We view the nonpayment of interest as akin to default on the senior secured notes. 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. For the purposes of this study, a corporate rating may also be withdrawn as a result of mergers and acquisitions. 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. The issuer had also obtained a commitment for $1 billion in debtor-in-possession financing. 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 Oct. 15, 2020, S&P Global Ratings lowered the issuer credit rating to 'CC' and on Nov. 16, 2020, lowered it to 'SD' from 'CC'. . 0 ratings 0% found this document useful (0 votes) 2 views. The issuer also conveyed that it entered into a lock-up agreement with its senior secured lenders and was in talks on a restructuring plan. An administrator was appointed by the court, after the lenders moved to court. This transactions increased available liquidity and reduced cash interest for the short term. On May 11, 2020, we withdrew the ratings at the issuer's request. In a small number of cases, we use the subordinated debt rating or the senior secured rating as the proxy. On Oct. 13, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Ireland-based manufacturer and distributer of specialty pharmaceutical products Mallinckrodt PLC to 'D' from 'CCC' after the issuer announced that it voluntarily initiated Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware to modify its capital structure, including to restructure portions of its debt and resolve several billion dollars of potential legal liabilities. Date Document Type Title Issuer/Entity 24 Feb 2023 Data Report Fleet Lease Securitizations: Loss Severity Modeling Earlier, on April 21, 2020, we lowered the rating on the issuer to 'CC' from 'CCC' after it announced entering into a voluntary administration to undertake a proposed debt restructuring and recapitalization of the business. Earlier, on April 1, 2020, we lowered our issuer credit rating on Gavilan to 'CCC-' from 'CCC+' after the issuer drew the full amount on the US$200 million reserve-based lending facility, which was up for redetermination in April 2020. 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. 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. Counterparty credit ratings, corporate credit ratings, and sovereign credit ratings are all forms of issuer credit ratings. 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 example, leisure and media has a much higher proportion of speculative-grade ratings than financial institutions or insurance (see chart 20). The company had a $135 million interest payment due in mid-July and a $208 million debt maturity in August 2020, and its bonds traded at less than $0.10 on the dollar. It is expected to reduce debt by US$500 million. On Nov. 23, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Oklahoma-based exploration and production company Gulfport Energy Corp. to 'D' from 'CCC-' after the issuer elected to skip its interest payment on its 6% senior unsecured notes maturing Oct. 15, 2024, and enter into a 30-day grace period. The transaction reduced the company's annual interest payments by about US$19.25 million. Historically, nonfinancial defaulters tend to have a much smoother and shorter path to default (see chart 12). The issuer was engaged in discussions with creditors for a debt restructuring. The group issued a US$450 million senior secured term loan and US$111 million senior secured term loan due in May 2024 and refinanced the US$111 million additional RCF that was maturing in December 2020. 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. of 15.1%. 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. Transition rates compare issuer credit ratings at the beginning of a period with ratings at the end of the period. Otherwise, the methodology was identical to that used for single-year transitions. On Aug. 19, 2020, we raised our issuer credit rating on Forum to 'CCC+' from 'SD' following the completion of its debt exchange for the majority of its 6.25% senior unsecured notes due 2021. Following Acharya et al. 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. 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. With its highly developed financing markets, the U.S. also has a considerably higher share of speculative-grade companies than other regions--it accounted for 52.6% of speculative-grade companies globally at the beginning of 2020. 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 Aug. 6, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based pizza restaurants operator PizzaExpress Financing 1 PLC to 'D' from 'CC' after the issuer opted for nonpayment of interests on it secured and unsecured notes. We considered this exchange as a distressed exchange. The date S&P Global Ratings revised the rating(s) to 'D', 'SD', or 'R'; The date a distressed exchange offer was announced; or. For example, the one-year default rate column of table 24 is equivalent to column 'D' of the average one-year transition matrix in table 21, as well as the cumulative average in the "Summary statistics" of the one-year column in table 32. The Content is provided on an as is basis. Annual speculative-grade default rates increased in all major regions in 2020, relative to 2019. On Feb. 26, 2020, S&P Global Ratings withdrew its ratings on the issuer. In 2019, the issuer derived about 41% of its revenue from the food service segment and about 32% from the retail segment. Our data on defaulted corporate issuers globally shows that defaults among speculative-grade entities tend to be clustered in the third year after the initial rating, particularly in the 'B' rating category (see chart 9). On April 6, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New Zealand-based nonbank financier FE Investments Ltd. to 'D' from 'CCC'. At the time of the withdrawal, our 'D' rating reflected the nonpayment of the coupon on the $350 million Eurobond in April 2020 followed by a nonpayment of its mezzanine loan. Moody's Corporation reported revenue of $1.5 billion for the three months ended March 31, 2022, down 5% from the prior-year period. On April 2, 2020, we lowered our issuer credit rating to 'CCC' from 'B-' and removed all of the ratings from CreditWatch negative, where they had been placed on March 19, 2020, as the company faced significant operational headwinds due to the coronavirus pandemic and had about $215 million of 8% senior unsecured notes maturing in less than two years. On May 14, 2020, we withdrew the ratings on the issuer. . Austria, Belgium, British Virgin Islands, Bulgaria, Channel Islands, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, Ireland, Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova Republic of, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the U.K. Meanwhile, the downgrade rate more than doubled, to 18.5% from 9.0% in 2019. Esma50 165 2229 TRV 2 22. 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. The issuer announced that it had tendered approximately US$215 million principal payment of the US$ 296 million senior unsecured notes due 2022. content Earlier, on March 2, 2020, we lowered our issuer credit ratings on LSC to 'CC' from 'CCC+' after the issuer entered into a forbearance agreement for failing to comply with its consolidated leverage and interest ratio credit agreements covenants. Although dollar amounts provide information about the portion of the market that is affected by defaults or rating changes, issuer-weighted averages are more useful measures of the performance of ratings. 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. The exchange provides additional liquidity for at least the next 12 months, but it minimally reduces leverage, and interest costs remain high. 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. On Nov. 12, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Argentina-based diversified real estate company IRSA Inversiones y Representaciones S.A. to 'SD' from 'CC' following the settlement of a distressed exchange offer for 98.3% of its outstanding US$181.5 million series I 10.00% senior unsecured notes due Nov. 14, 2020. Earlier, on Jan. 17, 2020, we withdrew our ratings on the issuer due to insufficient information. On Aug. 17, 2020, we withdrew the rating on the company at its request. On May 19, 2020, S&P Global Ratings lowered its issuer credit rating on German value retailer Takko Fashion S.a.r.l. Earlier, on June 6, 2020, we lowered our issuer credit rating on SMLP to 'CCC' from 'B'. Later, on Oct. 15, 2020, we withdrew the ratings at the issuer's request. 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. The company finalized a tender offer to repurchase $213 million of its outstanding $255 million 12% senior secured notes due 2022. The performance of Moody's corporate debt ratings - Q4 2022 - Excel supplement MOODY'S . On March 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Connecticut-based telecom operator Frontier Communications Corp. to 'SD' from 'CCC-' after the issuer missed interest payments of about US$322 million. 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. This page provides a central resource for Moody's research on default risks, impairment and loss rates, . On Dec. 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on France-based car rental service provider company Europcar Mobility Group S.A. to 'SD' from 'CC' after the issuer elected not to pay the interest due on its 2024 and 2026 corporate senior notes prior to the end of the 30-day grace period. Such rating categories with smaller populations will experience high rating transition rates when even a small number of issuers are upgraded or downgraded. The default rate Jennifer Tennant for all Moody's-rated corporate issuers rose to 1.9% at the end of 2008 Analyst from 0.3% at year-end 2007. 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. 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). The issuer agreed with certain majority debtholders to convert US$2.2 billion of existing debt into new equity. 'R' (regulatory intervention) indicates that an obligor is under regulatory supervision owing to its financial condition. Financial services companies are typically more sensitive to sudden declines in investor and stakeholder confidence than nonfinancial companies, which can contribute to a rapid decline in funding liquidity and credit quality. The regions covered in this study are: U.S. and tax havens: On Sept. 4, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based action sports apparel company Boardriders Inc. to 'SD' from 'CCC+' after the issuer completed a distressed transaction to increase its liquidity and fund operations. U.S., Bermuda, and the Cayman Islands, Other developed: The company emerged from Chapter 11 bankruptcy protection on Oct. 16, 2020, with a new capital structure and name, TNT Crane & Rigging LLC. On Oct. 13, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' following the completion of the exchange. 17 Jan 2023 | Moody's Investors Service. On Aug. 28, 2020, we withdrew our ratings on the company. 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. Later, on Aug. 11, 2020, we withdrew our issuer credit ratings on the company at its request. 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. The coronavirus pandemic-related business disruption (i.e., diamond sales and marketing) affected the cash flow of the issuer. Acharya: Credit Risk - Introduction 7 Moody's Definition Of Default: "Credit Events" 1. On Nov. 25, 2020, S&P Global Ratings raised the issuer credit rating to 'B-' from 'SD' on its improved maturity profile. This compares with a Gini of 88.3% and a default rate of 2.5% in 2019. 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. 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. COMMENTS; 4 May, 2022 | 17:17; . The company's credit quality deteriorated with the pressure on airlines' cash flows and liquidity due to the coronavirus pandemic. After experiencing high downgrade and default rates in 2020, ratings were much more stable in 2021. All 1981 static pool members still rated on Jan. 1, 2020, had 40 one-year transitions, while companies first rated on Jan. 1, 2020, had only one. In 2020, 226 companies, including 26 confidential issuers, defaulted on US$353.4 billion of debt. In its base case, Moody's analyzed the underlying collateral pool as having a performing par (after treating deferring securities as performing if they meet certain criteria) of $260.9 million, defaulted/deferring par of $0 million, a weighted average default probability of 12.33% (implying a WARF of 1527), and a weighted average recovery rate . On April 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based oilfield services company KCA DEUTAG Alpha Ltd. to 'SD' from 'CCC+' after the issuer announced it would use the grace period for interest payments. Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby disclosesthat most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. 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). On Oct. 20, 2020, S&P Global Ratings assigned its 'B-' issuer credit rating on the company, with a negative outlook. 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 issuer used 43 million of cash proceeds to repurchase 51 million of notes. 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. We used the same method to form static pools for 1983-2020. Specifically, 87.6% were rated 'CCC+' or lower just prior to default, which is much higher than the 69.4% long-term average. Initial ratings for these companies are those immediately following a prior default in 2020. On May 25, 2020, S&P Global Ratings lowered the issuer credit rating on U.K.-based foreign-exchange service provider Travelex Holdings Ltd. to 'D' from 'CCC' after the issuer failed to make the interest payments on its senior secured notes. The coronavirus pandemic-related impact has further weakened the operational performance and financial results. In other words, the Gini coefficient captures the extent to which actual ratings accuracy diverges from the random scenario and aspires to the ideal scenario. 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 Denbury Resources Inc. to 'D' from 'CCC+'. On May 15, 2020, S&P Global Ratings lowered the issuer credit rating on Texas-based oilfield products and services provider Forum Energy Technologies Inc. to 'SD' from 'CC'. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. 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. On July 2, 2020, we raised the issuer credit rating to 'B-' from 'D' after RGIS completed its debt restructuring and eliminated over US$ 230 million of debt, which, in turn, improved leverage.