moody's corporate default and recovery rates 2020 pdf

This page provides a central resource for Moody's research on default risks, impairment and loss rates, . In this case, we compared the rating at the beginning of the multiyear period with the rating at the end. For example, at the end of 2020, the one-year default rate among all financial entities was 0.23%, compared with 3.8% for all nonfinancial entities. The pools are static in the sense that their membership remains constant over time. On Aug. 17, 2020, S&P Global Ratings withdrew its ratings on the issuer. 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. 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. to 'SD' from 'B-' after the issuer missed the Oct. 31 coupon payment on its senior secured notes due 2023. 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. All of S&P Global Ratings Research's default studies have found a clear correlation between ratings and defaults: The higher the rating, the lower the observed frequency of default, and vice versa. On July 2, 2020, we withdrew the ratings on the issuer. Infrastructure debt remained resilient during the pandemic - GI Hub Reduced EBITDA amid the pandemic and oil price crisis in early 2020 stressed the operating performance of the issuer. 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. As the Gini ratios show, corporate ratings also serve as effective measures of relative risk over time, particularly in low-default years. Over the long term, the global weighted average Gini coefficient was 82.8% over the one-year horizon, 75.3% over three years, 71.5% over five years, and 69.2% over seven years (see table 27). On Aug. 10, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based oil field service and drilling service provider UTEX Industries Inc. to 'D' from 'CCC' after the issuer opted for missing interest payments on its first-lien and second-lien notes. Of the 28 defaults from companies that were not rated at the beginning of 2020, 11 were companies that had ratings withdrawn before the beginning of 2020 and 17 were companies that were first rated by S&P Global Ratings after Jan. 1, 2020. Default, Transition, and Recovery: 2021 Annual Global Sovereign Default Most were nonfinancial companies, and five were financial services issuers. 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. We would include this hypothetical company in the 1987 and 1988 pools with the 'BB' rating, which was the rating on the issuer at the beginning of those years. That is, when default pressure is high, economic conditions are such that the likelihood of companies from across the rating spectrum suffering a more rapid deterioration of credit quality is higher. to 'SD' from 'CCC+' after the company missed interest payment on its 510 million senior secured notes due November 2023. 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. Others are withdrawn because of a lack of cooperation, particularly when a company is experiencing financial difficulties and refuses to provide all the information needed to continue surveillance on the ratings, or at the entity's request. In 2020, the share of new speculative-grade issuers rated 'B-' and lower reached 56.8%. On July 20, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. The procedure for calculating the Gini coefficients is illustrated in chart 31: Area B is bounded by the random curve and the Lorenz curve, while area A is bounded by the Lorenz curve and the ideal curve. Multiyear transitions were also calculated for periods of two up to 20 years. For example, leisure and media has a much higher proportion of speculative-grade ratings than financial institutions or insurance (see chart 20). On March 27, 2020, S&P Global Ratings lowered its long-term issuer credit rating on China-based business parks developer and operator Yida China Holdings Ltd. to 'SD' from 'CC' after the issuer completed a distressed exchange. Transition matrices that present averages over multiple time horizons are also calculated as issuer-weighted averages. But over the past three years--now that more than a decade has passed since the financial crisis of 2008-2009--financial services defaulters show a median rating in the 'B' category five years prior to default. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. We calculated standard deviations for Gini ratios in this study as the standard deviations of a sample, and not those of a population. The transaction, which was settled on Oct. 14, was considered distressed, as opposed to opportunistic. esgSubNav, Discover more about S&P Globals offerings. moody's probability of default table 2021 The company received commitments for US$256 million in debtor-in-possession financing from various lenders. In connection with the filing, the company entered into a restructuring support agreement with the holders of approximately 92% of the principal amount of its tranche B-2 term loan and approximately 87% of the principal amount of its asset-based lending FILO term loan. On April 8, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based exploration and production company SPR Holdings LLC to 'D' from 'CCC+' after the issuer missed an interest payment due April 1, 2020. Even with a 60-day grace period, we did not expect payments. On Jan. 7, 2021, S&P Global Ratings raised the rating on the issuer to 'CCC+' from 'SD' based on its response to a decline in revenue by significantly reducing costs and capital investments. 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 April 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Wisconsin-based industrial products manufacturer Jason Inc. to 'SD' from 'CCC'. The Content is provided on an as is basis. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. The company filed for Chapter 11 bankruptcy with a prepackaged plan to equitize around US$300 million of unsecured notes. We viewed the repurchases as distressed and tantamount to a default given lenders participating in the repurchase received substantially less than the original promise of the term loan. 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 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'. This helps explain the resemblance between the annual default rates of nonfinancial entities and those of the speculative-grade segment as a whole, which certainly contributes to the vast differences between cumulative default rates across financial and nonfinancial sectors (see table 16). The company's credit quality deteriorated with the pressure on airlines' cash flows and liquidity due to the coronavirus pandemic. The cumulative value of the repurchase represents nearly 9% of the term loan debt outstanding compared with the value in fiscal 2019. On May 22, 2020, S&P Global Ratings lowered its issuer credit rating on Illinois-based generic pharmaceutical manufacturer company Akorn Inc. to 'D' from 'CC' after the issuer petitioned for reorganization under Chapter 11 of the U.S. Bankruptcy Code. On April 20, 2020, we raised the rating to 'CCC+' on account of liquidity the company maintained. On June 24, 2020, S&P Global Ratings withdrew its issuer credit rating at the company's request. The sovereign downgrades of China in 2017, the U.K. in 2016, France in 2012, and the U.S. in 2011 have factored into the downgrades of many higher-rated financial services companies. The issuer reached an agreement with 78% of its intellectual property notes lender and 71% of its term loan lenders to exchange around US$1.65 billion of debt for equity. The largest gap between the two was in financial institutions, which had a five-notch difference: The 233 financial institutions that defaulted had a median original rating of 'B+', compared with a sector median of 'BBB'. Recovery rate is essential to the estimation of the portfolio's loss and economic capital. Some issuers default after S&P Global Ratings no longer rates them. The issuer aims to eliminate US$840 million of debt by using restructuring and a US$230 million debtor-in-possession facility. 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. The fixed rate loan and the floating rates loans were repurchased at 85% and 84.875% of the original price, respectively. 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 June 20, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Cary, N.C.-based information technology and business skills learning solutions provider GK Holdings Inc. to 'D' from 'CC' as the company did not make the interest payments due March 31, 2020, on its revolver and first- and second-lien term loans. Later, on Sept. 16, 2020, we withdrew the issuer credit ratings on the company at its request. Data Report. 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. The issuer with the longest time to default in 2020 was U.S.-based Revlon Inc., with an initial issuer credit rating of 'AA' as of Dec. 31, 1980, 39.4 years before the rating was lowered to 'SD' (selective default) in May 2020. On June 19, 2020, S&P Global Ratings lowered its issuer credit rating on Oklahoma City-based oil and gas exploration and production company Chesapeake Energy Corp. to 'D' from 'CC' as the company skipped the interest payments on its 5.375% senior notes due 2021 and 8.0% senior notes due 2027. On June 18, 2020, we raised the issuer credit rating on Forum to 'CCC-' from 'SD', reflecting our forward-looking opinion on its creditworthiness. CEC expects to achieve a balance sheet restructuring that supports its reopenings and long-term strategic plans. During 2020, the company increased its stake in V.E from 69.2% to 99.8%. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. Dive Brief: T he default rate for speculative-grade corporate debt will gradually rise to 2.4% by the end of 2022 from 1.7% at the end of last year, remaining well below the 4.1% long-term average as companies navigate monetary policy tightening in many countries, according to Moody's Investors Service. For additional details on the 2020 defaulters, see Appendix III. On Nov. 3, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' after the company completed the distressed exchange. 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. Back in December, Moody's Investors Servicepegged the 2017 default rate for speculative-grade debt in the U.S. at 4% by year-end, down from 5.6%. The issuer was also in talks with its lenders and noteholders for a comprehensive financial restructuring. The cumulative default rates in this study average the experience of all static pools by first calculating marginal default rates for each possible time horizon and for each static pool, weight-averaging the marginal default rates conditional on survival (survivors being nondefaulters), and accumulating the average conditional marginal default rates (see tables 24-26 and 30-32). The issuer entered into a forbearance agreement for deferring the interest payments on its second lien-term loan until June 30, 2020. The high default rate for commodity sector in 2016 was caused by low oil prices, among other factors, and more than half of last year's 144 defaults documented by Moody's occurred in commodity . 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). Table 11 presents the average and median times to default from each rating category for all subsequent ratings. On Aug. 26, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Virginia-based travel assistance provider KCIBT Holdings L.P. to 'SD' from 'CCC+' after the issuer deferred a cash interest payment on its second lien-term loan. On July 20, 2020, S&P Global Ratings lowered its long-term issuer credit rating on North Carolina-based sock manufacturer Renfro Corp. to 'SD' from 'CCC-' after the issuer completed a distressed exchange. On Sept. 25, 2020, Neiman Marcus Holding Company Inc. (formerly the Neiman Marcus Group Ltd. LLC) announced that it emerged from voluntary Chapter 11. On Oct. 15, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Spain-based private gaming service provider Codere S.A. to 'SD' from 'CCC' after the scheme of arrangement was approved by the courts, after 99.6% of creditors participating in the scheme voted in favor. We treated this as distressed because the issuer did not meet its contractual obligation to pay principal and interest in a timely manner, and did not adequately compensate lenders for agreeing to temporarily waive their rights. PGS was also in talks with lenders to secure a new capital structure. This nonpayment was considered a general default, and the company was not expected to be able to pay most of its obligations. S&P Global Ratings does not require all issuers with rated debt to have an issuer credit rating. On June 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based natural gas compression services and equipment provider CSI Compressco L.P. to 'SD' from 'CC'.