Earlier, on Feb. 27, 2020, we revised our outlook on the issuer to negative from stable because of high refinancing risks given the high leverage and significant portion of debt maturing in 2022. Moody's Investors Service analysts use this . The coronavirus pandemic-related business disruption (i.e., diamond sales and marketing) affected the cash flow of the issuer. 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. On May 4, 2020, we raised the credit ratings to 'CCC' from 'SD' after the reduction of debt by approximately US$329 million. On Feb. 18, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based home dcor and furniture retailer Pier 1 Imports Inc. to 'D' from 'CCC-' after the issuer filed for Chapter 11 bankruptcy. (See table 15 for the 13 publicly rated investment-grade defaults during this period.) On Oct. 13, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' following the completion of the exchange. A missed or delayed disbursement of a contractually-obligated interest or principal payment (excluding missed payments cured within a contractually allowed grace period), as defined in credit agreements and indentures; 2. The two upgrades are U.S.-based Noble Energy Inc. and Infor Inc. Companies that experience large downgrades are often outliers, especially in years of high credit stability. Some methods for calculating default and rating transition rates might charge defaults against only the initial rating on the issuer, ignoring more recent rating changes that supply more current information. COMMENTS; 4 May, 2022 | 17:17; . Many practitioners use statistics from this default study to estimate the "probability of default" and "probability of rating transition." Annual speculative-grade default rates increased in all major regions in 2020, relative to 2019. Note: Numbers in parentheses are standard deviations. As a result, certain business units of S&P may have information that is not available to other S&P business units. Its Gini coefficient--which is a summary statistic of the Lorenz curve--would thus be zero. 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. Cumulative default rates are one minus the product of the proportion of survivors (nondefaulters). PGS was also in talks with lenders to secure a new capital structure. Combined global bond issuance for nonfinancial corporates and financial services companies hit $5.7 trillion--a 27% increase from the high in 2019. 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. While the one-year default rate for nonfinancial companies has climbed above 3.5% in four cyclical peaks (1991, 2001-2002, 2009, and 2020), the annual default rate for financial services has remained below 2% since 1990 and below 1% for the past 11 years (see chart 18). The company received commitments for US$256 million in debtor-in-possession financing from various lenders. On Feb. 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Commercial Barge Line Co. to 'D' from 'CC' after its subsidiary, American Commercial Lines Inc., filed for Chapter 11 bankruptcy with the Southern District of Texas. We study the effect of industry distress on recovery rates by using 5334 debt and loan instruments from Moody's Default and Recovery Database for the period from 1990 to 2017. Expansive Dataset: Includes more than 800,000 individual debt securities, both corporate and sovereign entities, and default history starting from 1920. . Each one-year transition matrix displays all rating movements between letter categories from the beginning of the year through year-end. Performance of project finance bank loans during the pandemic-fueled default cycle in 2020; Key findings for the power, infrastructure, and oil and gas industry sectors . The differences between each rating category's minimum and maximum times to default are in the last column, under "range." Earlier, on June 14, 2016, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. On July 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Mexican commercial aviation services provider Grupo Aeromexico S.A.B. But despite the noticeable increase in defaults in 2020, peak default rates were much lower than during the financial crisis. The lenders could accelerate the payment of the outstanding term loan balance, which as of December 2019 was about US$178 million. The issuer entered into an agreement with the majority of its lenders for recapitalization of its funded debt. 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). 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. The Credit Transition Model and Credit Risk Calculator give users access to easy to use, web-based tools to quickly calculate customized rating transition matrices and default rates based on the DRD data. The proposed reorganization involves the company eliminating more than half of its debt and transferring up to 97% of its equity to lenders. Note: Descriptive statistics for regions other than U.S. calculated from 1996 to 2020 due to sample size considerations. The leisure and entertainment default rate finished at 9.9% in 2020 and could approach 30% in 2021. We considered the transaction to be a distressed exchange and tantamount to a default on the notes because the noteholders were not adequately compensated and received less than they were originally promised under the securities. S&P Forecast. For example, 10 companies rated 'A' at any point in their lifetimes (excluding initial ratings) defaulted within one year of receiving this rating. On April 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Chicago-based printing and digital media company LSC Communications Inc. to 'D' from 'CC' after the issuer filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. On Nov. 19, 2020, we lowered our issuer credit rating to 'SD' from 'CC 'as the company completed its previously announced 5.75% senior notes exchange. The outlook is negative, reflecting the company's unsustainable leverage and the risk that liquidity could deteriorate without an improvement in sector conditions. On May 11, 2020, S&P Global Ratings lowered its issuer credit rating on Colombia-based air transportation company Avianca Holdings S.A. to 'D' from 'CCC-' after the issuer and its subsidiaries and affiliates voluntarily filed for bankruptcy under Chapter 11 in New York to preserve its business structure amid the severe impact of COVID-19 on the global air transportation industry. On April 24, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. On Sept. 25, 2020, we withdrew our 'D' long-term issuer and issue credit ratings at the issuer's request. On Sept. 17, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. We believe the company is unlikely to make this interest payment within the 30-day grace period as it has pursued a comprehensive capital restructuring or bankruptcy filing. During 2020, the company increased its stake in V.E from 69.2% to 99.8%. The share of management teams citing labor shortages, now at less than a third of the peak in 3Q 2021, indicates loosening in the jobs market. Reduced EBITDA amid the pandemic and oil price crisis in early 2020 stressed the operating performance of the issuer. On March 26, 2020, we withdrew our issuer ratings at the company's request. *U.S., Bermuda, and Cayman Islands. On Aug. 6, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Switzerland-based offshore drilling contractor Transocean Ltd. to 'SD' from 'CCC' after the issuer opted for an exchange of US$356 million due in 2023 for US$ 213 million new debt at a higher interest rate. 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. In 2005, the speculative-grade share of European corporate ratings peaked near 21%, and once the cycle turned, the European speculative-grade default rate peaked at 9.9% in November 2009. This transaction was aimed at preserving liquidity as sales volume and operating income had been adversely affected by the pandemic. PDF | On Jan 1, 2001, Edward I. Altman and others published Analyzing and Explaining Default Recovery Rates | Find, read and cite all the research you need on ResearchGate Earlier, on April 10, 2020, we lowered the rating on the issuer to 'CC' from 'CCC-' after it was unable to obtain mezzanine debt lenders' consent to extend the loan and had insufficient liquidity. Neglecting the randomness of the distribution of recovery rate may underestimate the risk. For the transition matrices in tables 21-23 and 33-44, the standard deviation for each cell in a given matrix is a weighted standard deviation, calculated using the data from each of the underlying cohort years that contribute to the averages, weighted by that cohort year's issuer base for each rating level. On Dec. 8, 2020, S&P Global Ratings assigned a 'CCC+' issuer credit rating to CPK after the issuer emerged from bankruptcy, where it was able to restructure US$200 million of reported prepetition debt. 1Great Financial Crisis 2008/2009. An analysis of transition rates for 2020 suggests that ratings behavior continues to exhibit consistency with long-term trends. In 2020, speculative-grade rating categories had higher default rates than in 2019, with an increase in the 'BB' category to 0.93% from 0.00%, 'B' category to 3.5% from 1.5%, and 'CCC'/'C' category to 47.5% from 29.8% (see table 3). One-year Gini coefficients appear to be broadly cyclical and negatively correlated with default rates (see chart 30). A bankruptcy filing or legal receivership by the debt issuer or obligor that will . 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 June 18, 2020, we raised the issuer credit rating to 'CCC+' from 'SD' after the debt exchange was completed. The rating action followed the company's distressed exchange after repaying only a portion of amount outstanding on its 1.5-lien notes. S&P Global Ratings had previously withdrawn its ratings on Techniplas. On May 21, 2020, S&P Global Ratings lowered the issuer credit rating on Colorado-based oil and gas exploration and production company Centennial Resource Development Inc. to 'SD' from 'CC' after the issuer announced the exchange of a portion of its 2026 and 2027 senior secured notes for new second-lien secured notes due 2025 at 50% of par value. 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. On Dec. 22, 2020, S&P Global Ratings lowered the rating to 'D' following the debt restructuring. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. Broadly speaking, the average and median times to default for each rating category are longer when based on the initial rating than when based on subsequent ratings, particularly for speculative-grade ratings. 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. In a theoretical exploration of recovery rates in a structural In return, the issuer agreed to a small increase in overall interest (cash interest plus PIK) for the first quarter. Earlier, on March 20, 2020, we lowered the issuer credit rating to 'CCC' from 'B' because the gaming operator and gaming equipment sectors were facing an unprecedented decline in revenue resulting from the temporary closures of casinos across the U.S. On May 20, 2020, S&P Global Ratings lowered its issuer credit rating on New York-based fitness club operator Equinox Holdings Inc. to 'SD' from 'CCC' after the issuer completed an amendment to its partial guarantee on affiliate company SoulCycle Inc.'s credit facility that will allow it to delay a mandatory payment, which we view as tantamount to a default. 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. On Jan. 13, 2021, we raised the issuer credit rating to 'CCC+' form 'SD' after the issuer retired a huge sum of principal in second half of 2020, approximately US$550 million by early December 2020. If any defaulting entity reemerges from bankruptcy--or otherwise restructures its defaulted debt instruments, thereby reestablishing regular, timely payment of all its debts--we reenter this issuer into the database as a new entity. Earlier in the month, on Feb. 5, 2020, American Commercial Lines Inc. announced it would execute a restructuring, after which S&P Global Ratings lowered the long-term issuer credit rating to 'CC' from 'CCC'. Global: Default and recovery rates for sustainable project finance bank loans, 1983-2020 MOODY'S INVESTORS SERVICE. On the same day, we withdrew the ratings at the company's request. Export PDF Export CSV Email . Strains between the U.S. and China in their ongoing trade dispute eased at the end of the year with the signing of the "Phase 1" trade deal, which helped markets close the . Entities that have had ratings withdrawn--that is, revised to not rated (NR)--are surveilled with the aim of capturing a potential default. On May 13, 2020, S&P Global Ratings lowered the issuer credit rating on New York-based youth licensed sports apparel maker Outerstuff LLC to 'SD' from 'CCC'. 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. The average number of notches for an upgrade moved to 1.19 in 2020, while downgrades remained at an average of 1.46 notches--the highest rate since 2010 (when the average was 1.52 notches) (see chart 8). Defaulters initially rated 'CCC' show the reverse pattern, with the highest default rate observed in the first year, which is not surprising given the low rating and S&P Global Ratings' associated criteria (see "Criteria For Assigning CCC+, CCC, CCC-, And CC Ratings," Oct. 1, 2012). On Aug. 19, 2020, we raised the issuer credit rating to 'CCC-' from 'SD' after the issuer resumed interest payments on senior secured notes issued by its subsidiary. Default activity in 2020 did increase, but to a lesser extent than recent recessions (see chart 1 and table 1). The company extended the maturity on its revolving credit facility of US$135 million by one week. Rising stars. This opinion focuses on the obligor's capacity and willingness to meet its financial commitments as they come due. Following Acharya et al. 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. 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. This brought the ratio of downgrades to upgrades to a historical high of 6.6 (see table 6). For instance, 92.9% of issuers rated 'A' at the beginning of 2020 were still rated 'A' by Dec. 31, 2020, whereas the comparable share for issuers rated 'B' was only 72%. 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. Earlier, on May 1, 2020, we lowered our issuer credit rating on Chesapeake Energy to 'CC' from 'CCC'. 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. Defaults increased in many sectors in 2020, though the consumer services and energy and natural resources sectors once again led the global default tally, together accounting for almost 54% of the total. 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. This also applies to transition matrices that span longer time horizons. 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. This restructuring was viewed as a distressed exchange because it would delay the interest payments. S&P Global Ratings subsequently withdrew the ratings at the issuer's request. On Oct. 20, 2020, S&P Global Ratings assigned its 'B-' issuer credit rating on the company, with a negative outlook. The filing preceded Covia's entry into a restructuring support agreement with its lenders, which was to involve a comprehensive restructuring of the company's debt against the backdrop of energy price shocks and the recession caused by the global pandemic. On Nov. 11, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Spain-based transportation company Bahia de las Isletas S.L. 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'. This act was classified as a general default because the issuer had not paid a substantial amount of its obligations. Foreign currency translation unfavorably impacted Moody's revenue by 2%. bp by year-end 2020. On Jan. 8, 2021, S&P Global Ratings withdrew its issuer credit rating. On Sept. 9, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Luxembourg-based global airport ground handler Swissport Group S.a.r.l to 'SD' from 'CCC' after the issuer completed issuing 230 million super senior secured debt for liquidity purposes and was planning to issue another 70 million. S&P does not act as a fiduciary or an investment advisor except where registered as such. On Sept. 22, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based hydraulic fracturing services provider FTS International Inc. to 'D' from 'CC' after the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. The negative outlook reflects the potential for a lower rating if continued weak operating performance meaningfully pressures the company's liquidity. This transactions increased available liquidity and reduced cash interest for the short term. Earlier, on May 15, 2020, S&P Global Ratings withdrew the issuer credit ratings at the issuer's request. However, given that machine learning currently receives a lot of attention in the credit risk community, further reviews and benchmark studies would certainly be welcome. *Fallen angels that survived to Jan. 1 of the year after they were downgraded. 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. In the transaction, the issuer raised another US$200 million notes due in 2026. As the default rate rose globally, credit quality also showed a net decline in 2020, with many more companies downgraded than upgraded. 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 . If the rank ordering of ratings had little predictive value, the cumulative share of defaulting corporate entities and the cumulative share of all entities at each rating would be nearly the same, producing a Gini ratio of zero. 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.