moody's corporate default and recovery rates 2020 pdf
On Jan. 21, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Panda Green Energy Group Ltd. to 'SD' from 'CC' on completion of a distressed exchange offer on its U.S. bonds due in January 2020. Often these are issuer-weighted averages. Ratings stability decreased in 2020, to 69.2%, largely the result of the downgrade rate of 18.5%, which was the highest since 2009. For the purposes of this study, we form static pools by grouping issuers (for example, by rating category) at the beginning of each year, quarter, or month that the database covers. On July 20, 2020, S&P Global Ratings raised the issuer ratings to 'B-' from 'SD' after the issuer completed its debt restructuring, resulting in its syndicated debt falling to 242 million from 575 million and the extension of debt maturities on its 160 million senior term loan and 82 million junior term loan by five and six years, respectively. On Jan. 13, 2020, S&P Global Ratings lowered its long-term issuer credit rating on paper manufacturer Lecta S.A. to 'SD' from 'CC' after failing to pay the interest of 3.8 million due November 2019 on its 225 million senior secured floating notes due 2020. Selective defaults accounted for just over half of all defaults in 2020. On July 30, 2020, S&P Global Ratings withdrew the ratings on the issuer. Earlier, on April 2, 2020, we lowered our long-term issuer credit rating to 'CCC+' from 'B-' because of weaker operating performance projections in 2020 owing to the coronavirus pandemic. The decision to miss interest payments of about US$15.5 million was based on prioritization of liquidity toward its operations. 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. On May 29, 2020, we raised the issuer credit rating to 'CCC-' from 'SD', reflecting our view of the approaching maturities that may have led to further restructuring of its capital. With an increase in the proportion of downgrades during the year, the number of large rating changes (which we define as more than six notches) increased in 2020. The Gini coefficient is defined as area B divided by the total of area A plus area B. The COVID-19 pandemic and lockdowns in 2020 led to one of the deepest recessions since the Great Depression roughly 90 years ago. The company will continue its operation with operating cash flow liquidity and another US$50 million from debtors. Static pool methodology. On Nov. 3, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'D' on the completed exchange offer. 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. This also applies to transition matrices that span longer time horizons. S&P reserves the right to disseminate its opinions and analyses. Default activity in 2020 did increase, but to a lesser extent than recent recessions (see chart 1 and table 1). On Nov. 18, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based debt issuing company Summit Midstream Partners Holdings LLC to 'D' from 'CC' after the issuer closed its sole debt restructuring transaction, at a significant discount. This is followed by a rating withdrawal in 1990 and a default in 1993. 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. It does not apply to any specific financial obligation because it does not take into account the nature and provisions of any single obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation. 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. In this case, we compared the rating at the beginning of the multiyear period with the rating at the end. On Aug. 17, 2020, S&P Global Ratings withdrew its ratings on the issuer. Despite increased defaults overall, there were no defaults that began 2020 with an investment-grade rating (see table 4). On Oct. 13, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' following the completion of the exchange. (For more information on methodologies and definitions, see Appendix I.). During 2020, the company increased its stake in V.E from 69.2% to 99.8%. On Aug. 21, 2020, we withdrew the issuer credit ratings on the company at its request. Earlier, on May 1, 2020, we lowered our issuer credit rating on Chesapeake Energy to 'CC' from 'CCC'. This transaction brought remaining principal balance to US$29 million. 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. For the Gini ratios in tables 2, 27, and 28, the standard deviations are derived from the time series of Gini ratios for all of their constituent annual cohorts. In other words, the use of a rating category suggests that transitions, for example, to 'AA' from 'AA-' or to 'BBB+' from 'BBB-', are not considered to be rating transitions because the rating remained within the rating category. It would not be part of the 1986 pool because it was not rated as of the first day of that year, and it would not be included in any pool after the last day of 1990 because the rating had been withdrawn by then. On Nov. 27, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC' from 'SD' following the company's debt issuance. Ten of the defaulters in 2020 were initially rated investment grade, and the other 216 (96% of the total) were initially rated speculative grade. On July 20, 2020, we raised the issuer credit rating to 'CCC+' from 'SD' after the issuer announced an improvement in leverage, which brought the borrowing base down to US$215 million from US$250 million. The issuer amended its lender group, which allowed it to make payment-in-kind (PIK) interest payments for three quarters on second-lien term debt. The negative outlook reflects the potential for a lower rating if continued weak operating performance meaningfully pressures the company's liquidity. 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. On July 9, 2020, S&P Global Ratings withdrew its issuer credit rating at the company's request. 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. to 'D' from 'CCC-'. Following Acharya et al. Multiplying 96.29% by 96.39% results in a 92.81% survival rate to the end of the second year, which leads to a two-year average cumulative default rate of 7.19%. On Oct. 20, 2020, S&P Global Ratings raised its issuer credit ratings to 'B-' from 'D' after the issuer announced it had completed a debt restructuring transaction, resulting in US$400 million of debt reduction. The global corporate default tally has increased to 17 after two issuers defaulted since our last report. We treated this as distressed because the issuer did not meet its contractual obligation to pay principal and interest in a timely manner, and did not adequately compensate lenders for agreeing to temporarily waive their rights. For example, of all the companies that defaulted during 1981-2020, only two entities rated 'AAA' at inception defaulted within seven years. The debt structure of the issuer became unsustainable, with adjusted debt to EBITDA close to 8x in 2019. On March 17, 2020, we withdrew our issuer credit rating at the issuer's request. But in both cases, defaults and downgrades were largely limited to the lowest rating categories, resulting in generally strong ratings performance in 2020. On June 4, 2020, S&P Global Ratings lowered its issuer credit rating on Los Angeles-based restaurant operator California Pizza Kitchen Inc. (CPK) to 'D' from 'CCC-' because the company missed its interest payments due at the end of May 2020 and entered into a forbearance agreement with its lenders. On Sept. 18, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based oil and gas exploration and production company Oasis Petroleum Inc. to 'D' from 'CCC-' after the issuer missed an interest payment and entered into the 30-day grace period. 2 Annualized volatility and return based on the period between 2005 and 2022. In contrast, the average time to default among entities initially rated speculative grade was 6.2 years, with an associated standard deviation of 6.3 years. On Aug. 6, 2020, S&P Global Ratings withdrew the ratings on the issuer. Combined global bond issuance for nonfinancial corporates and financial services companies hit $5.7 trillion--a 27% increase from the high in 2019. 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. It expected the transaction would reduce net debt by $400 million. To facilitate the proposed exchange, the issuer entered a new term loan facility of US$190 million maturing in 2024. The MarketWatch News Department was not involved in the creation of this content. 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. On July 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based oil and gas exploration and production company Lonestar Resources U.S. Inc. to 'D' from 'CCC-' after the issuer elected to skip an interest payment on its unsecured notes due 2023, and was not likely to pay within the 30-day grace period. Among all Moody's-rated The company exchanged $315 million of its existing unsecured notes for new 9% convertible secured notes due 2025, which we considered less than the original promise and tantamount to default. On Jan. 7, 2021, S&P Global Ratings raised the rating on the issuer to 'CCC+' from 'SD' based on its response to a decline in revenue by significantly reducing costs and capital investments. The issuer agreed with certain majority debtholders to convert US$2.2 billion of existing debt into new equity. This default and rating transition study includes industrials, utilities, financial institutions (banks, brokerages, asset managers, and other financial entities), and insurance companies globally with long-term local currency ratings from S&P Global Ratings. 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. In this case, however, the 'AA+' figure was derived from a much smaller sample than that for the 'AA' rating. On Aug. 19, 2020, we withdrew our issuer credit ratings on the company at its request. Tables 30, 31, and 32 are broken out by the broadest rating classifications (all rated, investment grade, and speculative grade).