Default activity in 2020 did increase, but to a lesser extent than recent recessions (see chart 1 and table 1). Static pool methodology. On Dec. 9, 2020, we raised the issuer credit rating to 'CCC+' from 'SD' following the distressed conversion of term loans to PIK toggle. 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. She joined Moody's in 2007. Recovery rate is essential to the estimation of the portfolio's loss and economic capital. 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 Aug. 17, 2020, we withdrew the rating on the company at its request. Higher ratings show a negative correspondence with the observed frequency of default. Later, the issuer commenced a Chapter 11 bankruptcy and was looking to restructure its capital structure. Earlier, on April 16, 2020, we lowered our long-term issuer credit rating on Diamond Offshore Drilling to 'CC' from 'CCC+' after the issuer missed an interest payment due on April 15 on the senior notes due 2039, and hired advisers to evaluate alternatives for its capital restructuring. Global: Default and recovery rates for sustainable project finance bank loans, 1983-2020 MOODY'S INVESTORS SERVICE. On Dec. 8, 2020, we raised the rating on the issuer to 'CCC' from 'SD', reflecting our view of reduced refinancing risk. On Nov. 6, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Florida-based health care service provider CDRH Parent Inc. to 'SD' from 'CCC+' because of the distressed nature of its credit agreement amendment, where the issuer amended its credit agreement to provide covenant relief and improve liquidity. Australia, Canada, Japan, and New Zealand. Many practitioners use statistics from this default study to estimate the "probability of default" and "probability of rating transition." The issuer expects to exchange US$447 million for US$612 million of its senior notes and US$107 million of its old convertible notes. This study--in line with previous default studies--confirms that over the long term (1981-2020), higher ratings are more stable than lower ratings. 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. On July 10, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Florida-based consumer products manufacturer and seller Tupperware Brands Corp. to 'SD' from 'CC' after the issuer completed a distressed exchange, for about US$97.6 million of its US$ 600 million, where noteholders received less than par value. On Oct. 13, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' following the completion of the exchange. 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. And as a general rule, the highest proportions of rating changes for any given rating or rating modifier occur at adjacent ratings and rating modifiers. We consider the exchange distressed and tantamount to default because, in our view, the transaction offers less than the original promise for the security. In contrast, the issuer with the shortest time to default (36 days) was a confidentially rated U.S.-based leisure/media company. 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. Excludes downgrades to 'D', shown separately in the default column. 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. 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. This was the second-largest default since 2014, when Texas Competitive Electric Holdings Co. LLC defaulted with $28.7 billion in associated debt (see table 5). *This table compares the net change in ratings from the first to the last day of each year. The higher default rates for nonfinancial sectors are not surprising, given their higher concentration of speculative-grade issuers. On Aug. 10, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based oil field service and drilling service provider UTEX Industries Inc. to 'D' from 'CCC' after the issuer opted for missing interest payments on its first-lien and second-lien notes. Default, Transition, and Recovery: Growing Strains Could Push The U.S. Speculative-Grade Corporate Default Rate To 4% By December 2023. On April 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based exploration and production (E&P) company Gavilan Resources LLC to 'D' from 'CCC-'. On July 17, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Marshall Islands-based offshore driller Seadrill Partners LLC, a subsidiary of Seadrill Ltd., to 'SD' from 'CCC' after the issuer announced that it would use the 30-day grace period for interest payment. The global speculative-grade corporate default rate edged up to 2.8% for the 12 months ended in December from 2.6% in November, and will rise to 5.1% by the end of 2023 under our baseline forecasts. We calculated all default rates on an issuer-weighted basis. On July 30, 2020, Delaware-based media solutions provider Mood Media Corp. defaulted, as the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. For each rating listed in the matrix's leftmost column, there are nine ratios listed in the rows, corresponding to the ratings from 'AAA' to 'D', plus an entry for NR (see table 22). On July 2, 2020, we raised the issuer credit rating to 'B-' from 'D' after RGIS completed its debt restructuring and eliminated over US$ 230 million of debt, which, in turn, improved leverage. . The issuer missed the aggregate interest payments on first-, second-, and 1.5-lien term loans due in 2021 and 2022, which was unlikely to be paid in the 30-day grace period. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated. When an issuer defaults, we assign that default to all of the static pools to which the issuer belonged. On Nov. 4, 2020, S&P Global Ratings withdrew its ratings on the issuer. 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. On Oct. 8, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Oklahoma-based oil and gas exploration and production company Ascent Resources Utica Holdings LLC to 'SD' from 'CC' after the issuer announced the expiration of its offer to exchange its 2022 senior notes for a combination of a new second-lien term loan due 2025 and new senior notes due 2027. We also do not include short-term issuer credit ratings. All of the defaulters in 2020 with active ratings immediately prior to default were rated in the lowest rating categories. On Nov. 17, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD', reflecting our assessment of the company's credit risk following the debt repurchases. We utilize the Lorenz curve, a graphical representation of the proportionality of a distribution, as one measure of ratings performance, and we summarize this via the Gini coefficient. 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. CEC expects to achieve a balance sheet restructuring that supports its reopenings and long-term strategic plans. An analysis of transition rates for 2020 suggests that ratings behavior continues to exhibit consistency with long-term trends. Liquidity also weakened as cash flows for debt repayment diminished. On May 21, 2020, after the settlement of the exchange, we raised the issuer credit rating to 'CCC+' from 'SD'. 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. Therefore, each annual default study is self-contained and effectively supersedes all previous versions. Once again, the default rate in the 'AAA' rating category was zero, consistent with historical trends. 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. 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'. 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. That was below the . This also applies to transition matrices that span longer time horizons. The Content shall not be used for any unlawful or unauthorized purposes. The default rates in table 34 are calculated as not conditional on survival, while those in table 24 are average default rates conditional on survival. 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. On April 9, 2020, we raised the ratings on the issuer to 'CCC' from 'D' on the expectation of average leverage above 15x. All four major regions also saw their 2020 speculative-grade default rates rise above their long-term annual averages (see table 7 and chart 21). But in a report issued today, the credit ratings. Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. 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. The share of newly assigned issuer credit ratings that are speculative grade has remained elevated in 2020: 78% of newly assigned issuer credit ratings globally were speculative grade. On May 11, 2020, we withdrew the ratings at the issuer's request. On July 22, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based media and satellite-based connectivity provider Global Eagle Entertainment Inc. to 'D' from 'CCC-' after the issuer filed for petitions under Chapter 11 of U.S. Bankruptcy Code. On Nov. 23, 2020, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. Table 10 displays the median, average, and standard deviations for the time to default from the original rating. Estimated 5-year default probabilities are on average 67% higher than default probabilities obtained using the standard 40% recovery assumption. On Dec. 28, 2020, S&P Global Ratings withdrew its rating at the issuer's request. As laid out in the American Recovery and Reinvestment Act, the plan would cost $825 billion What is in the DRD? Of the 226 corporate defaults in 2020, the majority (146) were from companies in the U.S. and associated tax havens (Bermuda and the Cayman Islands). 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. On July 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Ohio-based oil and gas exploration and production company Chaparral Energy Inc. to 'D' from 'CCC-' after the issuer elected not to make interest payments of US$13.1 million due on its unsecured notes due 2023. 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. Sources: StepStone Group, CS HY Index, Barclays US IG, Moody's, Cliffwater, Refinitiv LPC as of December 2022. 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, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and U.K. Australia, Canada, Japan, and New Zealand. We viewed this transaction as tantamount to a default on the term loan because the company's operations were distressed, making it difficult for it to meet its obligations. 3Q 2021 . 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 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Wisconsin-based small-engine manufacturer Briggs & Stratton Corp. to 'SD' from 'CCC-' after the issuer didn't make semiannual interest payments and used the grace period. This study analyzes the rating histories of 21,693 companies that S&P Global Ratings rated as of Dec. 31, 1980, or that were first rated between that date and Dec. 31, 2020. On Sept, 24, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Switzerland-based automobiles and components manufacturing company Garrett Motion Inc. to 'D' from 'B' after the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. The company was continuing discussions with its debtholders, and we believed these would result in a comprehensive debt restructuring or a bankruptcy filing. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. 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. On June 11, 2020, S&P Global Ratings withdrew its credit ratings on the issuer. When comparing default rates across sectors, we note some key differences between the industries. 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. Earlier, on June 14, 2016, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. 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. A quantitative analysis of the performance of S&P Global Ratings' corporate ratings shows that they continue to correlate with default risk across several time horizons. The company eliminated its prepetition debt during the bankruptcy process. On July 20, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. The trailing-12-month and annual default rates have become standard measures, but default rates measured over shorter time frames give a more immediate picture of credit market conditions. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. 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. 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. On Oct. 30, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Bermuda-based onshore drilling contractor Nabors Industries Ltd to 'SD' from 'CCC+' after the issuer completed a distressed private exchange, whereby it exchanged US$115 million of the principal amount of its 0.75% exchangeable bonds due 2024 for US$50.485 million of new senior priority guaranteed notes due 2025. 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. This nonpayment was considered a general default, and the company was not expected to be able to pay most of its obligations. On Dec. 17, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC-' from 'SD', which reflects the completion of the distressed exchange and significant risks over the next few months given looming debt maturities and very high leverage. The sudden and acute recession in 2020 led to the sharpest credit deterioration ever in speculative-grade ratings. 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). On Jan. 18, 2021, S&P Global Ratings withdrew its ratings at the issuer's request. These were Macy's Inc., Ally Financial Inc., Ambac Assurance Corp., Mutual Benefit Life Insurance Co., Executive Life Insurance Co. CA, Confederation Life Insurance Co., Motors Liquidation Co. (formerly known as General Motors Corp.), and Eastman Kodak Co. Table 13 shows the cumulative defaults over various time horizons from all ratings received subsequent to initial ratings. We use rating modifiers (plus and minus signs) to calculate upgrade and downgrade percentages, as well as the magnitude of rating changes, throughout this study. 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. Earlier, on April 15, 2020, we lowered our issuer credit rating on CEC to 'CC' from 'CCC' following the company's announcement that it formed a restructuring committee to explore various strategic alternatives, including an out-of-court or in-court restructuring. 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 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. Ratings On Nov. 27, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' following the company's debt issuance. On March 19, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Singapore-based Geo Energy Resources Ltd. to 'SD' from 'B-' after the issuer completed debt buybacks. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. The issuer was expected to reduce the outstanding debt amount by about US$290 million. Corporate downgrades also increased, to near an all-time high. During 2020, the company increased its stake in V.E from 69.2% to 99.8%. This preview shows page 40 - 41 out of 49 pages. On Oct. 7, 2020, Tennessee-based casual dining operator Ruby Tuesday Inc. filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, which S&P Global Ratings considers a default. However, the speculative-grade share of both the financial and nonfinancial sectors has been growing in recent years. The issuer used 43 million of cash proceeds to repurchase 51 million of notes. We are expecting that the issuer will be able to generate sufficient cash for debt repayment, though times are challenging. The issuer has long struggled to adapt to the business model in a challenging domestic department store space, which shrank further because of the coronavirus pandemic. On April 2, 2020, S&P Global Ratings raised its issuer credit rating on Optiv Inc. to 'CCC' from 'SD', on the view that the company was willing to use its liquidity to repay additional debt. Note: The totals included may differ from the counts in table 1 because defaults that are not rated at the beginning of the pool year are excluded. The company's new credit group includes wholly owned subsidiary Rocky Mountain Structures Inc. For example, leisure and media has a much higher proportion of speculative-grade ratings than financial institutions or insurance (see chart 20). Earlier, on July 2, 2020, S&P Global Ratings lowered the issuer credit rating to 'CC' from 'CCC+' after the issuer defaulted on its unrated asset-backed lending credit facility. Further, on Sept. 25, 2020, we lowered the issuer credit rating to 'SD' from 'CC' after the issuer announced it retired US$38.7 million principal of 2025 notes at below the price of US$575 per 1,000 principal. On Feb. 25, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Canada-based oilfield services provider Calfrac Well Services Ltd. to 'SD' from 'CC' after the company completed a distressed exchange on the U.S. dollar unsecured notes due in 2026. On July 20, 2020, we raised the issuer credit rating to 'CCC+' from 'SD' after the issuer announced an improvement in leverage, which brought the borrowing base down to US$215 million from US$250 million. Normally, recessions include, or are followed shortly by, marked increases in corporate defaults. The Gini ratio is a measure of the rank-ordering power of ratings over a given time horizon, from one through seven years. On Oct. 9, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC-' from 'SD'. 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 issuer is facing challenges in adapting to the ongoing changes in the department store sector. 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 Nov. 18, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based debt issuing company Summit Midstream Partners Holdings LLC to 'D' from 'CC' after the issuer closed its sole debt restructuring transaction, at a significant discount. On March 12, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Illinois-based engineered fastener distributor Optimas OE Solutions Holding LLC to 'SD' from 'CCC+'. If an issuer defaults or if the rating on the issuer is withdrawn in the middle of the year, then it would be considered rated 'D' or not rated as of Dec. 31 of that particular year. Adriana Matos Measured on a dollar volume basis, Moody's global speculative-grade Senior Associate bond default rate ended 2008 at 5.8%, up from 2007's year-end level of Richard Cantor 0.6%. After beginning with heightened credit market stress and a 45-plus-day stretch without any speculative-grade issuance in the U.S. and Europe, 2019 ultimately saw only marginally higher default and downgrade rates than 2018. 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. *Fallen angels that survived to Jan. 1 of the year after they were downgraded. The issuer was facing a rise in additional loan loss provision, which was attributed to the large nonperforming loans. On Oct. 21, 2020, S&P Global Ratings withdrew its ratings at the issuer's request.