The downgrade to 'SD' follows GFamsa's missed interest and principal payments on its $59.1 million outstanding senior unsecured notes on June 1, 2020. 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 average amount of debt per defaulter in 2020 was the same as in 2019: $1.6 billion. In addition to relief against very tight financial covenants, second-lien term loan lenders agreed to exchange annual cash interest payments of LIBOR plus 1,000 basis points (L+1000 bps) (1% LIBOR floor) for cash interest payments of L+100 bps (1% LIBOR floor) plus 1,000 bps PIK along with warrants to potentially acquire equity in the company. 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. Credit deterioration was significant in 2020, with a new historical low upgrade rate (2.8%) and one of the highest annual downgrade rates (18.5%). On Nov. 5, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based oilfield services provider Nine Energy Service Inc. to 'SD' from 'CCC+' after the issuer's open market debt repurchases, under which it repurchased a total of more than US$50 million of its unsecured notes principal year-to-date at less than 30 cents on the dollar. 1-2.Introduction to Credit Risk - Copy (3).pdf - Credit On Jan. 9, 2019, S&P Global Ratings lowered its issuer credit rating on Missouri-based retailer Moran Foods LLC (SAL Acquisition Corp.) to 'SD' from 'CCC' after the company elected not to make an interest payment due Dec. 31, 2019, while entering into a forbearance agreement. On Oct. 30, 2020, Luxembourg-based offshore drilling contractor Pacific Drilling S.A. filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, which S&P Global Ratings considers a default. The safeguard procedure, which we considered tantamount to default, implies that the debt of the protected companies is frozen, allowing for a reorganization of liabilities and a grace period. On Jan. 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on China-based integrated aluminum producer Qinghai Provincial Investment Group Co. Ltd. (QPIG) to 'D' from 'CCC-' following the company's failure to pay interest due on Jan. 10, 2020, on its US$ 300 million bonds. Preferred stock is not considered a financial obligation; thus, a missed preferred stock dividend is not normally equated with default. Default & Recovery Database | Moody's Analytics On Dec. 28, 2020, S&P Global Ratings withdrew its rating at the issuer's request. COMMENTS; 4 May, 2022 | 17:17; . Sources: StepStone Group, CS HY Index, Barclays US IG, Moody's, Cliffwater, Refinitiv LPC as of December 2022. 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). 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. Angola, Argentina, Armenia, Aruba, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belize, Bhutan, Bolivia, Bosnia-Herzegovina, Brazil, Brunei Darussalam, Cambodia, Chile, China, Colombia, Costa Rica, Curacao, Dominican Republic, Ecuador, Egypt, El Salvador, Fiji, Gabon, Georgia, Ghana, Grenada, Guatemala, Honduras, Hong Kong, India, Indonesia, Israel, Jamaica, Jordan, Kazakhstan, Kenya, Korea (Republic of), Kuwait, Lebanon, Liberia, Macao Special Administrative Region of China, Malaysia, Marshall Islands, Mauritius, Mexico, Mongolia, Morocco, Namibia, Netherlands Antilles, Nigeria, Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Qatar, Russian Federation, Saudi Arabia, Singapore, South Africa, Sri Lanka, Syrian Arab Republic, Taiwan, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Turks and Caicos Islands, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, Vietnam, and Yemen. The issuer was also in talks with its lenders and noteholders for a comprehensive financial restructuring. On June 24, 2020, we raised the credit ratings on the issuer to 'CCC+' from 'SD' after it extended the maturities on all its loans to 2021 and 2022, which helps CSM maintain liquidity for its operation over the next 12 months. These are calculated in the same way as the default column in table 20, though table 20 shows the one-year default rates for each rating category for 2020 exclusively. Low demand, weak macroeconomic performance, and the pandemic led to weakening liquidity and performance. In this case, however, the 'AA+' figure was derived from a much smaller sample than that for the 'AA' rating. This does not necessarily indicate a default event, but during the period of regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. 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. 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. On Nov. 2, 2020, Tennessee-based real estate company CBL & Associates Properties Inc. defaulted after the issuer filed for protection under Chapter 11 of the U.S. Bankruptcy Code. 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. For example, three-year transition matrices were the result of comparing ratings at the beginning of the years 1981-2018 with the ratings at the end of the years 1983-2020. 1Great Financial Crisis 2008/2009. Our ongoing enhancement of the database used to generate this study could lead to outcomes that differ to some degree from those reported in previous studies. Various forms of bankruptcy accounted for just over 24% of all defaults. 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 Nov. 20, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Minnesota-based exploration and production (E&P) company Northern Oil and Gas Inc. to 'SD' from 'CCC+' after the issuer disclosed debt exchanges, which over the past few quarters represent a meaningful amount of the original principal. We consider this exchange as tantamount to default. On Nov. 18, 2020, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. On Nov. 3, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' after the company completed the distressed exchange. 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 May 4, 2020, we raised the credit ratings to 'CCC' from 'SD' after the reduction of debt by approximately US$329 million. The sovereign downgrades of China in 2017, the U.K. in 2016, France in 2012, and the U.S. in 2011 have factored into the downgrades of many higher-rated financial services companies. The 50.3% at the end of 2020 does represent an all-time high, albeit by a margin of only 0.1%. The rating action followed the company's exchange of about $58.3 million in aggregate principal amount of its senior unsecured notes for $23.3 million in cash, or a 60% discount to par value. 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. As the default rate rose globally, credit quality also showed a net decline in 2020, with many more companies downgraded than upgraded. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENTS FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. The downgrade followed the completion of the partial repurchase of senior secured notes. The company was operating at a reduced rate of utilization--a production rate of 5.7 million tons per year against total nameplate capacity of 17.3 million tons per year. We believe that COVID-19-related fitness club closures have materially impaired the company's liquidity position. On Dec. 7, 2020, the issuer credit rating on the company was raised to 'CCC+'. Moody's - Corporate defaults to decline in 2021 after sharp rise in 2020 Table 8 provides a list of all the publicly rated companies that defaulted in 2020. On July 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Ohio-based frac sand and industrial minerals producer Covia Holdings Corp. to 'D' from 'CCC+'. PDF An Empirical Analysis of Bond Recovery Rates: Exploring a Structural On April 29, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Kansas-based consumer products supplier CSM Bakery Solutions LLC to 'SD' from 'CCC' after the issuer executed an amendment to extend the maturity of its US$105 million asset-based lending and has not completed refinancing of its first-lien term loan due July 2020. Each one-year transition matrix displays all rating movements between letter categories from the beginning of the year through year-end. 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. 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. CPK's performance was weak prior to the disruption stemming from the coronavirus pandemic; however, we believe the pandemic contributed additional operating pressure and potentially accelerated the need to restructure its debt. On Nov. 3, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' on the basis of increased liquidity. PDF China Banking System Credit trends amid policy-led recovery and a On Nov. 3, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'D' on the completed exchange offer. Several sectors have had distinct default cycles, such as the high technology, computers, and office equipment sector and the telecommunications sector, which both fueled the prolonged spike in defaults during the tech bubble, when the global speculative-grade default rate reached 12.2% in June 2002. Default, Transition, and Recovery: Growing Strains Could Push The U.S. Speculative-Grade Corporate Default Rate To 4% By December 2023. In Europe, by contrast, the share of speculative-grade ratings remains in the minority. On April 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Colorado-based crude oil and natural gas exploration and production company Whiting Petroleum Corp to 'D' from 'CCC+' after the issuer filed for voluntary Chapter 11 bankruptcy. This is roughly in line with the annual average since 2010, which is 76.7%. On average, there is a negative correlation between the initial rating on an entity and its time to default, if a default occurs. Revenue for MIS in the first quarter of 2022 was $827 million, down 20% from . On Nov. 26, 2020, S&P Global Ratings lowered the long-term issuer credit rating on Spain-based real estate debt and property management company Haya Real Estate S.A.U. 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 May 20, 2020, S&P Global Ratings lowered its issuer credit rating on Oklahoma-based casino resort operator Downstream Development Authority (DDA) to 'SD' from 'CCC'. The issuer is facing challenges in adapting to the ongoing changes in the department store sector. On July 22, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based media and satellite-based connectivity provider Global Eagle Entertainment Inc. to 'D' from 'CCC-' after the issuer filed for petitions under Chapter 11 of U.S. Bankruptcy Code. Earlier, on June 9, 2020, we withdrew the issuer credit ratings at the issuer's request. Investment-grade defaulters. Moody's Default and Ratings Analytics team publishes Moody's default studies, ratings transitions and ratings performance studies for corporates, financial institutions, sovereign and sub-sovereign, public finance and infrastructure sectors. PDF Default Recovery Rates and LGD in Credit Risk Modeling and Practice Speculative-grade-rated issuers account for more than 60% of total issuers in eight of the 13 industries we track. 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. Export PDF Export CSV Email . Similarly, the second- and third-year conditional marginal averages--shown in the "Summary statistics" section at the bottom portion of the table--were 3.61% for the first 39 pools (96.39% of those companies that did not default in the first year survived the second year) and 3.23% for the first 38 pools (96.77% of those companies that did not default by the second year survived the third year), respectively.