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 All rating changes that occur in between are ignored. Specifically, 87.6% were rated 'CCC+' or lower just prior to default, which is much higher than the 69.4% long-term average. As one measure of ratings performance, the cumulative share of defaulters was plotted against the cumulative share of issuers by rating in a Lorenz curve to visually render the accuracy of its rank ordering (for definitions and methodology, refer to Appendix II). On March 18, 2020, S&P Global Ratings raised its ratings on the issuer to 'CCC' from 'SD', reflecting our view that there was a possibility of additional debt restructuring. The safeguard procedure, which we considered tantamount to default, implies that the debt of the protected companies is frozen, allowing for a reorganization of liabilities and a grace period. The filing preceded Covia's entry into a restructuring support agreement with its lenders, which was to involve a comprehensive restructuring of the company's debt against the backdrop of energy price shocks and the recession caused by the global pandemic. 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. 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. Earlier on Feb. 13, 2020, we withdrew the ratings at the issuer's request. The issuer was also planning for a comprehensive debt restructuring involving debt-for-equity swaps. 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. As a supplement to many of the averages and time series presented in this study, standard deviations are also shown to provide a gauge of the dispersion of data behind these averages. For instance, the 1981 static pool consists of all companies rated as of 12:00:01 a.m. on Jan. 1, 1981. All 1981 static pool members still rated on Jan. 1, 2020, had 40 one-year transitions, while companies first rated on Jan. 1, 2020, had only one. Difference between last four quarters and weighted average, Largest corporate defaulters by outstanding debt amount, Texas Competitive Electric Holdings Co. LLC. 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+'. Earlier, in 2004, S&P Global Ratings withdrew its ratings on the company. On May 27, 2020, we lowered our ratings on the issuer to 'D' from 'SD' after it filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code, and subsequently on June 26, 2020, we withdrew our credit ratings. Issuers rated 'AAA' were still rated 'AAA' one year later 87.1% of the time, while issuers rated in the 'CCC'/'C' category retained those ratings just 43.1% of the time. On Aug. 3, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Missouri-based motion picture exhibitor AMC Entertainment Holdings Inc. to 'SD' from 'CC' after the issuer completed the distressed exchange of its subordinated debt at 70%-75% of its par value. 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. For the transition matrices in tables 21-23 and 33-44, the standard deviation for each cell in a given matrix is a weighted standard deviation, calculated using the data from each of the underlying cohort years that contribute to the averages, weighted by that cohort year's issuer base for each rating level. Outerstuff reached an agreement with its lenders to extend its term loan maturity to December 2023 and paid its lenders the principal and interest it missed in March, June, and September 2020. U.S., Bermuda, and the Cayman Islands, Other developed: 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. On Nov. 17, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD', reflecting our assessment of the company's credit risk following the debt repurchases. The status of the issuer's subsidiary, Anagram International, is changed to unrestricted subsidiary, which raised another US$110 million of secured debt. On Aug. 26, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based fitness club operator Town Sports International Holdings Inc. to 'SD' from 'CC' after the issuer failed to pay its US$14 million outstanding revolver balance. This growth of the publicly rated speculative-grade market in Europe has resulted largely from newly assigned speculative-grade ratings (in addition to downgrades). This is slightly higher than the post-Lehman Bros. default (2009 onward) annual average of $1.4 billion. 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. The Credit Transition Model and Credit Risk Calculator give users access to easy to use, web-based tools to quickly calculate customized rating transition matrices and default rates based on the DRD data. At the end of 2020, speculative-grade issuers once again became the global majority, accounting for 50.3% of rated issuers, from 49.9% at the beginning of the year. S&P Global Ratings lowered its oil and natural gas price assumptions and forecasted that Brent crude would average $30 per barrel while West Texas Intermediate (WTI) averages $25 per barrel for the remainder of 2020. The rating action followed the company's distressed exchange after repaying only a portion of amount outstanding on its 1.5-lien notes. The study introduces two kinds of models of distribution, Beta distribution estimation and kernel density distribution estimation, to simulate the distribution of recovery rates of corporate loans and bonds. The MarketWatch News Department was not involved in the creation of this content. On June 25, 2020, we withdrew the issuer credit rating on Unit Corp. at its request. 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. 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. Among all Moody's-rated The issuer halted production at some of its plants because of the impact of the coronavirus pandemic and reached an agreement with its senior secured lenders for a financial restructuring plan. Of these new issuers, 78% were rated speculative grade. On May 6, 2020, Techniplas LLC filed for Chapter 11 protection under the U.S. Bankruptcy Code with a bondholders' offer of US$105 million, which involves exchanging equity for debt. We believe that COVID-19-related fitness club closures have materially impaired the company's liquidity position. Meaningfully lower yoy default rates in 2021 are expected for the energy and retail industries, which produced a significant volume of defaults over the prior five years. 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. On Aug. 6, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC-' from 'SD'. We viewed the debt exchange as distressed due to the company's weak operating performance, liquidity constraints, and lack of compensation to existing lenders for the exchange. Moody's Investors Service (MIS) First Quarter Revenue Down 20%. Later, on Aug. 11, 2020, we withdrew our issuer credit ratings on the company at its request. 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. The issuer was looking for alternatives while remaining operational through bankruptcy, with the help of operational free cash flows and debtor-in-possession financing, approximately US$100 million. 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. 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. All default rates that appear in this study are based on the number of issuers rather than the dollar amounts affected by defaults or rating changes. On May 27, 2020, Texas-based retailer Tuesday Morning Corp. defaulted as the company filed for Chapter 11. On Nov. 3, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' after the company completed the distressed exchange. Europe: There were three additional defaults in 2021 following our last report on Dec. 9, 2021: Malaysia-based engineering and construction company Serba Dinamik Holdings Bhd., China-based (Cayman Island incorporated) real estate company China Evergrande Group, and One confidential issuer. For both axes of the Lorenz curve, the observations are ordered from the low end of the ratings scale ('CCC'/'C') to the high end ('AAA'). On Nov. 6, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' on completion of restructuring. These default rates are the same that appear in table 24 and are average cumulative default rates conditional on survival. A bankruptcy filing or legal receivership by the debt issuer or obligor that will . This study limits the reporting of default rates to the 15-year time horizon. The higher default rates for nonfinancial sectors are not surprising, given their higher concentration of speculative-grade issuers. On Oct. 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Indonesia-based retailer PT Alam Sutera Realty Tbk. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. 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). On July 31, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' on the basis of increased liquidity. 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. Later, on Dec. 10, 2020, we raised the issuer credit rating to 'CCC+' from 'SD' after the company completed debt repurchases on favorable terms.
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