Note: Numbers in parentheses are standard deviations. The company extended the maturity on its revolving credit facility of US$135 million by one week. 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 average number of notches for an upgrade moved to 1.19 in 2020, while downgrades remained at an average of 1.46 notches--the highest rate since 2010 (when the average was 1.52 notches) (see chart 8). Posted on . The outlook is negative, reflecting the company's unsustainable leverage and the risk that liquidity could deteriorate without an improvement in sector conditions. The CreditWatch negative reflected Avianca's weakening liquidity and that the absence of extraordinary financial support from shareholders or the Colombian government could force the company to default on the repayment of its 8.375% senior unsecured notes due 2020. The squared difference between each cohort's transition rate and the weighted average--which is the data point in each cell--is multiplied by each cohort's weight. 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 relationship between higher ratings and higher ratings stability holds even over longer time horizons (see table 21) and when broken out by region (see table 22). On June 5, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Colorado-based APC Automotive Technologies Intermediate Holdings LLC to 'D' from 'CCC' after the issuer announced it was commencing Chapter 11 bankruptcy proceedings. 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. 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 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'. 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. In 2021, we rated over $6 trillion of issuance and served more than 1,100 issuers who accessed the markets for the first time. 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. The company finalized a tender offer to repurchase $213 million of its outstanding $255 million 12% senior secured notes due 2022. On Nov. 4, 2020, S&P Global Ratings withdrew its ratings on the issuer. But in both cases, defaults and downgrades were largely limited to the lowest rating categories, resulting in generally strong ratings performance in 2020. Recovery rate is essential to the estimation of the portfolio's loss and economic capital. On April 8, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based exploration and production company SPR Holdings LLC to 'D' from 'CCC+' after the issuer missed an interest payment due April 1, 2020. On Aug. 21, 2020, we withdrew the issuer credit ratings on the company at its request. This also applies to transition matrices that span longer time horizons. The syndicated creditors will now acquire 49% of the capital of the operating business. On Dec. 10, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' following the company's debt exchange. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. Meanwhile, the downgrade rate more than doubled, to 18.5% from 9.0% in 2019. On Nov. 26, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based cinema operator Cineworld Group PLC to 'SD' from 'CCC-' following its distressed debt issuance transaction. On Dec. 16, 2020, S&P Global Ratings withdrew the issuer credit ratings at the issuer's request. For the most part, the speculative-grade share of every sector has grown over the past decade, with the exception of the real estate sector. On Dec. 8, 2020, we raised our rating on Outerstuff to 'CCC' from 'SD', reflecting its restructured debt and licensing agreements, though it still has high leverage and less than adequate liquidity. Of the rated defaulters at the beginning of 2020, none began the year with an investment-grade rating. The issuer also deferred on principal payments. Among all Moody's-rated In turn, this can result in a relatively fast descent into default (see chart 11). The exchange occurred at a weighted average ratio of approximately US$557 per US$1,000 of principal exchanged plus a total of 1.76 million warrants with a strike price of US$5.60. On July 30, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based oil and gas company Nostrum Oil and Gas PLC to 'SD' from 'CCC-' after the issuer announced nonpayment of interest on 2022 notes and 2025 notes and would likely use the grace period. When an issuer defaults, we assign that default to all of the static pools to which the issuer belonged. On Sept. 28, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'D' after the issuer emerged from bankruptcy with a new capital structure comprising a priority exit facility due 2023. Historically, nonfinancial defaulters tend to have a much smoother and shorter path to default (see chart 12). to 'SD' from 'CC' following its distressed exchange. The downgrade came after the issuer failed to make the term loan principal and interest payment due March 31 and subsequently decided to enter into a forbearance agreement with lenders on April 6. 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. (EDGAR Online via COMTEX) -- NETSCOUT SYSTEMS INC false 0001078075 0001078075 2023-02-22 2023-02-22 Earlier, on Jan. 17, 2020, we withdrew our ratings on the issuer due to insufficient information. Specifically, 87.6% were rated 'CCC+' or lower just prior to default, which is much higher than the 69.4% long-term average. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. This act was classified as a general default because the issuer had not paid a substantial amount of its obligations. On Feb. 21, 2020, S&P Global Ratings lowered its long-term issuer credit rating on China-based high technology service provider Tunghsu Group Co. Ltd. to 'SD' from 'CCC-' after the issuer missed interest and principal payments on three onshore bonds. Although dollar amounts provide information about the portion of the market that is affected by defaults or rating changes, issuer-weighted averages are more useful measures of the performance of ratings. The issuer announced that it completed a transaction to exchange US$700 million of the US$1.476 billion senior unsecured debt due in 2028 with US$400 million in cash and 10 million common shares. As part of the exchange, current owner Bain Capital made a 40 million equity contribution. For both broad categories over the past three years, all of these defaulters were rated in the lowest rating categories several years ahead of their eventual default. On March 26, 2020, we withdrew our issuer ratings at the company's request. On July 27, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based party goods retailer and wholesaler Party City Holdings Inc. to 'SD' from 'CC' after the issuer completed a distressed exchange, at 33.5% of par value for the debt exchanged. This was especially evident during the global financial crisis, when many highly rated banks defaulted within a short amount of time after initial downgrades. The downgrade to 'SD' follows GFamsa's missed interest and principal payments on its $59.1 million outstanding senior unsecured notes on June 1, 2020. 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. 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. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. Similarly, the second- and third-year conditional marginal averages--shown in the "Summary statistics" section at the bottom portion of the table--were 3.61% for the first 39 pools (96.39% of those companies that did not default in the first year survived the second year) and 3.23% for the first 38 pools (96.77% of those companies that did not default by the second year survived the third year), respectively. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated. 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. The higher default rates for nonfinancial sectors are not surprising, given their higher concentration of speculative-grade issuers. For example, of all the companies that defaulted during 1981-2020, only two entities rated 'AAA' at inception defaulted within seven years. Earlier, on March 31, 2020, we lowered our issuer credit rating on Global Knowledge to 'CC' from 'CCC-' as the company's liquidity remained very weak and it faced substantial near-term debt maturities, as well as needed to address its unsustainable capital structure. The gap becomes even wider over longer time horizons, such as three years and 10 years (see chart 19). In this proceeding, the issuer was to obtain US$80 million in debtor-in-possession, and if the prepackaged plan was approved, then the issuer would emerge with US$400 million of debt. 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. Post default, the issuer has been upgraded three times, leading to a 'B' rating on Dec. 14, 2020, with a positive outlook, due to its improved financials and liquidity. On May 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New Jersey-based vehicle renting and leasing service provider Hertz Global Holdings Inc. to 'SD' from 'CCC-' after the issuer missed lease payments on some of its asset-backed securities. Sources: High yield spreads, default rate and unemployment assumptions sourced from Moody's Investors Service . This brought the downgrade-to-upgrade ratio to a new high of 6.6. . In light of our expectation of a continued economic recovery and accommodative funding conditions in the coming year, Moody's Analytics Credit Transition Model projects the global default rate will fall to 1.7% at the end of this year. We consider the exchange distressed and tantamount to default because, in our view, the transaction offers less than the original promise for the security. The issuer's financial and operational situation had worsened because of the coronavirus pandemic. On Dec. 23, 2020, we raised the issuer credit ratings to 'B-' from 'D'. 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. The rating action followed the company's distressed exchange after repaying only a portion of amount outstanding on its 1.5-lien notes. 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. On Dec. 8, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' following debt repurchases. On June 15, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Calfrac to 'D' from 'CCC-' after the issuer missed an interest payment due on June 15 and entered into the grace period. This included two main components: first, the conversion of about 1,234 million of debt into a new 574 million facility and 660 million of equity on Sept. 22, 2020, and second, the issuance of 457 million of new debt to repay the US$110 million J.P. Morgan bridge facility and to support Technicolor's liquidity needs, undertaken in July and September 2020. On Dec. 9, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Tennessee-based health care services provider Community Health Systems Inc. to 'SD' from 'CC'. What is in the DRD? A mere 0.88% of the approximately $500 billion of U.S. CLOs issued from 1994-2009 that were rated by S&P Global Ratings experienced defaults, and no defaults were recorded among the AAA- and AA-rated tranches rated by Moody's. 7 In fact, default rates among CLOs were not only lower than those of CDOs, but also lower than those of similarly . Therefore, we believe Serta Simmons' capital structure remains unsustainable, especially amid an uncertain economic environment that could continue to pressure operating performance and cash flow. 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. The rating action followed the company's exchange of about $58.3 million in aggregate principal amount of its senior unsecured notes for $23.3 million in cash, or a 60% discount to par value. More generally, evidence from many countries in recent years suggests that collateral values and recovery rates can be volatile and, moreover, they tend to go down just when the number of defaults goes up in economic downturns. The transactions announced represented about 23% of total first- and second-lien term loans. 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). Subsequently, on June 29, 2020, S&P Global Ratings withdrew its ratings on the issuer. This is due to the company's interest in preserving the liquidity and financial flexibility to continue 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. We believed conditions for GNC were deteriorating substantially due to the coronavirus pandemic, the anticipated macroeconomic downturn, and the limited access to capital markets. Subsequently, we withdrew the ratings due to insufficient information. 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. The majority of the company's revenue comes from airports, depending on airline passenger travel, which has declined sharply because of the pandemic. On Jan. 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Virginia-based aerospace and defense service provider Constellis Holdings LLC to 'SD' (selective default) from 'CC' after the company failed to make a mandatory principal payment on its $872 million first-lien term loan. Moody's optimistic scenario entails a strong recovery leading to a default rate forecast of just 2% for the year-end and maintaining around the 2% area for the initial months of 2022. On July 20, 2020, we withdrew the ratings on the issuer. The depressed commodity prices, the company's liquidity position, and the ongoing capital needs to maintain production were the main factors behind the decision. Defaults reached a multiyear high in 2020, but this was largely limited to nonfinancial corporates. We considered the transaction to be a distressed exchange and tantamount to a default on the notes because the noteholders were not adequately compensated and received less than they were originally promised under the securities. On June 16, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Alta-based frac sand producer and supplier Source Energy Services Ltd. to 'D' from 'CCC-' after the issuer missed the interest payment due on June 15, and we believed the company was unlikely to make the interest payment within the 60-day grace period. On Aug. 19, 2020, we raised our issuer credit rating on Forum to 'CCC+' from 'SD' following the completion of its debt exchange for the majority of its 6.25% senior unsecured notes due 2021. These marginal averages are then used to calculate the cumulative average default rates in the row directly beneath them, as explained in the "Average cumulative default rate" section above. Across sectors, the average difference between an industry's median initial rating and the median initial rating of its defaulters was about 1.5 notches. 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. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses. On April 24, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Chilean casino operator Enjoy S.A. to 'D' from 'B-' after the company announced suspension of its shareholder meeting to treat a capital increase while the board decided to file for judicial reorganization. On Sept. 25, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' as the liquidity metrics significantly improved and debt was lower, with sources of cash exceeding uses by significantly more than 1.5x in the following 12 months. On July 30, 2020, S&P Global Ratings withdrew the ratings on the issuer. But despite the noticeable increase in defaults in 2020, peak default rates were much lower than during the financial crisis. Since the beginning of 2020, secured debtholders had received 95% of par, on average, in the form of cash, preferred stock, and common equity for US$130 million of secured notes due 2023. to 'D' from 'CCC-'. Defaulters initially rated 'CCC' show the reverse pattern, with the highest default rate observed in the first year, which is not surprising given the low rating and S&P Global Ratings' associated criteria (see "Criteria For Assigning CCC+, CCC, CCC-, And CC Ratings," Oct. 1, 2012). Broadly consistent with 2019, almost 54% of defaults in 2020 came from two sectors: consumer services and energy and natural resources (with 122 defaults combined). Earlier, on April 20, 2020, we lowered our issuer credit rating on Valaris to 'CCC-' from 'CCC+' following the collapse in oil prices that led to a sharp drop in demand for all oilfield services, and the offshore activity that was expected to be weak over at least the next two years, given the higher cost, higher operating risk, and longer payback periods for offshore projects relative to onshore plays. In 2010-2020, about 77% of the initial ratings that S&P Global Ratings assigned to new issuers were speculative grade. 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). On Feb. 21, 2020, S&P Global Ratings raised the issuer ratings to 'CCC-' from 'SD', after the issuer reached a settlement on the US$350 million notes via a partial exchange, and the new shareholder Beijing Energy Group Co. Ltd. can provide credit enhancements. Earlier, on May 1, 2020, we lowered our issuer credit rating on Chesapeake Energy to 'CC' from 'CCC'. 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. On July 20, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. On June 11, 2020, S&P Global Ratings withdrew its credit ratings on the issuer. As is the case globally, the proportion of speculative-grade ratings reached an all-time high in the U.S. as well, at 57.8%. 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. Data Report. Default activity in 2020 did increase, but to a lesser extent than recent recessions (see chart 1 and table 1).
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moody's corporate default and recovery rates 2020 pdf