moody's corporate default and recovery rates 2020 pdf

Esma50 165 2229 TRV 2 22. S&P assumes no obligation to update the Content following publication in any form or format. On April 6, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-headquartered home health provider BW Homecare Holdings LLC to 'SD' from 'CCC'. NPC is the largest franchisee of Pizza Hut and Wendy's restaurants operating nearly 1,600 locations in the U.S. On July 1, 2020, S&P Global Ratings lowered the ratings on the issuer to 'D' from 'SD' following its Chapter 11 bankruptcy filing, following which, on Aug. 5, 2020, the ratings on the issuer were withdrawn. 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. Reduced EBITDA amid the pandemic and oil price crisis in early 2020 stressed the operating performance of the issuer. 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. 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%). Rising stars. On Oct. 13, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' following the completion of the exchange. This transaction brought remaining principal balance to US$29 million. On June 18, 2020, we raised the issuer credit rating on Forum to 'CCC-' from 'SD', reflecting our forward-looking opinion on its creditworthiness. On Dec. 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based payroll software provider Zellis Holdings Ltd. to 'SD' from 'CCC+'. 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. 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. Default rate calculation. Selective defaults accounted for just over half of all defaults in 2020. 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. Note: Descriptive statistics for regions other than U.S. calculated from 1996 to 2020 due to sample size considerations. We consider the exchange distressed and tantamount to default because, in our view, the transaction offers less than the original promise for the security. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. 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. When comparing default rates across sectors, we note some key differences between the industries. . 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. On Jan. 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based shoes and accessories seller TOMS Shoes LLC to 'D' (default) from 'CCC' after the company restructured substantially all of its debt and its term loan lenders took ownership of the company. 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. For example, the share of speculative-grade ratings increased in the U.S. beginning in 2002. The latest step in this effort is the plan put forth by House Democrats in mid-January. The squared difference between each cohort's transition rate and the weighted average--which is the data point in each cell--is multiplied by each cohort's weight. Structured finance vehicles, public-sector issuers, and sovereign issuers are the subjects of separate default and transition studies, and we exclude them from this study. On Oct. 16, 2020 S&P Global Ratings lowered its long-term issuer credit rating on Chile-based bank holding company Corp Group Banking S.A. to 'D' from 'CC' after the issuer missed its US$16.9 million semiannual interest payment on its bond. 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 Feb. 13, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based newspaper publisher The McClatchy Co. to 'D' from 'CC' after the issuer filed for bankruptcy under Chapter 11. 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. S&P Global Ratings then withdrew its issuer credit ratings on the company at its request. On Aug. 21, 2020, we withdrew the issuer credit ratings on the company at its request. The exchange provides additional liquidity for at least the next 12 months, but it minimally reduces leverage, and interest costs remain high. 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. Earlier, on April 14, 2020, we lowered the issuer credit ratings on the company to 'CCC-' from 'CCC' as it was contending with the disruption and recessionary conditions stemming from the coronavirus pandemic, the challenging trends facing department stores, and an unsustainable capital structure. On March 27, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Colorado-based cyber security provider Optiv Inc. to 'SD' from 'CCC+' after the issuer completed a distressed exchange, repurchasing about US$47 million of second-lien debt for about US$23 million. We included such subsidiaries for the period during which they had a distinct and separate risk of default. Higher ratings show a negative correspondence with the observed frequency of default. 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. 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. 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. On May 27, 2020, S&P Global Ratings lowered its issuer credit rating on Chile-based Latam Airlines Group S.A. to 'D' from 'CCC-' after the issuer volunteered a reorganization process under Chapter 11 of the Bankruptcy Code in the U.S. We consider that the debt restructuring under Chapter 11 constitutes a default. On May 21, 2020, after the settlement of the exchange, we raised the issuer credit rating to 'CCC+' from 'SD'. 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. Note: Numbers in parentheses are standard deviations. The company will not make the interest payments within the 30-day grace period. This compares with a Gini of 88.3% and a default rate of 2.5% in 2019. S&Ps opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. The shareholder made an offer to purchase the remaining 2023 notes. The proportion of defaulters with confidential ratings in 2020 (11.5%) held steady relative to 11% in 2019. All companies included in the study are assigned to one or more static pools. 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 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. However, the data was gathered for 40 years, and all calculations are based on the rating experience of that period. 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). On April 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Ohio-based glassware manufacturer Libbey Inc. to 'SD' from 'CCC' after the issuer deferred an excess prepayment of about US$12 million. On July 7, 2020, we withdrew our long-term issuer credit rating at the issuer's request. But despite the noticeable increase in defaults in 2020, peak default rates were much lower than during the financial crisis. Through Dec. 31, 2020, 198 defaults have come from the 2020 pool of financial and nonfinancial companies, and 94% of these were from the lowest rating categories--'B' and lower. This scheme was expected to save about 7.6 million per year in cash, but the company was still facing an interest payment of about 35 million and huge rent payments. For instance, the 1981 static pool consists of all companies rated as of 12:00:01 a.m. on Jan. 1, 1981. On April 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Delaware-based physician staffing and ambulatory services company Envision Healthcare Corp. to 'SD' from 'CC' after the settlement of its debt exchange offer on the notes due in 2026 and offering on 53-55 cents on the dollar for the new secured term debt. On June 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Alta-based frac sand producer and supplier Source Energy Services Ltd. to 'D' from 'CCC-' after the issuer missed the interest payment due on June 15, and we believed the company was unlikely to make the interest payment within the 60-day grace 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-'. It is expected that North American and international markets are likely to contract up to 50% and 20%, respectively. This study--in line with previous default studies--confirms that over the long term (1981-2020), higher ratings are more stable than lower ratings. The transaction was approved by 100% of lenders, and it provided the issuer with additional liquidity. The study Default, Transition, and Recovery: 2019 Annual Global Corporate Default And Rating Transition Study April 29, 2020 Key Takeaways - The global speculative-grade corporate default rate rose to 2.5% in 2019 from 2.1% at the end of 2018, while the number of corporate defaults globally rose to 118, the first triple-digit total since 2016. 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. The issuer announced that it completed an amend-and-extend transaction for all of its US$100 million senior term loans due in February 2022 and most of its US$300 million junior term loans. Qinghai Provincial Investment Group Co. Ltd. APC Automotive Technologies Intermediate Holdings LLC. 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. The downgrade followed BLY's conversion of the June 2020 and December 2020 interest payments due on its senior secured notes to payment-in-kind (PIK) interest from cash interest. 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. A bankruptcy filing or legal receivership by the debt issuer or obligor that will . Investment-grade defaulters. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com. This is followed by a rating withdrawal in 1990 and a default in 1993. The majority of the company's revenue comes from airports, depending on airline passenger travel, which has declined sharply because of the pandemic. Tables 30, 31, and 32 are broken out by the broadest rating classifications (all rated, investment grade, and speculative grade). Over the long term (since 1981), financial services defaulters show a median rating of 'BB+' five years prior to default. 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. Affected debt amounts also rose (see chart 15). On Oct. 15, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC', with a negative outlook, considering the company's ability to improve its liquidity. Default, Transition, and Recovery: 2020 Annual Global Corporate Default And Rating Transition Study, China's Local Governments Are Shedding Their Ties To Struggling SOEs, Instant Insights: Key Takeaways From Our Research, Research Update: Dexus Wholesale Property Fund Outlook Revised To Stable From Positive On Merger Completion; 'A' Ratings Affirmed, Scenario Analysis: Higher Rates Threaten The Credit Quality Of 13 EMEA Retail And Restaurant Companies. On Aug. 17, 2020, we withdrew the rating on the company at its request. The company entered a "stalking horse" asset purchase agreement with private equity firm KPS Capital Partners L.P. As part of the agreement, KPS will purchase a substantial part of Garrett's assets and liabilities for US$2.1 billion in cash. 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 issuer also conveyed that it entered into a lock-up agreement with its senior secured lenders and was in talks on a restructuring plan. If, however, S&P Global Ratings withdrew the rating prior to Jan. 1 of the year of default, we do not include the issuer in the default rate calculation in that year. Corporate Power; Enforceability : 35 : 3.3 : Company Board Approval; Fairness Opinion; Anti-Takeover Laws : 36 : . Average cumulative default rate calculation. As a supplement to many of the averages and time series presented in this study, standard deviations are also shown to provide a gauge of the dispersion of data behind these averages. 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. In periods of high defaults, there tends to be greater variation in the distribution of ratings prior to default, which reduces the Gini. Furthermore, weak liquidity supports our view of O1 Properties' general default. The sudden and acute recession in 2020 led to the sharpest credit deterioration ever in speculative-grade ratings. Note: Numbers in parentheses are weighted standard deviations, weighted by the issuer base. The Content shall not be used for any unlawful or unauthorized purposes. 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 transaction was viewed as distressed because the exchange was at a much discounted rate, of about 70 cents on a dollar. 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'. On April 22, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Massachusetts-based department store operator Neiman Marcus Group Ltd. LLC to 'D' from 'CCC-' after the issuer missed paying interest due on unsecured notes maturing October 2021. complementary role in model validation and as benchmarks. On April 17, 2020, S&P Global Ratings lowered the issuer credit ratings on Texas-based oil and gas exploration and production company Ultra Petroleum Corp. to 'D' from 'CCC-' after the issuer announced it would not be making interest payments of about US$13.2 million due on April 15, 2020, and entered into a 30-day grace period. As per the forbearance agreement, the term loan and ABL lenders agreed to not exercise or enforce certain remedies with respect to this nonpayment for 60 days, ending May 31, 2020. Normally, recessions include, or are followed shortly by, marked increases in corporate defaults. On Feb. 28, 2020, S&P Global Ratings raised the long-term issuer ratings on Calfrac to 'CCC-' from 'SD' after it completed a debt exchange, which reduced the debt by US$98 million. Consider the following example: An issuer is originally rated 'BB' in mid-1986 and is downgraded to 'B' in 1988. 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. Our model further indicates that the global rate will . On the same day, we withdrew the ratings at the company's request. We viewed the proposed transaction, if completed, as distressed and tantamount to a selective default because the proposed transaction involved debt exchange at a discount. Earlier, on April 20, 2020, we lowered the issuer credit rating on Equinox to 'CCC' from 'B-' following the closure of all its fitness clubs in the U.S. and freezing of all its club memberships due to the coronavirus outbreak. 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). Most were nonfinancial companies, and five were financial services issuers. Many events over the long term have contributed to the decline of global 'AAA' rated issuers. This usually leads to shorter time frames from which to calculate default statistics. 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. The negative outlook reflects the risk of a lower rating if operating performance continues to deteriorate and the company fails to meet our expectations. 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. 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. 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. The company filed for Chapter 11 bankruptcy with a prepackaged plan to equitize around US$300 million of unsecured 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. 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. As part of the exchange, current owner Bain Capital made a 40 million equity contribution. For example, 10 companies rated 'A' at any point in their lifetimes (excluding initial ratings) defaulted within one year of receiving this rating. On May 27, 2020, we lowered our ratings on the issuer to 'D' from 'SD' after it filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code, and subsequently on June 26, 2020, we withdrew our credit ratings. In nearly all instances, the financial services sector's longer-term default rates were lower in 2020 than long-term averages. The issuer used 43 million of cash proceeds to repurchase 51 million of notes. The coronavirus pandemic-related business disruption (i.e., diamond sales and marketing) affected the cash flow of the issuer. 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. The median rating for all recently defaulted entities was solidly in the speculative-grade category in the seven years preceding default, and for all of that period, it was at least one notch below that of the long-term equivalent. On May 11, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Chinese furniture maker Yihua Enterprise (Group) Co. Ltd. to 'SD' from 'CCC' after the issuer failed to make interest payment on its domestic medium-term notes due 2022. On Jan. 8, 2021, S&P Global Ratings withdrew its issuer credit rating. We treat this transaction as distressed since the investors did not receive the originally promised amount. 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. 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'. The downgrade came after the issuer failed to make the term loan principal and interest payment due March 31 and subsequently decided to enter into a forbearance agreement with lenders on April 6. On July 2, 2020, we raised our issuer credit rating on BLY to 'CCC+' from 'SD' as the company completed amending interest payments on its senior secured notes to PIK from cash for 2020. The negative outlook reflects the possibility that we could lower the rating if we believe a near-term conventional default, restructuring, or transaction that we view as tantamount to a default becomes a near certainty. Sovereign Default and Recovery Rates - Moody's Analytics 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. 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. 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. This page provides a central resource for Moody's research on default risks, impairment and loss rates, . Multiyear transitions. We considered this exchange as a distressed exchange. On Feb. 26, 2020, S&P Global Ratings withdrew its ratings on the issuer. 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 Oct. 19, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Oklahoma-based home security and monitoring company Central Security Group Inc. to 'SD' from 'CCC-' after the issuer completed a distressed debt exchange on the first-lien credit facility, in which lenders will exchange about US$396 million of their respective claims for a new US$200 million first-lien term loan due 2025 and most of the reorganized equity, and the second-lien lenders will exchange 100% of their US$50 million claim for 1% of the company's reorganized equity. On June 4, 2020, S&P Global Ratings lowered its issuer credit rating on Los Angeles-based restaurant operator California Pizza Kitchen Inc. (CPK) to 'D' from 'CCC-' because the company missed its interest payments due at the end of May 2020 and entered into a forbearance agreement with its lenders. This was especially evident during the global financial crisis, when many highly rated banks defaulted within a short amount of time after initial downgrades. On July 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based specialty apparel retailer Tailored Brands Inc. to 'D' from 'CCC+', reflecting interest payment default on its senior notes due 2022. On July 17, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Noble to 'D' from 'CCC-' as the company skipped the interest payment on its 7.75% senior notes due 2024. Over the long term, defaults in nonfinancial sectors have tended to be more cyclical than defaults in the financial sectors. 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. On May 27, 2020, Texas-based retailer Tuesday Morning Corp. defaulted as the company filed for Chapter 11. 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. Earlier, on June 10, 2020, we lowered our issuer credit rating on Serta Simmons to 'CC' from 'CCC-' following the company's announcement that it entered into a transaction support agreement with a majority of its first- and second-lien term loan lenders to recapitalize the company. On July 1, 2020, S&P Global Ratings lowered its issuer credit rating to 'D' following the company's missed interest payments on its first-lien and second-lien debt and entrance into another forbearance agreement until Sept. 30, 2020. Of these new issuers, 78% were rated speculative grade. In Europe, by contrast, the share of speculative-grade ratings remains in the minority. On Aug. 30, 2020, Ohio-based automotive components manufacturer Shiloh Industries Inc. defaulted after the issuer filed for Chapter 11 of the U.S. Bankruptcy Code.

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