moody's corporate default and recovery rates 2020 pdf

In addition to relief against very tight financial covenants, second-lien term loan lenders agreed to exchange annual cash interest payments of LIBOR plus 1,000 basis points (L+1000 bps) (1% LIBOR floor) for cash interest payments of L+100 bps (1% LIBOR floor) plus 1,000 bps PIK along with warrants to potentially acquire equity in the company. On May 11, 2020, we withdrew the ratings at the issuer's request. 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 Republic of, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the U.K. Among all Moody's-rated Revenue for MIS in the first quarter of 2022 was $827 million, down 20% from . On Oct. 19, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Oklahoma-based home security and monitoring company Central Security Group Inc. to 'SD' from 'CCC-' after the issuer completed a distressed debt exchange on the first-lien credit facility, in which lenders will exchange about US$396 million of their respective claims for a new US$200 million first-lien term loan due 2025 and most of the reorganized equity, and the second-lien lenders will exchange 100% of their US$50 million claim for 1% of the company's reorganized equity. Some issuers default after S&P Global Ratings no longer rates them. On May 20, 2020, S&P Global Ratings lowered its issuer credit rating on Oklahoma-based casino resort operator Downstream Development Authority (DDA) to 'SD' from 'CCC'. The issuer entered into a forbearance agreement for its term loan, which allowed it to defer the interest and principal payments for 30 days until April 30, 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%. NAIC - Supporting Insurance, Regulators, & Public Interest The company faced intense earnings pressure due to years of market-share declines, further exacerbated by the stay-at-home orders and economic recession stemming from COVID-19. Higher ratings show a negative correspondence with the observed frequency of default. 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). 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. In the seven-year Lorenz curve, speculative-grade issuers constituted 88.3% of defaulters and only 36.7% of the entire sample (see chart 29). For example, three-year transition matrices were the result of comparing ratings at the beginning of the years 1981-2018 with the ratings at the end of the years 1983-2020. On Nov. 27, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' following the company's debt issuance. We combined these percentages to obtain cumulative default rates for the 40 years the study covers (see tables 24-26 and 30-32). Average cumulative default rate calculation. On Dec. 10, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' following the company's debt repurchase. Even with a 60-day grace period, we did not expect payments. to 'D' from 'CC' after the issuer completed a distressed debt exchange for both its US$115 million notes due in April 2021 and US$370 million notes due in April 2022. 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). These two sectors, along with leisure time/media, had 2020 default rates in excess of 6%, which were much higher than other sectors and were markedly higher than their sectoral long-term weighted averages (see table 19). Combined global bond issuance for nonfinancial corporates and financial services companies hit $5.7 trillion--a 27% increase from the high in 2019. S&P Forecast. 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. On June 20, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Cary, N.C.-based information technology and business skills learning solutions provider GK Holdings Inc. to 'D' from 'CC' as the company did not make the interest payments due March 31, 2020, on its revolver and first- and second-lien term loans. Corporate Power; Enforceability : 35 : 3.3 : Company Board Approval; Fairness Opinion; Anti-Takeover Laws : 36 : . Later, on Sept. 16, 2020, we withdrew the issuer credit ratings on the company at its request. The rating action followed the issuer's completed exchange of its unsecured notes of cash and PIK. Acharya: Credit Risk - Introduction 7 Moody's Definition Of Default: "Credit Events" 1. 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 June 17, 2020, we withdrew the ratings on the issuer. On Dec. 16, 2020, S&P Global Ratings withdrew the issuer credit ratings at the issuer's request. Tables 30, 31, and 32 are broken out by the broadest rating classifications (all rated, investment grade, and speculative grade). The company was operating at a reduced rate of utilization--a production rate of 5.7 million tons per year against total nameplate capacity of 17.3 million tons per year. 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. This transaction was viewed as distressed because the exchange was at a much discounted rate, of about 70 cents on a dollar. With the strongly improved U.S. economic outlook for 2021, the speculative-grade negative . This report does not constitute a rating action. 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). 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. Defaulted issuers initially rated 'BB' show a similar pattern but peak a little later, in the fourth year. In fact, only four sectors had default rates in 2020 that were lower than their long-term averages (aerospace/automotive/capital goods/metal, forest and building products/homebuilders, financial institutions, and insurance) (see chart 2). On Nov. 3, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'D' on the completed exchange offer. Noteholders validly tendered about 69% of the total outstanding principal amount of the notes through the exchange. The company instructed the trustee to give a notice of optional redemption to redeem the remaining balance on Dec. 14, 2020. Moody's Investors Service analysts use this . The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. expect solid corporate bond issuance and low defaults. On July 23, 2020, S&P Global Ratings lowered its rating on the issuer to 'D' from 'CCC-' upon the company filing for Chapter 11 bankruptcy, following which, on Jan. 5, 2021, the ratings on the issuer were withdrawn. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. The company's credit quality deteriorated with the pressure on airlines' cash flows and liquidity due to the coronavirus pandemic. However, this poses no continuity problem because each study reports statistics back to Dec. 31, 1980. On July 29, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' following the issuer's completion of the distressed exchange. 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 Aug. 26, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Virginia-based travel assistance provider KCIBT Holdings L.P. to 'SD' from 'CCC+' after the issuer deferred a cash interest payment on its second lien-term loan. On March 3, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based oilfield services provider Pioneer Energy Services Corp. to 'D' from 'CCC-'. Average and standard deviation for Europe calculated for the period 1996-2020 due to sample size considerations. DB's 'Core Bank' reported an adjusted net return on tangible equity (ROTE) of 7.3% in Q3 following a strong 9.1% and 11.9% in Q2 and Q1, respectively, close to the bank's 8% target set for 2022. Second-lien lenders agreed to convert scheduled cash interest payments to payment-in-kind (PIK) interest for three quarters (starting Sept. 30, 2020). 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). 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 . Exploring Industry-Distress Effects on Loan Recovery: A Double Machine 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. In line with expectations, the Gini coefficients decline over time because longer time horizons allow for greater credit degradation among higher-rated entities. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. In 2020, speculative-grade rating categories had higher default rates than in 2019, with an increase in the 'BB' category to 0.93% from 0.00%, 'B' category to 3.5% from 1.5%, and 'CCC'/'C' category to 47.5% from 29.8% (see table 3). The company entered into a forbearance agreement with its senior debt lenders and is expected to pursue a debt restructuring. On May 4, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based apparel retailer J. The Content is provided on an as is basis. 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. On May 25, 2020, S&P Global Ratings withdrew its credit ratings on the issuer. 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. We included such subsidiaries for the period during which they had a distinct and separate risk of default. On Oct. 7, 2020, Tennessee-based casual dining operator Ruby Tuesday Inc. filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, which S&P Global Ratings considers a default. Europe followed with 42 defaults, emerging markets with 28, and the other developed region (Australia, Canada, Japan, and New Zealand) with 10. Project Finance Bank Loans: Default and Recovery Rates - Moody's Live Rising stars. 8-K: NETSCOUT SYSTEMS INC - MarketWatch The transaction, which was settled on Oct. 14, was considered distressed, as opposed to opportunistic. S&P does not act as a fiduciary or an investment advisor except where registered as such. All four major regions also saw their 2020 speculative-grade default rates rise above their long-term annual averages (see table 7 and chart 21). 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. We calculated annual default rates for each static pool, first in units and later as percentages with respect to the number of issuers in each rating category. S&P Global Ratings considers the repurchase to be distressed and tantamount to default given the holders received less than the original promise on the securities and that the offer was made to avoid a default and cross acceleration of Noble's unsecured debt. However, defaults from most other sectors increased as well. The sudden and acute recession in 2020 led to the sharpest credit deterioration ever in speculative-grade ratings. (EDGAR Online via COMTEX) -- NETSCOUT SYSTEMS INC false 0001078075 0001078075 2023-02-22 2023-02-22 All of the defaulters in 2020 with active ratings immediately prior to default were rated in the lowest rating categories. On July 1, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Ohio-based frac sand and industrial minerals producer Covia Holdings Corp. to 'D' from 'CCC+'. We used the same method to form static pools for 1983-2020. Each one-year transition matrix displays all rating movements between letter categories from the beginning of the year through year-end. Because static pools include only entities with active ratings as of the beginning date of a given pool, we exclude companies with withdrawn ratings, as well as those that have defaulted, from subsequent static pools. 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. In this case, these are the seven-year Gini ratios from the 1981 cohort through the 2014 seven-year cohort. We consider the exchange distressed and tantamount to default because, in our view, the transaction offers less than the original promise for the security. (For details on the Gini methodology, refer to Appendix II.). 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. Average cumulative default rate calculation. If S&P Global Ratings' corporate ratings only randomly approximated default risk, the Lorenz curve would fall along the diagonal. In return, the issuer agreed to a small increase in overall interest (cash interest plus PIK) for the first quarter. As an example, the standard deviation applied to the seven-year weighted average global Gini ratio in table 2 (5.3%) was calculated from the time series of all available seven-year Gini ratios by cohort. Earlier, on March 2, 2020, we lowered our issuer credit ratings on LSC to 'CC' from 'CCC+' after the issuer entered into a forbearance agreement for failing to comply with its consolidated leverage and interest ratio credit agreements covenants. PDF An Update on Proposed C1 Bond Factors - National Association of to 'SD' from 'B-' after the issuer missed the Oct. 31 coupon payment on its senior secured notes due 2023. The links between transition matrices and average cumulative default rates are best illustrated through tables 30-32. If the rating on the issuer was withdrawn in the middle of 1991, it would be included in the column representing transitions to NR in the 1991 transition matrix. Date Document Type Title Issuer/Entity 24 Feb 2023 Data Report Fleet Lease Securitizations: Loss Severity Modeling On June 26, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Irving, Texas-based CEC Entertainment Inc. to 'D' from 'CC' as the company filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. 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. moody's corporate default and recovery rates 2020 pdf On Nov. 25, 2020, we lowered the issuer credit rating to 'SD' from 'CCC+' after the issuer disclosed it had repurchased a significant portion of senior unsecured notes due in 2022 and 2024 below par. The issuer missed the interest payment on its US$450 million second-lien debt. On Nov. 17, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' on lower refinancing risk. 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. Earlier, on March 17, 2020, we lowered the long-term issuer credit rating to 'CCC+' from 'B' after the issuer's refinancing prospects were difficult and capital structure was unsustainable. On Dec. 10, 2020, we raised the issuer credit rating on Jo-Ann to 'B-' from 'CCC' on the basis of its good business performance and extension of its asset-based lending facility. It shows the ratio of actual rank-ordering performance to theoretically perfect rank ordering. 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. prior to May 2014, Kathrin was a lead analyst in Moody's EMEA Corporate Finance Group in Frankfurt, Germany, covering a diverse set of heavy industrial corporations across . 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. On Sept. 22, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based hydraulic fracturing services provider FTS International Inc. to 'D' from 'CC' after the issuer filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. On Nov. 16, 2020, Libbey announced that it had successfully emerged from Chapter 11 by completing its financial restructuring. We make our best effort to capture such defaults in the database, and we include an entity in the annual default rate calculations if it was rated as of Jan. 1 in the year of default. 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+'. 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 Aug. 7, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD'. Corporate default rate climbed in December. On Aug. 26, 2020, we raised the issuer credit rating to 'CCC' from 'SD'. On June 15, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Virginia-based tobacco leaf merchant Pyxus International Inc to 'D' from 'CCC-' after the issuer announced a reorganization process under Chapter 11 of the U.S. Bankruptcy Code with 92% of principal amount of its first-lien notes and 67% of its second-lien notes holders. On July 30, 2020, S&P Global Ratings withdrew the ratings on the issuer. On April 3, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based clinical toxicology laboratory services provider New Millennium Holdco Inc. to 'D' from 'CC'. On Aug. 26, 2020, we withdrew the issuer credit ratings on the company at its request. Annual Report 2021 - Moody's Investors Service 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'. The rating process begins when an arranger, issuer, sponsor, or underwriter contacts a member of Fitch's Business Relationship Management (BRM) group with a request to engage Fitch.