moody's corporate default and recovery rates 2020 pdf

On July 31, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' on the basis of increased liquidity. These include industrials, utilities, financial institutions, and insurance companies around the world with long-term local currency ratings. We understood that the company was making those amendments to preserve cash because customers have had to suspend their mining operations or delay their project spending due to the coronavirus pandemic. On Aug. 27, 2020, Texas-based oil and gas exploration and production company SAExploration Holdings Inc. defaulted after the issuer filed for reorganization under Chapter 11. 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. 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%. 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 April 29, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Kansas-based consumer products supplier CSM Bakery Solutions LLC to 'SD' from 'CCC' after the issuer executed an amendment to extend the maturity of its US$105 million asset-based lending and has not completed refinancing of its first-lien term loan due July 2020. Later, the issuer commenced a Chapter 11 bankruptcy and was looking to restructure its capital structure. An S&P Global Ratings issuer credit rating is a forward-looking opinion about an obligor's overall creditworthiness. This report does not constitute a rating action. 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 The number of companies rated in the 'BBB' category has grown by 27% since the beginning of 2008, to roughly 1,847 at the end of 2020. Despite this increase, the default total in 2020 was still lower than the peak of 235 in 2009. 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. Moody's expects the overall default rate for commodity companies to fall sharply this year, to 3.4% from 12.6% in 2016. On Dec. 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Houston-based oil and gas exploration and production company Callon Petroleum Co. to 'SD' from 'CC' following a distressed exchange wherein it exchanged US$217 million of new 9% second-lien notes due 2025 for US$389 million of its existing unsecured notes. complementary role in model validation and as benchmarks. We believe this bankruptcy filing is due to the combined effect of the coronavirus pandemic and the company's weak performance in 2019. On March 9, 2020, Bluestem Brands Inc. defaulted, having filed for Chapter 11 bankruptcy to restructure its debt. 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. On April 24, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. Distressed exchanges (which are typically selective defaults) accounted for 37.6% of all defaults, the same as missed interest or principal payments (37.6%). This was the highest count since 2016, when a wave of defaults in the energy and natural resources sector followed the prolonged collapse in oil prices that began in the second half of 2014 (see chart 5). Its Gini coefficient--which is a summary statistic of the Lorenz curve--would thus be zero. On Jan. 15, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. These weights are based on each cohort's rating level's contribution to the 40-year total issuer base for each rating level. On Oct. 13, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Ireland-based manufacturer and distributer of specialty pharmaceutical products Mallinckrodt PLC to 'D' from 'CCC' after the issuer announced that it voluntarily initiated Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware to modify its capital structure, including to restructure portions of its debt and resolve several billion dollars of potential legal liabilities. On June 3, 2020, S&P Global Ratings lowered its issuer credit rating on U.K.-based offshore drilling contractor Valaris PLC to 'D' from 'CCC-' because the company did not paid the June 1 interest payments on its senior notes due 2022 and 2042, and the company continued to discuss the terms of a comprehensive debt restructuring with its debtholders. On Nov. 9, 2020, we withdrew the issuer credit ratings on the company at its request. On July 30, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based retailer Missouri TopCo Ltd. to 'SD' from 'CCC-' after the issuer converted its 80 million second-lien notes into a payment-in-kind (PIK) toggle instrument. On June 18, 2020, we raised the issuer credit rating on Forum to 'CCC-' from 'SD', reflecting our forward-looking opinion on its creditworthiness. On July 2, 2020, we withdrew the ratings on the issuer. Consider the following example: An issuer is originally rated 'BB' in mid-1986 and is downgraded to 'B' in 1988. This is not surprising at the three- and 10-year horizons, considering the relative stress of the financial crisis has now passed beyond the 10-year time frame. For example, 427 defaults were recorded in the five-year pool that began in January 2016, of which 414 were rated speculative grade on Jan. 1, 2016. The company was to pay 12.0% and 14.5% PIK interest in June and December, respectively, rather than the previous 10.0% rate. 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. We calculated conditional default rates by dividing the number of issuers in a static pool that default at a specific time horizon by the number of issuers that survived (did not default) to that point in time. Sources: StepStone Group, CS HY Index, Barclays US IG, Moody's, Cliffwater, Refinitiv LPC as of December 2022. On May 27, 2020, we withdrew the ratings on the issuer. The largest default in 2020 was from U.S.-based telecommunications provider Frontier Communications Corp., with $22.5 billion (6.3%) of the outstanding debt for the year. The pools are static in the sense that their membership remains constant over time. On Nov. 18, 2020, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. The decision to miss interest payments of about US$15.5 million was based on prioritization of liquidity toward its operations. On April 16, 2020, S&P Global Ratings lowered the issuer credit ratings on Cyprus-based real estate market investor O1 Properties Ltd. to 'D' from 'CC' after the issuer missed a coupon payment on US$350 million Eurobonds. On Aug. 18, 2020, S&P Global Ratings withdrew its ratings on the issuer. On Jan. 29, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based engineered components manufacturer and marketer Doncasters Group Ltd. after the issuer received lender support for financial restructuring. Earlier, on April 21, 2020, we lowered the rating on the issuer to 'CC' from 'CCC' after it announced entering into a voluntary administration to undertake a proposed debt restructuring and recapitalization of the business. On June 18, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Lewisville, Texas-based ASP MCS Acquisition Corp. (MCS) to 'D' from 'CCC' after the company missed its June 15 interest payment on its secured term loan due 2024. The drilling market was under stress, and the drop in oil prices and the pandemic furthered worsened the problem. On Sept. 9, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Missouri-based printing equipment designer and manufacturer MAI Holdings Inc. to 'SD' from 'CCC-' after the issuer completed the partial exchange of its senior secured notes. Fitch Ratings provides forward-looking credit opinions, as indicated by its ratings, that reflect its expectations of credit behavior over a range of scenarios. This small sample size can, at times, result in historical default rates that seem counterintuitive. 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. 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. 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. Adding those companies first rated in 1981 to the surviving members (those still actively rated and not in default) of the 1981 static pool forms the 1982 static pool. 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. The Content is provided on an as is basis. With an increase in the proportion of downgrades during the year, the number of large rating changes (which we define as more than six notches) increased in 2020. This does not necessarily indicate a default event, but during the period of regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. As a result, the trustee placed the issuer into receivership (with KordaMentha as receivers). Half of this amount, US$5.5 million, was waived until the maturity of notes in 2024, while the issuer was still negotiating the payment date for the other half. We calculated standard deviations for Gini ratios in this study as the standard deviations of a sample, and not those of a population. In a theoretical exploration of recovery rates in a structural In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. The downgrade reflected our belief that continued low crude oil prices, the weak outlook for offshore drilling services, and the distressed level at which Valaris' debt is trading made it likely the company would not make the interest payments within the grace period. The 2021 corporate default tally of 72 is the lowest since 2014--down nearly 70% from the previous year's total . Revenue for MIS in the first quarter of 2022 was $827 million, down 20% from . On April 15, 2020, S&P Global Ratings lowered its rating on the issuer to 'D' from 'SD' upon the company filing for Chapter 11 bankruptcy, following which, on May 28, 2021, the ratings on the issuer were withdrawn. Throughout the 40-year span, only eight companies initially rated 'AAA' have ever defaulted. 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 May 11, 2020, we withdrew the ratings at the issuer's request. In our view, continued supply-demand rebalancing will be necessary to slow wage . However, defaults from most other sectors increased as well. In nearly all instances, the financial services sector's longer-term default rates were lower in 2020 than long-term averages. Earlier, on March 19, 2020, we lowered the issuer credit rating on Libbey to 'CCC' from 'B-' on constrained liquidity and less likelihood of refinancing its term loans. Earlier, on April 22, 2020, we lowered our issuer credit rating on Revlon to 'CC' from 'CCC-' after the company announced it was pursuing a recapitalization transaction to extend the maturity of its existing 2016 $1.8 billion term loan, term out its unrated $200 million term loan issued in 2019, and enhance its liquidity position. 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. On Dec. 8, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' following debt repurchases. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated. 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. On March 16, 2020, S&P Global Ratings raised its rating on the issuer to 'CCC-' from 'SD'. The regions covered in this study are: U.S. and tax havens: 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. The two-year default rates in table 24 are calculated in the same way as those in the cumulative average section for the two-year column in table 32, while those in the 'D' column of table 34 are equivalent to adding up all the defaults behind the two-year column's annual default rates in table 32, divided by the sum of all the issuers in table 32 for the years 1981-2020. The number of 'AAA' rated issuers globally declined to just eight by the end of 2020 from 89 at the beginning of 2008. 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 June 4, 2020, we withdrew the ratings on the issuer because of insufficient information to continue the surveillance of the ratings. On Nov. 23, 2020, S&P Global Ratings withdrew its rating on the issuer. This was especially evident during the global financial crisis, when many highly rated banks defaulted within a short amount of time after initial downgrades. On Dec. 9, 2020, S&P Global Ratings withdrew its 'D' issuer credit rating at the issuer's request. To facilitate the proposed exchange, the issuer entered a new term loan facility of US$190 million maturing in 2024. The one-year Gini in 2020 was well above the one-year weighted average (since 1981) Gini ratio of 82.8% and was higher than the median annual Gini ratio over the last 40 years of 85.7% (see table 2 and chart 30). 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. Initial ratings for these companies are those immediately following a prior default in 2020. On March 20, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Kazakhstan-based Grain Insurance Co. JSC to 'D' from 'B' after the issuer missed payments to the counterparties. de C.V. to 'D' from 'CC' after the issuer missed interest payments on senior unsecured notes due June 2022, which represent over 98% of total debt due, and announced it won't do it within the grace period. In 2020, 216 of the 226 defaults, or 96%, were from companies originally rated speculative grade, which is nearly eight percentage points higher than the long-term average of 88.3%. Foreign currency translation unfavorably impacted Moody's revenue by 2%. The buyback worth was around US$76 million between March 13 and March 17 and at a discount, and these buybacks were considered distressed, rather than an opportunistic attempt. The majority (94%) began the year rated in the 'B' or 'CCC'/'C' category (57% 'CCC'/'C' and 37% 'B'). Crew Group Inc. to 'D' from 'CCC-' following the company's announced petitions filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. On Aug. 26, 2020, we raised the issuer credit rating to 'CCC' from 'SD'. 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. /ratings/en/research/articles/210407-default-transition-and-recovery-2020-annual-global-corporate-default-and-rating-transition-study-11900573 The issuer submitted a prepackaged plan. Other sectors, such as consumer services, have had more frequent default cycles, both during and between economic cycles. All intermediate ratings are disregarded. Normally, recessions include, or are followed shortly by, marked increases in corporate defaults. The Default & Recovery Database is part of Moody's Analytics broader Default Suite of products. This page provides a central resource for Moody's research on default risks, impairment and loss rates, . After speculative-grade ratings reached a peak of 51% of U.S. corporate ratings in 2007, the default rate hit its cyclical peak of 12% in 2009, following the Great Recession (see chart 23). The negative outlook reflects our view of the company's unsustainable capital structure and heavy debt service burden, and our belief that Revlon could default on its debt obligations in the upcoming quarters.

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