On April 30, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Australia-based airline company Virgin Australia Holdings Ltd. to 'D' from 'CC' after the company filed for Chapter 15 bankruptcy and announced it would not pay the coupon on its US$425 million senior unsecured notes because of a moratorium on all creditor payments. The trailing-12-month and annual default rates have become standard measures, but default rates measured over shorter time frames give a more immediate picture of credit market conditions. On May 11, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. For example, 427 defaults were recorded in the five-year pool that began in January 2016, of which 414 were rated speculative grade on Jan. 1, 2016. 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 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'. 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. On Oct. 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Argentina-based Banco Hipotecario S.A. to 'SD' from 'CC' after the issuer announced that 46.7% of the bondholders of its outstanding US$279.8 million series 29 notes due on Nov. 30, 2020, accepted the exchange offer originally launched in early September. All four major regions also saw their 2020 speculative-grade default rates rise above their long-term annual averages (see table 7 and chart 21). At the end of September, the trailing 12-month default rate for U.S. corporate issuers of speculative-grade bonds and loans was 8.5%, according to Moody's Investors Service. 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'). The debt has been converted from cash to PIK at LIBOR+450 for US$125 million while another US$50 million at LIBOR+1000. 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 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+'. 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. moody's probability of default table 2021 de C.V. to 'D' from 'B-' after the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. Issuers rated 'AAA' were still rated 'AAA' one year later 87.1% of the time, while issuers rated in the 'CCC'/'C' category retained those ratings just 43.1% of the time. 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. The company was to pay 12.0% and 14.5% PIK interest in June and December, respectively, rather than the previous 10.0% rate. Later, on May 15, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. Adding those companies first rated in 1981 to the surviving members (those still actively rated and not in default) of the 1981 static pool forms the 1982 static pool. Fourth quarter earnings releases have provided insight into corporate margin pressures, but labor market commentary signals that some of these headwinds may be abating. The pools are static in the sense that their membership remains constant over time. 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. It is important to note that S&P Global Ratings' credit ratings do not imply a specific probability of default. 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. 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. Research & Ratings: Default & Ratings Analytics - Moody's 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. The issuer used 43 million of cash proceeds to repurchase 51 million of notes. 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. On June 24, 2020, S&P Global Ratings withdrew its issuer credit rating at the company's request. 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. 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. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. On July 23, 2020, S&P Global Ratings raised the rating on the issuer to 'CCC-' from 'SD', as the new priming loan is at a senior collateral position relative to the existing debt. This study analyzes the rating histories of 21,693 companies that S&P Global Ratings rated as of Dec. 31, 1980, or that were first rated between that date and Dec. 31, 2020. It had other coupon payments of US$8 million each in August and October. Many default studies, including this one, also look at transition rates, which gauge the degree to which ratings change--either up or down--over a particular period. 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-'. Corporate Power; Enforceability : 35 : 3.3 : Company Board Approval; Fairness Opinion; Anti-Takeover Laws : 36 : . 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. 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. In Europe, by contrast, the share of speculative-grade ratings remains in the minority. 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 May 21, 2020, S&P Global Ratings withdrew its ratings on the issuer. The issuer was engaged in discussions with creditors for a debt restructuring. Broadly speaking, the average and median times to default for each rating category are longer when based on the initial rating than when based on subsequent ratings, particularly for speculative-grade ratings. The company was acquired by an unrated company. On March 26, 2020, we withdrew our issuer ratings at the company's request. The fixed rate loan and the floating rates loans were repurchased at 85% and 84.875% of the original price, respectively. 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 COVID-19 pandemic and lockdowns in 2020 led to one of the deepest recessions since the Great Depression roughly 90 years ago. 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. 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. In contrast, the issuer with the shortest time to default (36 days) was a confidentially rated U.S.-based leisure/media company. In 2020, the share of new speculative-grade issuers rated 'B-' and lower reached 56.8%. The issuer entered into an agreement with the majority of its lenders for recapitalization of its funded debt. Moody's Investors Service (MIS) First Quarter Revenue Down 20%. *Or Dec. 31, 1980, whichever is later. On April 24, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based contract drilling services Diamond Offshore Drilling Inc. to 'D' from 'CC' after a review of market conditions for contract drilling services. Historically, a growing concentration of speculative-grade ratings often precedes a period of increased defaults. However, the data was gathered for 40 years, and all calculations are based on the rating experience of that period. S&P Global Ratings then withdrew the long-term issuer credit rating at the issuer's request. Affected debt amounts also rose (see chart 15). 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. We included such subsidiaries for the period during which they had a distinct and separate risk of default. The number of 'AAA' rated issuers globally declined to just eight by the end of 2020 from 89 at the beginning of 2008. The issuer announced that it completed a transaction to exchange US$700 million of the US$1.476 billion senior unsecured debt due in 2028 with US$400 million in cash and 10 million common shares. PDF Relative Attractiveness of Direct Lending: Term and Credit Risk This compares with a Gini of 88.3% and a default rate of 2.5% in 2019. On July 2, 2020, we withdrew our ratings on the issuer after it filed for reorganization under Chapter 11. On Feb. 26, 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. The issuer had also obtained a commitment for $1 billion in debtor-in-possession financing. On Nov. 25, 2020, S&P Global Ratings withdrew its rating at the issuer's request. 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. 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. All companies included in the study are assigned to one or more static pools. 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. S&P Global Ratings assigned initial ratings to 622 issuers in 2020, down from 650 issuers in 2019 and 875 in 2018. On April 9, 2020, we raised the ratings on the issuer to 'CCC' from 'D' on the expectation of average leverage above 15x. Second Party Opinions & Transaction Evaluations, U.S. Local Governments Credit Scenario Builder, Annual Global Trends: Defaults Reach Their Highest Level Since 2009, Lower Ratings Are Much More Vulnerable To Default, Industry Variations: Energy And Consumer Services Lead Again, But Defaults Were Widespread In 2020, Speculative-Grade Ratings Represent About Half Of Corporate Issuers, Transition And Cumulative Default Rates Demonstrate Ratings Performance, Criteria For Assigning CCC+, CCC, CCC-, And CC Ratings, U.S. Recovery Study: Clouds Loom As Defaults Rise. *U.S., Bermuda, and Cayman Islands. On June 15, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Virginia-based tobacco leaf merchant Pyxus International Inc to 'D' from 'CCC-' after the issuer announced a reorganization process under Chapter 11 of the U.S. Bankruptcy Code with 92% of principal amount of its first-lien notes and 67% of its second-lien notes holders. Kathrin was a lead analyst in Moody's EMEA Corporate Finance Group in Frankfurt, Germany, covering a diverse set of heavy industrial corporations across Europe. On Nov. 9, 2020, we withdrew the issuer credit ratings on the company at its request. However, in most of the relatively benign period since the financial crisis, the two series have diverged somewhat, as they did in 2004-2007. From Jan. 1, 1981-Dec. 31, 2020, a total of 21,693 first-time-rated organizations were added to form new static pools, while we excluded 3,098 defaulting companies and 11,448 companies that are no longer assigned ratings (NR). These include industrials, utilities, financial institutions, and insurance companies around the world with long-term local currency ratings. Given this track record, monitoring the trends of newly assigned ratings could prove useful in anticipating future default activity, based on the observation that years with high numbers of new 'B-' and lower ratings will likely be followed by increased default risk. Consider the following example: An issuer is originally rated 'BB' in mid-1986 and is downgraded to 'B' in 1988. Earlier, on April 4, 2020, we lowered our issuer credit rating on Covia to 'CCC+' from 'BB-' after customers were dealing with a sudden and dramatic collapse in prices for the oil and gas they produce. 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+'. A majority of issuers have been rated speculative grade before--the first instance in July 2018--but the ratio has largely hovered around 50% since. DDA's term loan waiver agreement is equivalent to a default, even though no legal default has occurred under the provisions of the term loan, because the timing of the payments was delayed relative to the terms of the original agreement. The company separately raised a bridge loan in April 2020 that required it to file a restructuring support agreement by June 15, 2020. On May 26, 2020, S&P Global Ratings lowered its issuer credit rating on Oklahoma-based oil and gas exploration and production company Unit Corp. to 'D' from 'CC' after the issuer reorganized under Chapter 11 of the U.S. Bankruptcy Code. 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. In contrast, the relationship is slightly more discontinuous when we examine rating transitions across modifiers (the plus or minus after a rating), but these variations are likely a result of sample size considerations, and we do not consider them significant (see table 23). At times, however, some of these subsidiaries might not yet have been covered by a parent's guarantee, or the relationship that combines the default risk of parent and subsidiary might have come to an end or might not have begun. Default, Transition, and Recovery: 2021 Annual Global Sovereign Default 16 FEB 2023. S&P Global Ratings Research conducts its default studies on the basis of groupings called static pools. Most were nonfinancial companies, and five were financial services issuers. We also do not include short-term issuer credit ratings. On July 29, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' following the issuer's completion of the distressed exchange. DB's 'Core Bank' reported an adjusted net return on tangible equity (ROTE) of 7.3% in Q3 following a strong 9.1% and 11.9% in Q2 and Q1, respectively, close to the bank's 8% target set for 2022. Meaningfully lower yoy default rates in 2021 are expected for the energy and retail industries, which produced a significant volume of defaults over the prior five years. 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). Cross-Sector: The . 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 . Some issuers default after S&P Global Ratings no longer rates them. 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 Nov. 3, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' after the company completed the distressed exchange. 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. A total of 3,098 defaults have been recorded globally since 1981. On Dec. 16, 2020, S&P Global Ratings withdrew the issuer credit ratings at the issuer's request. Half of this amount, US$5.5 million, was waived until the maturity of notes in 2024, while the issuer was still negotiating the payment date for the other half. Difference between last four quarters and weighted average, Largest corporate defaulters by outstanding debt amount, Texas Competitive Electric Holdings Co. LLC. The coronavirus pandemic-related business disruption (i.e., diamond sales and marketing) affected the cash flow of the issuer. 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. All default rates that appear in this study are based on the number of issuers rather than the dollar amounts affected by defaults or rating changes. The issuer was unable to raise capital to maintain the regulatory minimum, and subsequently the principal and interest payments to the depositors were suspended. 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. KIS Research and revenue from providing ESG research, data and assessments. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. 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).
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