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On Feb. 25, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Canada-based oilfield services provider Calfrac Well Services Ltd. to 'SD' from 'CC' after the company completed a distressed exchange on the U.S. dollar unsecured notes due in 2026. On May 11, 2020, we withdrew the ratings at the issuer's request. 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. The group issued a US$450 million senior secured term loan and US$111 million senior secured term loan due in May 2024 and refinanced the US$111 million additional RCF that was maturing in December 2020. Sovereign default and recovery rates, 1983-2020 - Excel Data: 15 Sep 2009 . 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 issuer's business had been suffering and further deteriorated due to the coronavirus pandemic. On July 6, 2020, we raised our issue credit rating on Serta Simmons to 'CCC+' from 'SD', reflecting the improved liquidity profile, although the capital structure is still highly leveraged, and the company amended and extended its asset-based lending credit facility maturity to August 2023 from November 2021. 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. Default, Transition, and Recovery: Growing Strains Could Push The U.S. Speculative-Grade Corporate Default Rate To 4% By December 2023. 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. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENTS FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. For this study, the Lorenz curve is plotted with the x-axis showing the cumulative share of issuers, arranged by rating, while the y-axis represents the cumulative share of defaulters, also arranged by rating. On June 1, 2020, we lowered the credit ratings to 'D' after the issuer commenced Chapter 11 bankruptcy restructuring, and subsequently on June 25, 2020, the ratings were withdrawn at the issuer's request. Conversely, among nonfinancial entities, willingness to operate with higher leverage to fund share buybacks, expand businesses, or finance acquisitions has gradually increased. As an example, the two-year column of table 32 shows the two-year default rates (not conditional on survival) for each static pool. We considered the transaction as distressed given the company's weak operating performance, negative cash flow generation, and near-term debt maturities. "ESPP" means the Company's 2020 Employee Stock Purchase Plan, . The company aimed to restructure its debt, capital structure, and business model to adapt to post-COVID-19 prospects. (EDGAR Online via COMTEX) -- NETSCOUT SYSTEMS INC false 0001078075 0001078075 2023-02-22 2023-02-22 (PDF) Curve fitting of the corporate recovery rates: the comparison of This nonpayment was considered a general default, and the company was not expected to be able to pay most of its obligations. The drilling market was under stress, and the drop in oil prices and the pandemic furthered worsened the problem. to 'SD' from 'CCC-' after the issuer missed principal payment on its IDR150 billion domestic notes and entered a 10-day grace period. On May 11, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. 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. As an example, if 'CCC'/'C' rated entities made up 10% of the total population of issuers at the start of the time frame examined (x-axis) and 50% of the defaulters (y-axis), then the coordinate (10, 50) would be the first point on the curve. Default activity in 2020 did increase, but to a lesser extent than recent recessions (see chart 1 and table 1). On July 17, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Marshall Islands-based offshore driller Seadrill Partners LLC, a subsidiary of Seadrill Ltd., to 'SD' from 'CCC' after the issuer announced that it would use the 30-day grace period for interest payment. Following Acharya et al. The shareholder made an offer to purchase the remaining 2023 notes. Exploring Industry-Distress Effects on Loan Recovery: A Double Machine Overall, ultimate recovery rates for project finance bank loans are similar to those for senior secured corporate bank loans and overall corporate bank loans. Earlier, on April 1, 2020, we lowered our issuer credit rating on Gavilan to 'CCC-' from 'CCC+' after the issuer drew the full amount on the US$200 million reserve-based lending facility, which was up for redetermination in April 2020. PDF China Banking System Credit trends amid policy-led recovery and a In contrast, the issuer with the shortest time to default (36 days) was a confidentially rated U.S.-based leisure/media company. Moody's expects the overall default rate for commodity companies to fall sharply this year, to 3.4% from 12.6% in 2016. Corporate default rate climbed in December. Rising stars. On Nov. 19, 2020, we lowered our issuer credit rating to 'SD' from 'CC 'as the company completed its previously announced 5.75% senior notes exchange. Over each time span, lower ratings correspond to higher default rates (see chart 4 and chart 25), and this relationship holds true when broken out by rating modifier (see tables 24 and 26) and by region (see table 25). On Dec. 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based payroll software provider Zellis Holdings Ltd. to 'SD' from 'CCC+'. Earlier, on May 15, 2020, S&P Global Ratings withdrew the issuer credit ratings at the issuer's request. On Feb. 14, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Kansas-based Pizza Hut restaurants franchise operator NPC International Inc. to 'SD' from 'CCC-' after the company decided not to make interest payments due Jan. 31, 2020. All of the defaulters in 2020 with active ratings immediately prior to default were rated in the lowest rating categories. Broadly speaking, the average and median times to default for each rating category are longer when based on the initial rating than when based on subsequent ratings, particularly for speculative-grade ratings. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. For instance, the 1981 static pool consists of all companies rated as of 12:00:01 a.m. on Jan. 1, 1981. 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%. Earlier, on June 9, 2020, we withdrew the issuer credit ratings at the issuer's request. Combined global bond issuance for nonfinancial corporates and financial services companies hit $5.7 trillion--a 27% increase from the high in 2019. With the strongly improved U.S. economic outlook for 2021, the speculative-grade negative . Fourth quarter earnings releases have provided insight into corporate margin pressures, but labor market commentary signals that some of these headwinds may be abating. 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). Credit quality declined in 2020, with increasing default and downgrade rates, while the upgrade rate fell to an all-time low of 2.8%. On Aug. 21, 2020, we withdrew the issuer credit ratings on the company at its request. This study analyzes the rating histories of 21,693 companies that S&P Global Ratings rated as of Dec. 31, 1980, or that were first rated between that date and Dec. 31, 2020. *U.S., Bermuda, and Cayman Islands. Post the transaction, the company will have new senior secured three-and-half-year US$171.4 million notes due in 2024 and five-year US$251 million notes due in 2025. On June 4, 2020, we raised the issuer credit rating to 'CCC-' from 'SD', reflecting our view of the company's still unsustainable capital structure, very high debt service burden, and weak liquidity. 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. Many of the tables and charts in this study display averages of default rates, transition rates, and Gini ratios. S&P Global Ratings viewed Technicolor's completed debt-to-equity swap as equivalent to a default. An S&P Global Ratings issuer credit rating is a forward-looking opinion about an obligor's overall creditworthiness. All of S&P Global Ratings Research's default studies have found a clear correlation between ratings and defaults: The higher the rating, the lower the observed frequency of default, and vice versa. On Oct. 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based transportation company Toro Private Holdings I Ltd. to 'SD' from 'CC' after the company completed the announced debt exchange and restructuring, which we view as distressed and tantamount to default, as lenders receive less than the original promise of the debt instruments. The performance of Moody's corporate debt ratings - Q4 2022 - Excel supplement MOODY'S . On Nov. 3, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' after the company completed the distressed exchange. The date the debtor filed for, or was forced into, bankruptcy. The downgrade followed the completion of the partial repurchase of senior secured notes. Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby disclosesthat most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. content 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 52.6% of speculative-grade companies globally at the beginning of 2020. "The default outlook for 2022 will continue to depend on the pace of economic growth . The issuer was engaged in discussions with creditors for a debt restructuring. On June 5, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based fitness service provider 24 Hour Fitness Worldwide Inc. to 'D' from 'CCC+' after the issuer missed interest payments on its senior notes due 2022 and entered into the grace period. The issuer also deferred on principal payments. 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. As laid out in the American Recovery and Reinvestment Act, the plan would cost $825 billion Over the long term, the global weighted average Gini coefficient was 82.8% over the one-year horizon, 75.3% over three years, 71.5% over five years, and 69.2% over seven years (see table 27). On June 18, SMLP announced it repurchased approximately $90 million of its 2022 senior unsecured notes and 2025 senior unsecured notes for approximately $50 million in cash. In contrast, the relationship is slightly more discontinuous when we examine rating transitions across modifiers (the plus or minus after a rating), but these variations are likely a result of sample size considerations, and we do not consider them significant (see table 23). On Aug. 19, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Georgia-based building products producer Omnimax International Inc. to 'D' from 'CCC-' after the issuer announced that it missed a principal repayment due on its US$385 million senior notes. 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. 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. 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. 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. This brought the downgrade-to-upgrade ratio to a new high of 6.6. 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. Foreign currency translation unfavorably impacted Moody's revenue by 2%. In addition, at the same share price, SAS offset SEK1,500 million of subordinated perpetual capital securities with about 1,164 million of common shares. The speculative-grade default rate rose in the U.S. (to 6.6%), Europe (5.3%), emerging markets (3.1%), and other developed countries (5.9%). The company was acquired by an unrated company. On Dec. 23, 2020, S&P Global Ratings raised its issuer credit rating to 'CCC+' from 'SD' based on the company's recent operating performance, improved cash flow, and financial transactions, which helped in improving its maturity profile and lowering interest rates. To facilitate the proposed exchange, the issuer entered a new term loan facility of US$190 million maturing in 2024. On May 27, 2020, Texas-based retailer Tuesday Morning Corp. defaulted as the company filed for Chapter 11. As part of the exchange, current owner Bain Capital made a 40 million equity contribution. 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. On May 22, 2020, S&P Global Ratings lowered its issuer credit rating on Illinois-based generic pharmaceutical manufacturer company Akorn Inc. to 'D' from 'CC' after the issuer petitioned for reorganization under Chapter 11 of the U.S. Bankruptcy Code. 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 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. 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. The issuer reached an agreement with 78% of its intellectual property notes lender and 71% of its term loan lenders to exchange around US$1.65 billion of debt for equity. While these payments would have a higher interest rate, we considered this modification a selective default since investors were receiving less than they were originally promised under the security, partly because the amendment would delay the timing of the interest payments. Earlier, on June 10, 2020, we lowered our issuer credit rating on Serta Simmons to 'CC' from 'CCC-' following the company's announcement that it entered into a transaction support agreement with a majority of its first- and second-lien term loan lenders to recapitalize the company. Default, Transition, and Recovery: Global Corporate Defaults Drop A market share war between Saudi Arabia and Russia led to a crash in crude oil prices, on top of the significant demand destruction for crude oil and natural gas due to the coronavirus. Based on quarterly intervals of measurement (nonannualized), default rates in second-quarter 2020 reached their highest point since the second quarter of 2009 (see chart 16). On Nov. 3, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' on the basis of increased liquidity. 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. In line with expectations, the Gini coefficients decline over time because longer time horizons allow for greater credit degradation among higher-rated entities. Export PDF Export CSV Email . CEC expects to achieve a balance sheet restructuring that supports its reopenings and long-term strategic plans. These weights are based on each cohort's rating level's contribution to the 40-year total issuer base for each rating level. We used the same method to form static pools for 1983-2020. last several cycles haven't had Key to those discussions at pandemics and land wars in Eu-their two-day policy meeting 0 0 Units in buildings with ve units or more 0 rope in them." will be estimating how much The Fed's rate moves didn't 1980 '90 2000 '10 '20 1980 '90 2000 '10 '20 1980 '90 2000 '10 '20 their previous . 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. articles 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). Research & Ratings: Default & Ratings Analytics - Moody's Ratings On May 21, 2020, S&P Global Ratings withdrew its ratings on the issuer. She joined Moody's in 2007. 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. 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. Complementary role in model validation and as default rates and decrease of recovery rates registered during a substantial part of the 1999-2009 period. As coincident indicators, the proportion of new speculative-grade ratings at 'B-' or lower in the U.S. and the year-end U.S. speculative-grade default rate generally mirror each other throughout most of their shared history (see chart 17). 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 Oct. 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Massachusetts-based foodservice equipment and supplies distributes TMK Hawk Parent Corp. to 'SD' from 'CCC' after the issuer completed a recapitalization transaction and issued a new US$120 million super-priority first out term loan, which was provided by a majority of its first-lien lenders. On Oct. 15, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC', with a negative outlook, considering the company's ability to improve its liquidity. On Sept. 18, 2020, we placed the issuer credit ratings on CreditWatch with negative implications after Argentina's central bank tightened foreign exchange accessing regulations. 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%. Distribuidora Internacional de Alimentacion S.A. On a year-over-year basis, the number of rated defaults globally was higher in every quarter of 2020 relative to 2019 (see chart 14). 'R' (regulatory intervention) indicates that an obligor is under regulatory supervision owing to its financial condition. The company was to pay 12.0% and 14.5% PIK interest in June and December, respectively, rather than the previous 10.0% rate. 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. In a small number of cases, we use the subordinated debt rating or the senior secured rating as the proxy. 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'). The rating action followed the issuer's exchange of its senior secured notes due 2027 for the new notes, including the PIK of the four quarterly principal and interest payments in the next 12 months, which are repaid pro rata during the remaining term of the notes. In 2019, the issuer derived about 41% of its revenue from the food service segment and about 32% from the retail segment. 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. Help No Longer Wanted? On July 29, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' following the issuer's completion of the distressed exchange. 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. On April 12, 2020, Pace Industries Inc. filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. We deem 'D', 'SD', and 'R' issuer ratings to be defaults for the purposes of this study. Although MCS had sufficient liquidity to make the interest payment, S&P Global Ratings believed that the company was unlikely to pay it within the five-day grace period, given its unsustainable capital structure. Earlier, on April 10, 2020, we lowered the rating on the issuer to 'CC' from 'CCC-' after it was unable to obtain mezzanine debt lenders' consent to extend the loan and had insufficient liquidity. Earlier, on June 14, 2016, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. On Aug. 10, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based oil field service and drilling service provider UTEX Industries Inc. to 'D' from 'CCC' after the issuer opted for missing interest payments on its first-lien and second-lien notes. In table 13, the times to default are from the date that each entity received each unique rating in its path to default. Of the defaulted companies in 2020, 7.5% were unrated just prior to default, which is well below the long-term percentage of 16.2% (see chart 13). If S&P Global Ratings' corporate ratings only randomly approximated default risk, the Lorenz curve would fall along the diagonal. 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. At times, however, some of these subsidiaries might not yet have been covered by a parent's guarantee, or the relationship that combines the default risk of parent and subsidiary might have come to an end or might not have begun. The high default rate for commodity sector in 2016 was caused by low oil prices, among other factors, and more than half of last year's 144 defaults documented by Moody's occurred in commodity . . On Dec. 17, 2020, S&P Global Ratings raised its issuer credit rating to 'CCC+' from 'D', reflecting the company's position post restructuring. On May 8, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Bermuda-based diamond miner Petra Diamonds Ltd. to 'D' from 'CCC+' following the issuer's announcement to enter into a grace period of 30 days for interest payment on it US$650 million debt. Angola, Argentina, Armenia, Aruba, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belize, Bhutan, Bolivia, Bosnia-Herzegovina, Brazil, Brunei Darussalam, Cambodia, Chile, China, Colombia, Costa Rica, Curacao, Dominican Republic, Ecuador, Egypt, El Salvador, Fiji, Gabon, Georgia, Ghana, Grenada, Guatemala, Honduras, Hong Kong, India, Indonesia, Israel, Jamaica, Jordan, Kazakhstan, Kenya, Korea (Republic of), Kuwait, Lebanon, Liberia, Macao Special Administrative Region of China, Malaysia, Marshall Islands, Mauritius, Mexico, Mongolia, Morocco, Namibia, Netherlands Antilles, Nigeria, Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Qatar, Russian Federation, Saudi Arabia, Singapore, South Africa, Sri Lanka, Syrian Arab Republic, Taiwan, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Turks and Caicos Islands, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, Vietnam, and Yemen. Corporate downgrades also increased, to near an all-time high. The issuer was also planning for a comprehensive debt restructuring involving debt-for-equity swaps. On Feb. 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Pennsylvania-based pet food distributor PFS Holding Corp. (PFS) to 'SD' from 'CCC-' after the issuer missed interest payments on its US$ 280 million first-lien bank loan due on Feb. 18, 2020. On Nov. 20, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Minnesota-based exploration and production (E&P) company Northern Oil and Gas Inc. to 'SD' from 'CCC+' after the issuer disclosed debt exchanges, which over the past few quarters represent a meaningful amount of the original principal. The 50.3% at the end of 2020 does represent an all-time high, albeit by a margin of only 0.1%. Trends in the one-year Gini ratio emerge during periods of both high and low default rates, which reflects the natural relationship between the two extremes.