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However, the two-year default rate column in table 24 is not the same as column 'D' of the average two-year transition matrix in table 34. On July 20, 2021, S&P Global Ratings lowered its issuer credit on Mexican lending company Alpha Holding S.A. de C.V. to 'D' from 'CC'. (2), Bahamas On April 13, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Argentina-based electricity generation company YPF Energia Electrica S.A. to 'SD' from 'CCC-' following execution of a distressed exchange for its US$100 million Series I bond. Not all of the lenders participated; about US$77 million in principal remained outstanding under first-lien term notes due April 2022, and US$9 million in principal remained for notes due 2023. AMC had raised nearly $818 million in gross equity proceeds and roughly $1.83 billion in total equity so far in the year. This year we have added to the countries included in other developed and emerging markets. AI Mistral's financial restructuring resulted in lower debt and interest costs, while an equity contribution from the owner strengthened the company's liquidity. The issuer primarily caters to the oil and gas and petrochemicals sector, which accounted for about 79% of 2019 sales. When an issuer defaults, we assign that default to all of the static pools to which the issuer belonged. If the rating on an entity is withdrawn after the start date of a particular static pool and the entity subsequently defaults, we will include the entity in that static pool as a defaulter and categorize it in the rating category of which it was a member at that time. (1), US Late Credit Cycle Risks But even at 'CCC'/'C', the 11% default rate for 2021 was still markedly lower than the 28.3% long-term (1981-2020) weighted average. Annual speculative-grade default rates decreased in all major regions in 2021 relative to 2020. Otherwise, the methodology was identical to that used for single-year transitions. (1), Delaware (2), Leveraged All four major regions saw speculative-grade default rates below 2%--a first since 2006 and only the second time ever--and all these default rates fell below their long-term annual averages (see table 7 and chart 23). (5), Growth: Macroeconomic outlook & insights on fiscal and monetary policies (2), Bermuda Please contact your Moodys representative or contact Moodys at one of the locations listed: Americas Client Desk: +1-212-553-1653 clientservices@moodys.com Asia Client Desk: +852-3551-3077 clientservices.asia@moodys.com On Jan. 7, 2021, we raised our issuer credit rating on Promotora de Informaciones to 'CCC+' from 'SD'. (27), SGL Monitor Before 2010, the majority of newly assigned European issuer credit ratings were investment-grade, but since then, roughly 74.3% of newly assigned ratings have been speculative-grade annually. On Feb. 3, 2021, S&P Global Ratings lowered its long-term issuer credit rating on the Missouri-based coal producer Peabody Energy Corp. to 'SD' from 'CC' after the company's completed distressed exchange of its senior secured notes due 2022. (1), New Technologies This long-term corporate default and rating transition study uses the CreditPro database of long-term local currency issuer credit ratings. There was a possibility of further debt restructuring because the capital structure remained unsustainable. Many default studies, including this one, also look at transition rates, which gauge the degree to which ratings change--either up or down--over a particular period. Overview Historically, practitioners have focused on the one-year probability of default (PD) calculation using a firm's financial information, because the default has mostly been modeled as a binary event (except the intensity model), suited for single-period (one-year) considerations within the regulatory framework of a fixed planning horizon. The negative outlook reflected the high probability that Renfro would default on its debt obligations or engage in a restructuring transaction over the next six months. (2), Haiti "Measuring the Credit Impact of Physical Risk for Corporates," Moody's Analytics, 2021. Based on quarterly intervals of measurement (nonannualized), the default rates in the fourth quarter of 2021 reached their lowest point since the third quarter of 2013 (see chart 18). Counterparty credit ratings, corporate credit ratings, and sovereign credit ratings are all forms of issuer credit ratings. While the amendments provided additional liquidity and delayed short-term covenant risks, the downgrade reflected the likelihood of weaking liquidity over the course of the next 12 months amid the possibility of a new distressed restructuring or debt exchange. Moody's Default & Recovery Database (DRD) contains the following data for 550,000 debts and 60,000 global sovereigns and corporate entities, including Real Estate, Insurance, and Financial Institutions. (6), Guinea 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 12 years (see chart 20). We viewed this transaction as tantamount to a default on the original $220 million term loan and $20 million priming term loan due to the company's weak operating performance, liquidity constraints, the near-term maturity of its debt facilities, the distressed trading prices of its debt on the secondary market, and the lack of adequate compensation for its existing lenders involved in the transaction. On Jan. 25, 2021, Texas-based restaurants owner and franchiser Awesome Acquisition Co. L.P. defaulted after filing voluntary petitions seeking relief under Chapter 11 of the U.S. Bankruptcy Code. This would effectively lead to an extended maturity for the revolver by one year because its maturity would align to that of the term loan B following the amalgamation. Numbers in parentheses are standard deviations. (1), Nebraska (For a detailed explanation of our data sources and methodology, see Appendix I. The rating action on Joye Media SLU reflected its failure to meet interest payments and amortization on its first- and second-lien debt instruments due June 28, 2021. Liberia, Syrian Arab Republic, and Togo, Latin America and Caribbean. (2), Liechtenstein Investment-grade-rated issuers globally tend to exhibit greater ratings stability (as measured by the frequency of rating transitions) than those rated speculative-grade (see table 20). (2), Fiji (5), Barbados Transition studies have repeatedly confirmed that higher ratings tend to be more stable and that speculative-grade ratings ('BB+' or lower) generally experience more volatility over a given time frame. Within this study, tables and charts are often presented using specific geographic regions. In contrast, the relationship is slightly more discontinuous when we examine rating transitions at the modifier (the plus or minus after a rating) level, but these variations are likely a result of sample size considerations, and we do not consider them significant (see table 23). For the second year in a row, there were no defaulters that began 2021 with investment-grade ratings ('BBB-' or higher) (see table 4). Of these new issuers, 83% were rated speculative-grade. The use of the term "methodology" in this article refers to data aggregation and calculation methods used in conducting the research. Other sectors, such as consumer services, have had more frequent default cycles, both during and between economic cycles. US Credit Compass signals further deterioration as lending standards tighten. (992), Financial Institutions The largest gaps were in financial institutions and real estate, which each had a four-notch difference. It had repurchased about US$95 million of debt in the open market so far in the year. The negative outlook reflected the issuer's vulnerable capital structure and tough operating conditions. As in most recovery periods, defaults fell relative to the prior year, with the S&P Global Ratings global speculative-grade corporate default rate falling below 2% for only the eighth time in the past 41 years, to 1.7% (see chart 1 and table 1). (2), Republic of Moldova For example, of the 275 companies that defaulted within 12 months of having been rated, 256 (or 93.1%) were originally in the 'B' or 'CCC'/'C' categories (see table 12). (8), Sovereign & Supranational The default count rose to nine, up from a revised six in January. For instance, an issuer continually rated from the middle of 1984 to the middle of 1991 would appear in the seven consecutive one-year transition matrices from 1985-1991. Our ongoing enhancement of the database used to generate this study could lead to outcomes that differ to some degree from those reported in previous studies. (1), Idaho Structured Finance - Global: March 2023 structured rating transitions ( Jan 2009 - Mar 2023) - Excel supplement. (1), Texas Data provided in table 13 also differs from default rates in table 24 owing to the use of the static pool methodology. (6), China (2), Nigeria articles The date the debtor filed for, or was forced into, bankruptcy. On March 2, 2021, S&P Global Ratings lowered its issuer credit rating on China-based (incorporated in Cayman Islands) company Sunshine 100 China Holdings Ltd. to 'SD' from 'CCC-'. With its highly developed financing markets, the U.S. also has a considerably higher share of speculative-grade companies than other regions--it accounted for 52.5% of speculative-grade companies globally at the beginning of 2021. The issuer repurchased a significant portion of its senior secured term loan at an average price well below par, about US$0.65 per dollar. *Fallen angels that survived to Jan. 1 of the year after they were downgraded. On Dec. 9, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Malaysia-based engineering and construction company Serba Dinamik Holdings Bhd. Credit conditions in the euro area remained resilient in Q4 2022 but will deteriorate sharply in the current quarter, according to our new indicator. (2), SMEs and Mid-caps: A Focus on Funding However, in most of the relatively benign period since the financial crisis, the two series have diverged somewhat, as they did in 2004-2007. On April 15, 2021, we raised our issuer credit rating on the company to 'CCC+' from 'SD'. On Oct. 13, 2021, we raised the long-term issuer credit rating on Summit to 'B' from 'SD' after it launched a refinancing transaction involving its two wholly owned subsidiaries, Summit Midstream Holdings LLC and Summit Midstream Finance Corp. The cumulative default rates in this study average the experience of all static pools by first calculating marginal default rates for each possible time horizon and for each static pool, weight-averaging the marginal default rates conditional on survival (survivors being nondefaulters), and accumulating the average conditional marginal default rates (see tables 24-26 and 30-32). The company entered into a forbearance agreement with its lenders on June 21 to defer its interest payment due June 15, 2021. Since 1981, the 'B' rating category has accounted for 1,767 defaults (55.7% of the total from initial rating), well more than double the number of defaults from the 'BB' category (see tables 10 and 12). (2), Guinea-Bissau S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. DRA also publishes impairment and loss studies for structured finance sectors. (6), Japan In addition, it offered a lower interest rate of inflation plus 6.5% to its debentureholders (versus previous inflation plus 12.6%). Riverbed Parent Inc. and Sunshine 100 China Holdings Ltd. defaulted twice, and Peabody Energy Corp. defaulted three times. (5), Macedonia (former Yugoslav Republic of) The creditors agreed to extend the maturity of its 665 million senior bank debt and Swiss franc (CHF) 350 million unsecured notes by five years. 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. On April 30, 2021, we raised our issuer credit rating on Future Retail Ltd. to 'CCC-' from 'SD' after the completion of the debt restructuring improved the liquidity status of the company as it pushed its debt repayments further out. (1), District of Columbia The financial sponsors of the company agreed to contribute US$25 million for its liquidity. Credit quality improved significantly in 2021, with a record-low downgrade rate (5.5%) and one of the highest annual upgrade rates (10.2%). The positive outlook reflected the potential for a higher rating if AMC prioritized its sizable cash balance toward reducing its heavy debt load and interest burden, thereby improving its cash flow prospects and the sustainability of its capital structure. For the most part, the speculative-grade share of every sector has grown over the past decade, with the exception of the real estate and transportation sectors. The rating action followed an amendment to the terms of the company's first and second term loans. However, the speculative-grade share of both the financial and nonfinancial sectors has been growing in recent years. (15), Eurozone 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, Moldova, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and U.K. Australia, Brunei Darussalam, Canada, Israel, Japan, Republic of Korea, New Zealand, and Singapore. (2), Congo, Democratic Republic of (DRC) (7), Czech Republic Senior debt lenders also agreed to an option in exchange of annual interest payments. This study--in line with previous default studies--confirms that over the long term (1981-2021), higher ratings are more stable than lower ratings. 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. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. (2), Paraguay These weights are based on each cohort's rating level's contribution to the 41-year total issuer base for each rating level. 1. (2), Suriname (1), High Yield Interest Throughout the year, the U.S. accounted for the majority of the debt, and the largest defaulter in 2021 was Cayman Islands-based homebuilder China Evergrande Group, with $11 billion outstanding in rated debt at the time of its default. It is important to note that S&P Global Ratings' credit ratings do not imply a specific probability of default. /ratings/en/research/articles/220413-default-transition-and-recovery-2021-annual-global-corporate-default-and-rating-transition-study-12336975 Earlier, on Nov. 16, 2021, we lowered our long-term issuer credit rating on the company to 'CCC' from 'B' because we believed the company might not have access to its cash balance to fulfill its debt obligations. Key Features On Jan. 26, 2021, we raised our issuer credit rating on the issuer to 'CCC+' from 'SD' following the completion of the debt restructuring. Therefore, every update revises results to the same starting date of Dec. 31, 1980, to avoid continuity problems. When comparing default rates across sectors, we note some key differences between the industries. On a year-over-year basis, the number of rated defaults globally was much lower in every quarter of 2021 relative to 2020, and the quarterly pace of defaults consistently declined as the year wore on (see chart 16). (10), Hungary Default Report. The company also announced the suspension of dividends on its outstanding preferred stock. Excludes confidentially rated defaults. We expected the issuer's revenue and cash flow would not recover to pre-COVID-19 levels until at least 2022. 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. This would provide greater operational and financial flexibility for the issuer. On Nov. 11, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Brazil-based transportation infrastructure group Investimentos e Participacoes em Infraestrutura S.A. - Invepar to 'D' from 'CC'. 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