On March 17, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Georgia-based data center operator Internap Corp. to 'D' from 'CCC+' after the issuer, along with its subsidiaries, filed for Chapter 11 bankruptcy with the Southern District of New York. 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). 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 appendix provides summaries of the events leading up to each default and, in some cases, events following the 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+'. 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. 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. We use the static pool methodology to avoid certain pitfalls in estimating default rates, such as by ensuring that default rates account for rating migration and allowing for default rates to be calculated across multiperiod time horizons. 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. On April 1, 2020, we raised the issuer credit rating on Yida to CCC-' from 'SD' on a reassessment of the company's credit profile. 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 Dec. 7, 2020, S&P Global Ratings raised the issuer credit rating to 'B-' from 'SD' on improved liquidity with constraints from high leverage. The exchange provides additional liquidity for at least the next 12 months, but it minimally reduces leverage, and interest costs remain high. We combined these percentages to obtain cumulative default rates for the 40 years the study covers (see tables 24-26 and 30-32). Earlier, on March 31, 2020, we lowered our issuer credit rating on Global Knowledge to 'CC' from 'CCC-' as the company's liquidity remained very weak and it faced substantial near-term debt maturities, as well as needed to address its unsustainable capital structure. On April 20, 2020, we raised the rating to 'CCC+' on account of liquidity the company maintained. On Feb. 26, 2020, S&P Global Ratings withdrew its ratings on the issuer. However, since 2008, speculative-grade ratings in Europe have surged, with the share more than doubling to 44.5% at the end of 2020. In contrast, table 21 reports transition-to-default rates using the static pool methodology, which calculates movements to default from the beginning of each static pool year. For the Gini ratios in tables 2, 27, and 28, the standard deviations are derived from the time series of Gini ratios for all of their constituent annual cohorts. Distressed exchanges (which are typically selective defaults) accounted for 37.6% of all defaults, the same as missed interest or principal payments (37.6%). 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+'. Furthermore, weak liquidity supports our view of O1 Properties' general default. The Content shall not be used for any unlawful or unauthorized purposes. Defaults arise disproportionately from low rating categories, and this holds true over longer time horizons (see table 14). Post default, the issuer has been upgraded three times, leading to a 'B' rating on Dec. 14, 2020, with a positive outlook, due to its improved financials and liquidity. On Nov. 18, 2020, S&P Global Ratings lowered the issuer credit ratings to 'D' from 'CCC-' after the issuer missed interest payments due on Oct. 15, 2020, and announced that it had entered into a restructuring support agreement, which it intended to file for bankruptcy. 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. Rating transition rates may be compared with the marginal and cumulative default rates described in the previous sections. On May 4, 2020, we raised the credit ratings to 'CCC' from 'SD' after the reduction of debt by approximately US$329 million. Speculative-grade bond spreads in the U.S. widened to 991 basis points (bps) on March 23, but finished the year at 434 bps. Prior studies have shown that fluctuations within default rates and transitions can vary greatly depending on many circumstances specific to particular time frames, industries, and geographic regions. S&P Global Ratings then withdrew its issuer credit ratings on the company at its request. The company effectively converted its existing 270 million first-lien term loans from paying cash interest to paying interest as part-cash, part-payment-in-kind over the next three years and 20 million second-lien term loans from paying cash interest to all payment-in-kind until maturity, with unanimous lender approval. On May 11, 2020, we withdrew the ratings on the issuer. On June 18, 2020, we raised the issuer credit rating on Forum to 'CCC-' from 'SD', reflecting our forward-looking opinion on its creditworthiness. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. On June 4, 2020, we raised the issuer credit rating to 'CCC-' from 'SD', reflecting our view of the company's still unsustainable capital structure, very high debt service burden, and weak liquidity. Acharya: Credit Risk - Introduction 7 Moody's Definition Of Default: "Credit Events" 1. On Jan. 30, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Pinnacle Operating Corp. to 'SD' from 'CCC'. Affected debt amounts also rose (see chart 15). On Oct. 19, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based health care provider Alliance HealthCare Services to 'SD' from 'B-' after the issuer completed a distressed exchange of its second-lien debt. 2 Annualized volatility and return based on the period between 2005 and 2022. The fixed rate loan and the floating rates loans were repurchased at 85% and 84.875% of the original price, respectively. 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. 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). Export PDF Export CSV Email . The proportion of defaulters with confidential ratings in 2020 (11.5%) held steady relative to 11% in 2019. Recovery rate is essential to the estimation of the portfolio's loss and economic capital. 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. 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. The company faced intense earnings pressure due to years of market-share declines, further exacerbated by the stay-at-home orders and economic recession stemming from COVID-19. Measured on a dollar volume basis, Moody's global speculative-grade bond default rate ended 2009 at 15.6%, up from 5.9% at the end of 2008. However, the speculative-grade share of both the financial and nonfinancial sectors has been growing in recent years. 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. 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. We calculated standard deviations for Gini ratios in this study as the standard deviations of a sample, and not those of a population. We used the same method to form static pools for 1983-2020. 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. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. On June 1, 2020, we lowered the credit ratings to 'D' after the issuer commenced Chapter 11 bankruptcy restructuring, and subsequently on June 25, 2020, the ratings were withdrawn at the issuer's request. On Nov. 17, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' on lower refinancing risk. On June 5, 2020, we withdrew our ratings on the issuer. The 2021 corporate default tally of 72 is the lowest since 2014--down nearly 70% from the previous year's total . At the end of 2020, speculative-grade issuers once again became the global majority, accounting for 50.3% of rated issuers, from 49.9% at the beginning of the year. This study limits the reporting of default rates to the 15-year time horizon. Investment-grade-rated issuers seldom default, so the number of defaults among these rating categories is particularly low. The rating action followed the issuer's exchange of its senior secured notes due 2027 for the new notes, including the PIK of the four quarterly principal and interest payments in the next 12 months, which are repaid pro rata during the remaining term of the notes. Transition studies have repeatedly confirmed that higher ratings tend to be more stable and that speculative-grade ratings ('BB+' or lower) generally experience more volatility over a given time frame. One-year Gini coefficients appear to be broadly cyclical and negatively correlated with default rates (see chart 30). If the rating on an entity is withdrawn after the start date of a particular static pool and the entity subsequently defaults, we will include the entity in that static pool as a defaulter and categorize it in the rating category of which it was a member at that time. Later, on Sept. 16, 2020, we withdrew the issuer credit ratings on the company at its request. Finally, PD estimates should also be compared across banks (EBA 2020). There were no downgrades among the eight 'AAA' rated companies in 2020. In cases where an issuer emerges from a prior default (including distressed exchanges), we consider it a separate entity, and the original rating is the first after the default event. Of the 226 defaults in 2020, 198 were from companies rated as of the beginning of the year. On Sept. 16, 2020, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. As . On June 18, SMLP announced it repurchased approximately $90 million of its 2022 senior unsecured notes and 2025 senior unsecured notes for approximately $50 million in cash. 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 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. Defaulted issuers initially rated 'BB' show a similar pattern but peak a little later, in the fourth year. 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. Even with a 60-day grace period, we did not expect payments. S&P Global Ratings viewed the repurchases as a distressed debt restructuring given the significant discount to par, cumulative size of the transactions, and W&T's weakened credit profile brought on by the weak and erratic pricing for crude oil and natural gas in 2020. complementary role in model validation and as benchmarks. 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. However, despite posting the 10th-highest annual default rate in 2020, the global Gini ratio finished closer to the middle of the annual distribution (18th), based on 40 years of observations. A 'D' rating is assigned when S&P Global Ratings believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. But in a report issued today, the credit ratings. Neglecting the randomness of the distribution of recovery rate may underestimate the risk. Defaults are much less frequent for financial services companies than for nonfinancials, which can allow outliers to bias the averages. 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. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. The issuer submitted a prepackaged plan. 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. 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. On April 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based hamburger restaurant chain Steak n Shake Inc. to SD from 'CCC-' after the issuer completed a distressed exchange by retiring a portion of its term loan. Project Finance Bank Loans: Default and Recovery Rates for 1983-2020 (APAC) APAC Edition. On July 2, 2020, we withdrew our ratings on the issuer after it filed for reorganization under Chapter 11. On Jan. 8, 2021, S&P Global Ratings withdrew its issuer credit rating at the company's request. On July 13, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based frac-sand and logistics company Hi-Crush Inc. to 'D' from 'CC' after the issuer filed for bankruptcy under Chapter 11 and entered into a restructuring support agreement with noteholders who control 94% of the company's senior unsecured notes due in 2026. Investment-grade defaulters. On Aug. 28, 2020, we withdrew our ratings on the company. The issuer was engaged in discussions with creditors for a debt restructuring. On July 31, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' on the basis of increased liquidity. 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+'. ACLI C-1 Bond Factor WG - 03-26-2021 3 Scope: Moody's Analytics to provide default probability term structures for each Moody's corporate rating and resulting C1 Bond Factors, with articulated limitations providing transparency using data and methodologies accessible and repeatable to the NAIC and industry on an ongoing basis. 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. Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. Moody's | Better decisions 3Q 2021 Investor Presentation 2 . S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. A ratio of 1 would indicate that the percentages of upgrades and downgrades were equal. The gap becomes even wider over longer time horizons, such as three years and 10 years (see chart 19). We consider companies reemerging from prior defaults to be separate entities, and their rating histories begin with the post-default rating. Although defaulters that are not rated (NR) are not always captured in the default rate calculations for the year of default, we do capture them in the longer-term cumulative default rate statistics, which are tied back to the year in which defaulters were last rated. The eligible holders of second-lien notes received 97.5 cents on the dollar of the principal amount, whereas first-lien notes holders received 90 cents on the dollar of the principal amount. Since 1981, the 'B' rating category has accounted for 1,735 defaults (56% of the total from initial rating), well more than double the number of defaulters from the 'BB' category (see tables 10 and 12). On Feb. 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Kansas-based Pizza Hut restaurants franchise operator NPC International Inc. to 'SD' from 'CCC-' after the company decided not to make interest payments due Jan. 31, 2020. The performance of Moody's corporate debt ratings - Q4 2022 - Excel supplement MOODY'S . 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'. On April 29, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. Initial ratings for these companies are those immediately following a prior default in 2020. 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. Similarly, if it defaulted in the middle of 1991, it would be included in the column representing transitions to 'D' in the 1991 one-year transition matrix. . prior to May 2014, Kathrin was a lead analyst in Moody's EMEA Corporate Finance Group in Frankfurt, Germany, covering a diverse set of heavy industrial corporations across . The outlook is negative, reflecting the company's unsustainable leverage and the risk that liquidity could deteriorate without an improvement in sector conditions.