We believe that COVID-19-related fitness club closures have materially impaired the company's liquidity position. The issuer also deferred on principal payments. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. 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. On March 3, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based oilfield services provider Pioneer Energy Services Corp. to 'D' from 'CCC-'. On Dec. 23, 2020, we raised the issuer credit ratings to 'B-' from 'D'. 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. On Nov. 17, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Colorado-based exploration and production company Jonah Energy LLC to 'D' from 'CCC-' after the issuer elected not to make its full US$30 million reserve-based lending facility deficiency payment for September. The issuer was expected to reduce the outstanding debt amount by about US$290 million. Cross-Sector: The . 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 June 15, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Virginia-based tobacco leaf merchant Pyxus International Inc to 'D' from 'CCC-' after the issuer announced a reorganization process under Chapter 11 of the U.S. Bankruptcy Code with 92% of principal amount of its first-lien notes and 67% of its second-lien notes holders. The key model inputs Moody's uses in its analysis, such as par, rating factor, and the recovery rate assumptions, are based on its published methodology and could differ from the trustee's reported numbers. If these default rate forecasts crystalize, the pandemic induced default cycle will be relatively mild comparing with prior recessionary default cycles whose peaks ranged from 9.7% to 13.3%. Source: Moody's Investors Service, "Moody's Corporate Default & Recovery Rates Study 2019" Senior Secured Loans Equity Unsecured Debt (ie, high yield bonds) Subordinated Bonds Senior Unsecured Bonds Loans 28.0% 47.0% 80.0% Recovery Rate 100% 80% 60% 40% 20% 0% 1 Source: S&P Global Market Intelligence, Wells Fargo, March 31, 2020 We view the nonpayment of interest as akin to default on the senior secured notes. On March 12, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New Jersey-based apparel retailer Ascena Retail Group Inc. to 'SD' from 'CCC' after the issuer repurchased US$122 million debt in two tranches, at approximately 37% below par. On Nov. 18, 2020, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. This restructuring was viewed as a distressed exchange because it would delay the interest payments. Earlier, on March 17, 2020, we lowered the long-term issuer credit rating to 'CCC+' from 'B' after the issuer's refinancing prospects were difficult and capital structure was unsustainable. 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). There were no downgrades among the eight 'AAA' rated companies in 2020. This compares with a Gini of 88.3% and a default rate of 2.5% in 2019. Nick W Kraemer, FRM, New York+ 1 (212) 438 1698; Nivritti Mishra Richhariya, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai, Sundaram Iyer, CRISIL Global Analytical Center, an S&P affiliate, Mumbai, Lyndon Fernandes, CRISIL Global Analytical Center, an S&P affiliate, Mumbai, Abinash Meher, CRISIL Global Analytical Center, an S&P affiliate, Mumbai, Shripati Pranshu, CRISIL Global Analytical Center, an S&P affiliate, Mumbai, APAC, United States of America, Latin America, Canada, EMEA, APAC. On Dec. 7, 2020, the issuer credit rating on the company was raised to 'CCC+'. Investment-grade defaulters. On Oct. 9, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC-' from 'SD'. This page provides a central resource for Moody's research on default risks, impairment and loss rates, . On July 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Delaware-based promotional products supplier CB Poly Investments LLC to 'SD' from 'B-' after the issuer completed a distressed exchange of its second-lien debt due in August 2024. Each issuer is likely to be captured multiple times, in line with its migration from one rating to another, so the total count in table 13 is different from that in table 12. Later, on Aug. 11, 2020, we withdrew our issuer credit ratings on the company at its request. On April 24, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based contract drilling services Diamond Offshore Drilling Inc. to 'D' from 'CC' after a review of market conditions for contract drilling services. If, however, S&P Global Ratings withdrew the rating prior to Jan. 1 of the year of default, we do not include the issuer in the default rate calculation in that year. Foreign currency translation unfavorably impacted Moody's revenue by 2%. 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. Tables 30, 31, and 32 are broken out by the broadest rating classifications (all rated, investment grade, and speculative grade). This opinion focuses on the obligor's capacity and willingness to meet its financial commitments as they come due. 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. Initial ratings for these companies are those immediately following a prior default in 2020. On June 25, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Houston-based exploration and production (E&P) company W&T Offshore Inc. to 'SD' from 'CCC+' following the company's announcement that it repurchased about $72.5 million of its second-lien notes due 2023, about 10% of its total year-end 2019 long-term debt, for roughly $23.9 million, or an average 33% of par value. However, since the financial downturn of 2008, many high-rated companies have been downgraded, leaving, for example, exceedingly few 'AAA' rated issuers at the start of 2020. The amount of the senior secured notes is half of the original 600 million, and the senior unsecured noteholders had not received any of the 150 million they invested. On Sept. 15, 2020, we raised the issuer credit rating to 'CC' from 'SD' after its subsidiary, Town Sports International LLC, filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, while the parent was not included in it. The coronavirus pandemic-related business disruption (i.e., diamond sales and marketing) affected the cash flow of the issuer. Moody's Default and Ratings Analytics team publishes Moody's default studies, ratings transitions and ratings performance studies for corporates, financial institutions, sovereign and sub-sovereign, public finance and infrastructure sectors. As a result, the trustee placed the issuer into receivership (with KordaMentha as receivers). To compute one-year rating transition rates by rating category, we compared the rating on each entity at the end of a particular year with the rating at the beginning of the same year. Defaults arise disproportionately from low rating categories, and this holds true over longer time horizons (see table 14). . A default is assumed to take place on the earliest of: When an issuer defaults, it is not uncommon for S&P Global Ratings to subsequently withdraw the 'D' rating. The leading shareholder, LetterOne, purchased 97.5% of its 300 million 1% notes due in 2021 and 76% of its 300 million 0.875% notes due in 2023. *This total does not match table 1 because it excludes confidentially rated defaults. Amid the fast and robust economic rebound, the speculative-grade rating bias has rapidly recovered, but the number of upgrades has not yet matched the magnitude of downgrades seen last year. 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. 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 sudden and acute recession in 2020 led to the sharpest credit deterioration ever in speculative-grade ratings. The company's credit quality deteriorated with the pressure on airlines' cash flows and liquidity due to the coronavirus pandemic. On Sept. 10, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based business process outsourcing and product support services provider iQor Holdings Inc. to 'D' from 'CC' after the issuer filed petition under Chapter 11 of the U.S. Bankruptcy Code. Earlier, on March 2, 2020, we lowered our issuer credit ratings on LSC to 'CC' from 'CCC+' after the issuer entered into a forbearance agreement for failing to comply with its consolidated leverage and interest ratio credit agreements covenants. commercial paper obligations rated A 1 or P 1 or better by Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively; or (iii) . On Sept. 25, 2020, Neiman Marcus Holding Company Inc. (formerly the Neiman Marcus Group Ltd. LLC) announced that it emerged from voluntary Chapter 11. Difference between last four quarters and weighted average, Largest corporate defaulters by outstanding debt amount, Texas Competitive Electric Holdings Co. LLC. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. 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. All of the defaulters in 2020 with active ratings immediately prior to default were rated in the lowest rating categories. The pools are static in the sense that their membership remains constant over time. Reduced EBITDA amid the pandemic and oil price crisis in early 2020 stressed the operating performance of the issuer. In return, the issuer agreed to a small increase in overall interest (cash interest plus PIK) for the first quarter. Defaults in 2020 came from all sectors, but--consistent with recent years--were heavily represented by two sectors: the energy and natural resources sector (with 62 defaults) and the consumer services sector (with 60 defaults). 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. The exchange provides additional liquidity for at least the next 12 months, but it minimally reduces leverage, and interest costs remain high. to 'SD' from 'CCC+' after the company missed interest payment on its 510 million senior secured notes due November 2023. 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. 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. Multiplying 96.29% by 96.39% results in a 92.81% survival rate to the end of the second year, which leads to a two-year average cumulative default rate of 7.19%. Ten of the defaulters in 2020 were initially rated investment grade, and the other 216 (96% of the total) were initially rated speculative grade. One-year Gini coefficients appear to be broadly cyclical and negatively correlated with default rates (see chart 30). This scheme was expected to save about 7.6 million per year in cash, but the company was still facing an interest payment of about 35 million and huge rent payments. Earlier, on March 21, 2020, we lowered our issuer credit rating on GNC to 'CC' from 'CCC+' and placed all ratings on CreditWatch with negative implications as the company announced that it did not expect to have sufficient cash flow from operations to repay its convertible senior notes and tranche B-2 term loan due. 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. 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. The status of the issuer's subsidiary, Anagram International, is changed to unrestricted subsidiary, which raised another US$110 million of secured debt. 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. 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. default, and recovery information. On April 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Plano, Texas-based department store operator J.C. Penney Co. Inc. to 'D' from 'CCC' after the company announced it would not make an interest payment. For these counts of large downgrades, we include movements to 'D' (default) along with what we normally report as downgrades (that is, downward movements between active ratings). On July 30, 2020, S&P Global Ratings withdrew the ratings on the issuer. The syndicated creditors will now acquire 49% of the capital of the operating business. On Jan. 19, 2020, The Krystal Co. defaulted after the company filed for bankruptcy under Chapter 11 with the Northern District of Georgia. Speculative-grade-rated issuers account for more than 60% of total issuers in eight of the 13 industries we track. On April 3, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based clinical toxicology laboratory services provider New Millennium Holdco Inc. to 'D' from 'CC'. On Oct. 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on the Netherlands-based self-service retail and coffee services company Selecta Group B.V. to 'SD' from 'CC' after the England and Wales High Court sanctioned the scheme of arrangement proposed by pan-European vending machine operator Selecta Group B.V. and backed by the group's creditors. On Feb. 28, 2020, S&P Global Ratings raised the long-term issuer ratings on Calfrac to 'CCC-' from 'SD' after it completed a debt exchange, which reduced the debt by US$98 million. Fourth quarter earnings releases have provided insight into corporate margin pressures, but labor market commentary signals that some of these headwinds may be abating. 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. *Or Dec. 31, 1980, whichever is later. This is slightly higher than the post-Lehman Bros. default (2009 onward) annual average of $1.4 billion. As . Our analysis is conducted at the bond level with RAD as the recovery rate measure. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. 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. 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. The debt structure of the issuer became unsustainable, with adjusted debt to EBITDA close to 8x in 2019. Revenue for MIS in the first quarter of 2022 was $827 million, down 20% from . On March 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Connecticut-based telecom operator Frontier Communications Corp. to 'SD' from 'CCC-' after the issuer missed interest payments of about US$322 million. A ratio of 1 would indicate that the percentages of upgrades and downgrades were equal. We considered this exchange as a distressed exchange. Finally, PD estimates should also be compared across banks (EBA 2020). The global corporate default tally has increased to 17 after two issuers defaulted since our last report. What is in the DRD? Other methods may calculate default rates using only the most recent year's default and rating data, which may yield comparatively low default rates during periods of high rating activity because they ignore prior years' default activity. With an increase in the number of defaults in 2020, the total amount of affected debt also rose, to $353.4 billion from $183.2 billion in 2019 (see chart 6). 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. The Gini coefficient is defined as area B divided by the total of area A plus area B. On June 26, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Irving, Texas-based CEC Entertainment Inc. to 'D' from 'CC' as the company filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Of these new issuers, 78% were rated speculative grade. Annual corporate bond issuance reached an all-time high in 2020, largely after the Fed and European Central Bank both created massive liquidity facilities in March, in response to the pandemic. As the default rate rose globally, credit quality also showed a net decline in 2020, with many more companies downgraded than upgraded. The latter are companies with obligations that are not legally guaranteed by a parent but that have operating or financing activities that are so inextricably entwined with those of the parent that it would be impossible to imagine the default of one and not the other. On Aug. 7, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD'. 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. But in a report issued today, the credit ratings. Note: Numbers in parentheses are weighted standard deviations, weighted by the issuer base. 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. On March 26, 2020, we withdrew our issuer ratings at the company's request. The issuer also conveyed that it entered into a lock-up agreement with its senior secured lenders and was in talks on a restructuring plan. The issuer announced that it voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code. 16 FEB 2023. The date the debtor filed for, or was forced into, bankruptcy. In a small number of cases, we use the subordinated debt rating or the senior secured rating as the proxy. On Aug. 17, 2020, S&P Global Ratings withdrew its ratings on the issuer. Otherwise, the methodology was identical to that used for single-year transitions. 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'. Second-lien lenders agreed to convert scheduled cash interest payments to payment-in-kind (PIK) interest for three quarters (starting Sept. 30, 2020). In 2020, 226 companies, including 26 confidential issuers, defaulted on US$353.4 billion of debt. On May 15, 2020, S&P Global Ratings lowered the issuer credit rating on Texas-based oilfield products and services provider Forum Energy Technologies Inc. to 'SD' from 'CC'. Data provided in table 13 also differ from default rates in table 24 owing to the use of the static pool methodology. On Aug. 17, 2020, we withdrew the rating on the company at its request. The issuer missed an interest payment of US$8 million on its senior convertible notes due in 2024. Therefore, each annual default study is self-contained and effectively supersedes all previous versions. For instance, in the three years ended Dec. 31, 2020, 402 nonfinancial companies defaulted, while only 24 financials did. S&P Global Ratings subsequently withdrew the ratings at the issuer's request. On Sept. 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on French trade show organizer Cassini SAS to 'D' from 'CCC' after the issuer entered into safeguard procedures because of losses caused by COVID-19-related show cancellations and postponements. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. 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. This brought the ratio of downgrades to upgrades to a historical high of 6.6 (see table 6). On June 24, 2020, S&P Global Ratings withdrew its issuer credit rating at the company's request. Investment-grade ratings are proportionately more prevalent among financial services companies as well (relative to nonfinancials). When comparing default rates across sectors, we note some key differences between the industries. Our data on defaulted corporate issuers globally shows that defaults among speculative-grade entities tend to be clustered in the third year after the initial rating, particularly in the 'B' rating category (see chart 9). Moody's Default and Ratings Analytics team publishes Moody's default studies, ratings transitions and ratings performance studies for corporates, financial institutions, sovereign and sub-sovereign, public finance and infrastructure sectors. On April 2, 2020, we lowered our issuer credit rating to 'CCC' from 'B-' and removed all of the ratings from CreditWatch negative, where they had been placed on March 19, 2020, as the company faced significant operational headwinds due to the coronavirus pandemic and had about $215 million of 8% senior unsecured notes maturing in less than two years. In 2021, we rated over $6 trillion of issuance and served more than 1,100 issuers who accessed the markets for the first time. However, some of the variation in default rates between sectors stems from overall sample size differences, as well as differences in the ratings distribution across industries. 1Great Financial Crisis 2008/2009. This nonpayment was considered a general default, and the company was not expected to be able to pay most of its obligations. On May 25, 2020, S&P Global Ratings withdrew its credit ratings on the issuer. On Nov. 25, 2020, S&P Global Ratings raised the issuer credit rating to 'B-' from 'SD' on its improved maturity profile. On July 7, 2020, we lowered the issuer credit rating on Forum to 'CC' from 'CCC-' following the issuer's announcement to exchange its remaining $328 million of 6.25% senior unsecured notes due October 2021. Globally, speculative-grade issuers constituted 50.3% of rated corporate issuers at the end of 2020, whereas at the end of 2019, speculative-grade ratings represented 49.9% of global ratings (see chart 22). Over the long term (since 1981), financial services defaulters show a median rating of 'BB+' five years prior to default. 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. 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. However, even when we limit the pool of new issuers to those that have never been rated before, speculative-grade issuers still account for 75% of the total. She joined Moody's in 2007. On May 22, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based Guitar Center Inc. to 'SD' from 'CCC'. 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. On Dec. 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on France-based car rental service provider company Europcar Mobility Group S.A. to 'SD' from 'CC' after the issuer elected not to pay the interest due on its 2024 and 2026 corporate senior notes prior to the end of the 30-day grace period. The majority of the company's revenue comes from airports, depending on airline passenger travel, which has declined sharply because of the pandemic. On Sept. 17, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. The issuer aims to eliminate US$840 million of debt by using restructuring and a US$230 million debtor-in-possession facility. This study limits the reporting of default rates to the 15-year time horizon. In 2010-2020, about 77% of the initial ratings that S&P Global Ratings assigned to new issuers were speculative grade. 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'. The company entered into a forbearance agreement with its senior debt lenders and is expected to pursue a debt restructuring. On Oct. 30, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Netherlands-based general merchandise retailer Hema B.V. to 'SD' from 'CC' after the issuer completed a distressed debt restructuring transaction on Oct. 19, 2020.