moody's corporate default and recovery rates 2020 pdf

Of the 198 companies that defaulted in 2020 that were rated at the start of the year, all but 12 were in the 'B' category or lower, and 57% were in the 'CCC'/'C' category, leading to a one-year global Gini ratio of 86.1%. Default, Transition, and Recovery: 2020 Annual Global Corporate Default 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. The leisure and entertainment default rate finished at 9.9% in 2020 and could approach 30% in 2021. 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. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. 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. Tunghsu also signed a letter of intent to acquire a 26%-38% stake in Alderon Iron Ore Corp., which would be conducted by its subsidiary. Earlier, on March 21, 2020, we lowered our issuer credit rating on GNC to 'CC' from 'CCC+' and placed all ratings on CreditWatch with negative implications as the company announced that it did not expect to have sufficient cash flow from operations to repay its convertible senior notes and tranche B-2 term loan due. A bankruptcy filing or legal receivership by the debt issuer or obligor that will . This long-term corporate default and rating transition study uses the CreditPro database of long-term local currency issuer credit ratings. Table 11 presents the average and median times to default from each rating category for all subsequent ratings. On Oct. 30, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Bermuda-based onshore drilling contractor Nabors Industries Ltd to 'SD' from 'CCC+' after the issuer completed a distressed private exchange, whereby it exchanged US$115 million of the principal amount of its 0.75% exchangeable bonds due 2024 for US$50.485 million of new senior priority guaranteed notes due 2025. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. Default & Recovery Analytics - Moody's Investors Service On July 2, 2020, we withdrew the ratings on the issuer. After experiencing high downgrade and default rates in 2020, ratings were much more stable in 2021. For instance, in table 32, the weighted average first-year default rate for all speculative-grade-rated companies for all 40 pools was 3.71%, meaning that an average of 96.29% survived one year. Liquidity also weakened as cash flows for debt repayment diminished. On Oct. 20, 2020, S&P Global Ratings assigned its 'B-' issuer credit rating on the company, with a negative outlook. 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. As an example, the two-year column of table 32 shows the two-year default rates (not conditional on survival) for each static pool. On Aug. 3, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Missouri-based motion picture exhibitor AMC Entertainment Holdings Inc. to 'SD' from 'CC' after the issuer completed the distressed exchange of its subordinated debt at 70%-75% of its par value. Default, Transition, and Recovery: Global Corporate Defaults Drop The issuer was also planning for a comprehensive debt restructuring involving debt-for-equity swaps. 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. On July 23, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Virginia-based student educational travel provider Lakeland Holdings LLC to 'D' from 'CCC-' after the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. On April 23, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Canadian diamond company Northwest Acquisitions ULC to 'D' from 'CCC+' after the issuer's subsidiary, Dominion Diamond Mines ULC, announced filing for insolvency protection under The Companies' Creditors Arrangement Act. Annual Report 2021 - Moody's Investors Service On Oct. 30, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Netherlands-based general merchandise retailer Hema B.V. to 'SD' from 'CC' after the issuer completed a distressed debt restructuring transaction on Oct. 19, 2020. On Nov. 17, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Colorado-based exploration and production company Jonah Energy LLC to 'D' from 'CCC-' after the issuer elected not to make its full US$30 million reserve-based lending facility deficiency payment for September. 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. Initial ratings, or those as of Dec. 31, 1980. Earlier, on Feb. 9, 2020, we lowered the issuer credit rating on Speedcast to 'CCC' from 'B-' after the issuer announced lower 2019 earnings, which intensified pressure on the group's liquidity. S&P assumes no obligation to update the Content following publication in any form or format. An administrator was appointed by the court, after the lenders moved to court. On May 25, 2020, S&P Global Ratings withdrew its credit ratings on the issuer. Ratings On Dec. 17, 2020, S&P Global Ratings raised its issuer credit rating to 'CCC+' from 'D', reflecting the company's position post restructuring. 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 8, 2020, we lowered our issuer credit rating on W&T Offshore to 'CCC+' from 'B-'. On Oct. 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New Hampshire-based specialty apparel retailer Jill Acquisition LLC to 'SD' from 'CC', as the issuer closed its previously announced transaction to extend the maturity on its debt by two years, which we consider distressed and tantamount to default. 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. Later, on Sept. 16, 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). On Aug. 17, 2020, we withdrew the rating on the company at its request. 8-K: NETSCOUT SYSTEMS INC - MarketWatch 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. With an increase in the proportion of downgrades during the year, the number of large rating changes (which we define as more than six notches) increased in 2020. PDF Deutsche Bank AG An obligor rated 'SD' (selective default) or 'D' (default) is in default on one or more of its financial obligations, including rated and unrated financial obligations but excluding hybrid instruments classified as regulatory capital or in nonpayment according to terms. 16 FEB 2023. The Gini ratio is a measure of the rank-ordering power of ratings over a given time horizon, from one through seven years. Most were nonfinancial companies, and five were financial services issuers. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. This was the highest count since 2016, when a wave of defaults in the energy and natural resources sector followed the prolonged collapse in oil prices that began in the second half of 2014 (see chart 5). On March 3, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based oilfield services provider Pioneer Energy Services Corp. to 'D' from 'CCC-'. We included such subsidiaries for the period during which they had a distinct and separate risk of default. On Dec. 23, 2020, we raised the issuer credit ratings to 'B-' from 'D'. 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 July 30, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based retailer Missouri TopCo Ltd. to 'SD' from 'CCC-' after the issuer converted its 80 million second-lien notes into a payment-in-kind (PIK) toggle instrument. N/A--Not available. 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. Annual speculative-grade default rates increased in all major regions in 2020, relative to 2019. 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. Other sectors, such as consumer services, have had more frequent default cycles, both during and between economic cycles. With the strongly improved U.S. economic outlook for 2021, the speculative-grade negative . On Aug. 18, 2020, S&P Global Ratings withdrew its ratings on the issuer. Once again, the default rate in the 'AAA' rating category was zero, consistent with historical trends. 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 missed an interest payment of US$8 million on its senior convertible notes due in 2024. After beginning with heightened credit market stress and a 45-plus-day stretch without any speculative-grade issuance in the U.S. and Europe, 2019 ultimately saw only marginally higher default and downgrade rates than 2018. Data provided in table 13 also differ from default rates in table 24 owing to the use of the static pool methodology. On Dec. 16, 2020, S&P Global Ratings lowered the issuer credit rating to 'CC' from 'CCC-' with a negative outlook due to the distressed debt-for-equity proposal. 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. More generally, evidence from many countries in recent years suggests that collateral values and recovery rates can be volatile and, moreover, they tend to go down just when the number of defaults goes up in economic downturns. Normally, recessions include, or are followed shortly by, marked increases in corporate defaults. 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. On Oct. 12, 2020, Texas-based oil and gas exploration and production company MD America Energy LLC filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, which S&P Global Ratings considers a default. 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+'. 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. In this study, the insurance industry includes life insurance, health insurance, property/casualty insurance, reinsurance, bond insurance, mortgage insurance, and title insurance. 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. S&P Global Ratings assigned initial ratings to 622 issuers in 2020, down from 650 issuers in 2019 and 875 in 2018. The issuer aims to eliminate US$840 million of debt by using restructuring and a US$230 million debtor-in-possession facility. 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. On average, there is a negative correlation between the initial rating on an entity and its time to default, if a default occurs. PDF Markets, Bankers and Analysts Differ on 2021's Default Rate Ratings stability decreased in 2020, to 69.2%, largely the result of the downgrade rate of 18.5%, which was the highest since 2009. Investment-grade ratings are proportionately more prevalent among financial services companies as well (relative to nonfinancials). Defaults in 2020 came from all sectors, but--consistent with recent years--were heavily represented by two sectors: the energy and natural resources sector (with 62 defaults) and the consumer services sector (with 60 defaults). 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 issuer had also obtained a commitment for $1 billion in debtor-in-possession financing. However, reported average ultimate recoveries [2] included in our data set of unrated project finance bank loans remained stable at 76.8% (Moody's) for the period 1983-2020. Default rate will rise this year, Moody's says | CFO Dive The issuer was unable to raise capital to maintain the regulatory minimum, and subsequently the principal and interest payments to the depositors were suspended. Emerging markets: Research & Ratings: Default & Ratings Analytics - Moody's 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. It would not be part of the 1986 pool because it was not rated as of the first day of that year, and it would not be included in any pool after the last day of 1990 because the rating had been withdrawn by then. 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. Moody's Corporation reported revenue of $1.5 billion for the three months ended March 31, 2022, down 5% from the prior-year period. The company noted that the filing resulted from the financial strain from the prolonged COVID-19 restaurant closures. Broadly consistent with 2019, almost 54% of defaults in 2020 came from two sectors: consumer services and energy and natural resources (with 122 defaults combined). Because errors, if any, are corrected by every new update and because the criteria for inclusion or exclusion of companies in the default study are subject to minor revisions as time goes by, it is not possible to compare static pools across different studies. S&P does not act as a fiduciary or an investment advisor except where registered as such. (For more information on methodologies and definitions, see Appendix I.). 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. 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. *This column includes companies that were no longer rated one year prior to default. On April 24, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. Earlier, on June 6, 2020, we lowered our issuer credit rating on SMLP to 'CCC' from 'B'. 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'. 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 Oct. 15, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' because the issuer had enough liquidity to pay the remainder of the bond's maturity. Qinghai Provincial Investment Group Co. Ltd. APC Automotive Technologies Intermediate Holdings LLC. 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. The negative outlook reflects the risk of a lower rating if operating performance continues to deteriorate and the company fails to meet our expectations. Moody's | Better decisions 3Q 2021 Investor Presentation 2 . Investment-grade defaulters. The issuer announced that it voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The company was to pay 12.0% and 14.5% PIK interest in June and December, respectively, rather than the previous 10.0% rate. The CreditWatch negative reflected Avianca's weakening liquidity and that the absence of extraordinary financial support from shareholders or the Colombian government could force the company to default on the repayment of its 8.375% senior unsecured notes due 2020. On June 18, 2020, we raised the issuer credit rating on Forum to 'CCC-' from 'SD', reflecting our forward-looking opinion on its creditworthiness. Earlier, on April 22, 2020, we lowered our issuer credit rating on Revlon to 'CC' from 'CCC-' after the company announced it was pursuing a recapitalization transaction to extend the maturity of its existing 2016 $1.8 billion term loan, term out its unrated $200 million term loan issued in 2019, and enhance its liquidity position. We calculated all default rates on an issuer-weighted basis. As part of the exchange, current owner Bain Capital made a 40 million equity contribution. Multiplying 96.29% by 96.39% results in a 92.81% survival rate to the end of the second year, which leads to a two-year average cumulative default rate of 7.19%. We then divide this by the ratio of the total number of nonzero weights minus one and the total number of nonzero weights. 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. Its Gini coefficient--which is a summary statistic of the Lorenz curve--would thus be zero. On Oct. 20, 2020, S&P Global Ratings raised its issuer credit ratings to 'B-' from 'D' after the issuer announced it had completed a debt restructuring transaction, resulting in US$400 million of debt reduction. Therefore, each annual default study is self-contained and effectively supersedes all previous versions. Distribuidora Internacional de Alimentacion S.A. On a year-over-year basis, the number of rated defaults globally was higher in every quarter of 2020 relative to 2019 (see chart 14). (PDF) Curve fitting of the corporate recovery rates: the comparison of When an issuer defaults, we assign that default to all of the static pools to which the issuer belonged. to 'SD' from 'CCC+' after the company missed interest payment on its 510 million senior secured notes due November 2023. Earlier, on March 17, 2020, we lowered the long-term issuer credit rating to 'CCC+' from 'B' after the issuer's refinancing prospects were difficult and capital structure was unsustainable. This figure includes new ratings subsequent to a prior default--such as after distressed exchanges. A key consideration when analyzing transition matrices that present averages computed over multiple static pools is that the standard deviations associated with each transition point in the matrix are large relative to the averages (outside of stability rates).

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