each static pool is followed from that point forward. Noteholders validly tendered about 69% of the total outstanding principal amount of the notes through the exchange. In a small number of cases, we use the subordinated debt rating or the senior secured rating as the proxy. 36 pages. For instance, an issuer continually rated from the middle of 1984 to the middle of 1991 would appear in the seven consecutive one-year transition matrices from 1985-1991. 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. For the most part, the speculative-grade share of every sector has grown over the past decade, with the exception of the real estate sector. On July 6, 2020, we raised our issue credit rating on Serta Simmons to 'CCC+' from 'SD', reflecting the improved liquidity profile, although the capital structure is still highly leveraged, and the company amended and extended its asset-based lending credit facility maturity to August 2023 from November 2021. Of the rated defaulters at the beginning of 2020, none began the year with an investment-grade rating. 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). The transaction was approved by 100% of lenders, and it provided the issuer with additional liquidity. On Aug. 24, 2020, S&P Global Ratings lowered the issuer credit ratings to 'D' from 'SD' after Travelex completed its restructuring plan, including the write-off of 225 million of debt. On Oct. 7, 2020, Tennessee-based casual dining operator Ruby Tuesday Inc. filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, which S&P Global Ratings considers a default. The issuer amended its lender group, which allowed it to make payment-in-kind (PIK) interest payments for three quarters on second-lien term debt. 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. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses. Following a year marked by one of the deepest recessions in the past 100 years, 2021 proved to be a year of better-than-expected economic recovery, despite the lingering COVID-19 pandemic. On June 19, 2020, S&P Global Ratings lowered its issuer credit rating on Oklahoma City-based oil and gas exploration and production company Chesapeake Energy Corp. to 'D' from 'CC' as the company skipped the interest payments on its 5.375% senior notes due 2021 and 8.0% senior notes due 2027. On Dec. 28, 2020, S&P Global Ratings withdrew its rating at the issuer's request. For example, in the average one-year global transition matrix in table 33, each cell's weighted standard deviation is calculated from the series of that particular cell in each of the 40 cohorts beginning with the 1981 cohort and ending with the 2020 cohort. On Nov. 4, 2020, S&P Global Ratings withdrew its ratings on the issuer. Post default, the issuer has been upgraded three times, leading to a 'B' rating on Dec. 14, 2020, with a positive outlook, due to its improved financials and liquidity. Tables 30, 31, and 32 are broken out by the broadest rating classifications (all rated, investment grade, and speculative grade). On Oct. 9, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC-' from 'SD'. 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.