moody's corporate default and recovery rates 2020 pdf

The proposed reorganization involves the company eliminating more than half of its debt and transferring up to 97% of its equity to lenders. On Nov. 18, 2020, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. 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. In this new report, Moody's forecasts that the rate will peak at 7.3% in March 2021, and then decline to 4.7% by December. S&P Global Ratings Research conducts its default studies on the basis of groupings called static pools. 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. Consistent with the increase in the number of defaults in 2020, the volume of debt affected by defaults almost doubled to $353.4 billion. 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. 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. 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. 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 . One key reason is that financial services companies typically start with investment-grade ratings, while most nonfinancial issuers have speculative-grade initial ratings, particularly over the past 10 years. Later, the issuer commenced a Chapter 11 bankruptcy and was looking to restructure its capital structure. The Content is provided on an as is basis. On April 17, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Arizona-based retailer Mister Car Wash Holdings Inc. to 'SD' from 'CCC+'. On April 6, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New Zealand-based nonbank financier FE Investments Ltd. to 'D' from 'CCC'. 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. Earlier, on March 20, 2020, we lowered the ratings to 'CC' from 'CCC-' based on our view that the issuer has an unsustainable capital structure and weak liquidity. Some issuers default after S&P Global Ratings no longer rates them. For example, leisure and media has a much higher proportion of speculative-grade ratings than financial institutions or insurance (see chart 20). In 2019, the issuer derived about 41% of its revenue from the food service segment and about 32% from the retail segment. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. Each static pool can be interpreted as a buy-and-hold portfolio. We used the same method to form static pools for 1983-2020. Of the defaulted companies in 2020, 7.5% were unrated just prior to default, which is well below the long-term percentage of 16.2% (see chart 13). 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. The default rates that we refer to as weighted averages in this study use the number of issuers at the beginning of each year as the basis for each year's weight. At the time of the withdrawal, our 'D' rating reflected the nonpayment of the coupon on the $350 million Eurobond in April 2020 followed by a nonpayment of its mezzanine loan. 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. On May 12, 2020, S&P Global Ratings lowered the issuer credit rating on New York-based beauty and personal care manufacturer and distributor Revlon Inc. to 'SD' from 'CC' after the issuer completed refinancing its 2016 term loan. It is expected that North American and international markets are likely to contract up to 50% and 20%, respectively. On May 11, 2020, we withdrew the ratings at the issuer's request. On Oct. 30, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' following the completion of the distressed exchange. 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. In addition to these subsectors, this study groups insurance service providers (such as insurance brokers and third-party administrators that are rated according to corporate criteria) with the insurance industry. This brought the downgrade-to-upgrade ratio to a new high of 6.6. The rating action followed the company's distressed exchange after repaying only a portion of amount outstanding on its 1.5-lien notes. This also followed the issuer's missed $65.6 million principal payment on its 8.375% unsecured notes due on May 10, 2020. The Default & Recovery Database is part of Moody's Analytics broader Default Suite of products. Moody's Investors Service analysts use this . 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. 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. The global corporate default tally has increased to 17 after two issuers defaulted since our last report. In contrast, the issuer with the shortest time to default (36 days) was a confidentially rated U.S.-based leisure/media company. On May 6, 2020, S&P Global Ratings withdrew its ratings on the issuer. On Aug. 19, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Georgia-based building products producer Omnimax International Inc. to 'D' from 'CCC-' after the issuer announced that it missed a principal repayment due on its US$385 million senior notes. These two sectors, along with leisure time/media, had 2020 default rates in excess of 6%, which were much higher than other sectors and were markedly higher than their sectoral long-term weighted averages (see table 19). On June 18, 2020, we raised the issuer credit rating to 'CCC+' from 'SD' after the debt exchange was completed. Our model further indicates that the global rate will . Distressed exchanges (which are typically selective defaults) accounted for 37.6% of all defaults, the same as missed interest or principal payments (37.6%). The transaction was viewed as distressed because lenders got less than they were originally promised. On April 15, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Luxembourg-based telecom service provider Intelsat S.A. to 'SD' from 'CCC+' after the issuer failed to pay semiannual interest payments on unsecured debt. For example, among defaulters that were rated 'B' at origination, the default rate climbs to a high of 18.3% in the third year and decelerates thereafter. esgSubNav, Discover more about S&P Globals offerings. Earlier, on May 13, 2020, we lowered our issuer credit rating and senior unsecured issue-level ratings on Extraction to 'CC' from 'CCC+', reflecting the increased likelihood that the issuer would enter a debt restructuring that we would view as distressed in the near term. The issuer announced a restructuring agreement as well as filed petitions under Chapter 11. On June 17, 2020, we withdrew the ratings on the issuer. A bankruptcy filing or legal receivership by the debt issuer or obligor that will . Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. In 2010-2020, about 77% of the initial ratings that S&P Global Ratings assigned to new issuers were speculative grade. At times, however, some of these subsidiaries might not yet have been covered by a parent's guarantee, or the relationship that combines the default risk of parent and subsidiary might have come to an end or might not have begun. In other words, the Gini coefficient captures the extent to which actual ratings accuracy diverges from the random scenario and aspires to the ideal scenario. Only in longer time frames do companies with higher original ratings surface among the defaulters. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. 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. On May 19, 2020, S&P Global Ratings lowered its issuer credit rating on German value retailer Takko Fashion S.a.r.l. Multiplying 92.81% by 96.77% results in a 89.82% survival rate to the end of the third year, which results in a three-year average cumulative default rate of 10.18%. 36 pages. This difference results from the different methods of calculating default rates. The COVID-19 pandemic and lockdowns in 2020 led to one of the deepest recessions since the Great Depression roughly 90 years ago. On Sept. 16, 2020, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. The one-year Gini ratio remained high in 2020, at 86.1% (see chart 3). 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. On April 3, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Canada-based theatrical and live entertainment company CDS Group to 'D' from 'CCC-', reflecting payment default after the issuer didn't made interest and principal payments on first lien-debt and interest payment on second-lien debt, both of which were due March 31, 2020. Corporate downgrades also increased, to near an all-time high. 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. Foreign currency translation unfavorably impacted Moody's revenue by 2%. The issuer was unable to raise capital to maintain the regulatory minimum, and subsequently the principal and interest payments to the depositors were suspended. Each one-year transition matrix displays all rating movements between letter categories from the beginning of the year through year-end. 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. articles On July 2, 2020, S&P Global Ratings withdrew its ratings on the issuer. An obligor is considered in default unless S&P Global Ratings believes that such payments will be made within five business days of the due date in the absence of a stated grace period, or within the earlier of the stated grace period or 30 calendar days. Earlier, on Feb. 7, 2020, we lowered the long-term issuer credit rating to 'CCC-' from 'CCC' after it reported some operational missteps, resulting in a covenant violation. 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. Later, on May 2, 2020, the issuer entered into standstill agreement with the lenders of the notes due 2021 and the term loan due 2023, until July 31, 2020. On May 21, 2020, S&P Global Ratings withdrew its ratings on the issuer. Likewise, it would be included in the 1989 and 1990 pools with the 'B' rating. We then divide this by the ratio of the total number of nonzero weights minus one and the total number of nonzero weights. As in most years, the U.S. accounted for the majority of defaults in 2020, by both count and the amount of affected debt. In table 13, the times to default are from the date that each entity received each unique rating in its path to default. to 'SD' from 'B-' after the issuer missed the Oct. 31 coupon payment on its senior secured notes due 2023. The local currency senior unsecured rating is the preferred debt rating used for the proxy because it is usually consistent with the issuer credit rating. For example, 10 companies rated 'A' at any point in their lifetimes (excluding initial ratings) defaulted within one year of receiving this rating. The syndicated creditors will now acquire 49% of the capital of the operating business. Rating transition rates may be compared with the marginal and cumulative default rates described in the previous sections. For example, the one-year default rate column of table 24 is equivalent to column 'D' of the average one-year transition matrix in table 21, as well as the cumulative average in the "Summary statistics" of the one-year column in table 32. DDA's term loan waiver agreement is equivalent to a default, even though no legal default has occurred under the provisions of the term loan, because the timing of the payments was delayed relative to the terms of the original agreement. The U.S. has the largest number of rated corporate issuers, accounting for roughly 45.9% of the global total at the start of 2020. On Dec. 9, 2020, S&P Global Ratings withdrew its 'D' issuer credit rating at the issuer's request. According to S&P, at the end of 2020, their 12-month trailing default rates amounted to 6.6% for U.S. speculative-grade. Defaults arise disproportionately from low rating categories, and this holds true over longer time horizons (see table 14). Earlier, on April 4, 2020, we lowered our issuer credit rating on Covia to 'CCC+' from 'BB-' after customers were dealing with a sudden and dramatic collapse in prices for the oil and gas they produce. 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.

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