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. We combined these percentages to obtain cumulative default rates for the 40 years the study covers (see tables 24-26 and 30-32). Initial ratings for these companies are those immediately following a prior default in 2020. On Sept. 25, 2020, we withdrew our 'D' long-term issuer and issue credit ratings at the issuer's request. Recovery rate is essential to the estimation of the portfolio's loss and economic capital. 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upon the company filing for Chapter 11 bankruptcy, following which, on Jan. 5, 2021, the ratings on the issuer were withdrawn. On Oct. 30, 2020, S&P Global Ratings raised the issuer credit rating to 'CCC+' from 'SD' following the completion of the distressed exchange. 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. 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. Distressed exchanges (which are typically selective defaults) accounted for 37.6% of all defaults, the same as missed interest or principal payments (37.6%). On July 17, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Delaware-based oil and gas exploration and production company Bruin E&P Partners LLC to 'D' from 'CC' after the issuer filed for Chapter 11 bankruptcy. The issuer expects to exchange US$447 million for US$612 million of its senior notes and US$107 million of its old convertible notes. Earlier, on April 15, 2020, we lowered our issuer credit rating on CEC to 'CC' from 'CCC' following the company's announcement that it formed a restructuring committee to explore various strategic alternatives, including an out-of-court or in-court restructuring. Consistent with the increase in the number of defaults in 2020, the volume of debt affected by defaults almost doubled to $353.4 billion. On Feb. 4, 2020, S&P Global Ratings lowered its ratings on Lecta S.A. to 'D' from 'SD', on completion of restructuring of its debt obligation, and subsequently withdrew the ratings. If S&P Global Ratings' corporate ratings only randomly approximated default risk, the Lorenz curve would fall along the diagonal. She joined Moody's in 2007. As a result, the noteholders received less than the original promise. The issuer was hit by an ongoing bankruptcy proceeding of its joint venture partner Sanchez Energy and by the decline in oil prices owing to the Saudi-Russia price war and decline in demand related to the coronavirus pandemic. 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. As an example, the two-year column of table 32 shows the two-year default rates (not conditional on survival) for each static pool. The largest default in 2020 was from U.S.-based telecommunications provider Frontier Communications Corp., with $22.5 billion (6.3%) of the outstanding debt for the year. On Feb. 18, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based home dcor and furniture retailer Pier 1 Imports Inc. to 'D' from 'CCC-' after the issuer filed for Chapter 11 bankruptcy. Each one-year transition matrix displays all rating movements between letter categories from the beginning of the year through year-end. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. In connection with the filing, the company entered into a restructuring support agreement with the holders of approximately 92% of the principal amount of its tranche B-2 term loan and approximately 87% of the principal amount of its asset-based lending FILO term loan. Data Report. On June 5, 2020, we raised the rating on the issuer to 'CCC+' from 'D' on revised credit agreements, which reduced its annual cash interest payments by $10 million, which, in turn, alleviated near-term liquidity concern. Of the 226 defaults in 2020, 198 were from companies rated as of the beginning of the year. The COVID-19 pandemic and lockdowns in 2020 led to one of the deepest recessions since the Great Depression roughly 90 years ago. 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 June 17, 2020, we withdrew the ratings on the issuer. On May 11, 2020, S&P Global Ratings lowered its issuer credit rating on Colombia-based air transportation company Avianca Holdings S.A. to 'D' from 'CCC-' after the issuer and its subsidiaries and affiliates voluntarily filed for bankruptcy under Chapter 11 in New York to preserve its business structure amid the severe impact of COVID-19 on the global air transportation industry. This reflects our forward-looking opinion post the reduction in outstanding gross debt by approximately $127 million. Moody's Investors Service (MIS) First Quarter Revenue Down 20%. . Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. On March 12, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Illinois-based engineered fastener distributor Optimas OE Solutions Holding LLC to 'SD' from 'CCC+'. The Default & Recovery Database is part of Moody's Analytics broader Default Suite of products. Sovereign default and recovery rates, 1983-2020 - Excel Data: 15 Sep 2009 . On Oct. 20, 2020, S&P Global Ratings assigned its 'B-' issuer credit rating on the company, with a negative outlook. 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. The default rate Jennifer Tennant for all Moody's-rated corporate issuers rose to 1.9% at the end of 2008 Analyst from 0.3% at year-end 2007. On May 11, 2020, we withdrew the ratings on the issuer. On Sept. 14, 2020, we withdrew the issuer credit ratings on the company at its request. Moody's expects the overall default rate for commodity companies to fall sharply this year, to 3.4% from 12.6% in 2016. On Dec. 16, 2020, S&P Global Ratings lowered the issuer credit rating to 'CC' from 'CCC-' with a negative outlook due to the distressed debt-for-equity proposal. Back in December, Moody's Investors Servicepegged the 2017 default rate for speculative-grade debt in the U.S. at 4% by year-end, down from 5.6%. Defaults US HY default rate: According to Moody's Investors Service, the U.S.' trailing 12-month high-yield default rate jumped from August 2019's 3.1% to August 2020's 8.7% and may average 10.6% during 2020's final quarter. In addition, average default statistics become less reliable at longer time horizons as the sample size becomes smaller and the cyclical nature of default rates has a bigger effect on averages. Since 1981, the 'B' rating category has accounted for 1,735 defaults (56% of the total from initial rating), well more than double the number of defaulters from the 'BB' category (see tables 10 and 12). Otherwise, the methodology was identical to that used for single-year transitions. On July 7, 2020, we withdrew our long-term issuer credit rating at the issuer's request. It is expected that North American and international markets are likely to contract up to 50% and 20%, respectively. On Jan. 7, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based shoes and accessories seller TOMS Shoes LLC to 'D' (default) from 'CCC' after the company restructured substantially all of its debt and its term loan lenders took ownership of the company. Subsequently, on May 29, 2020, the issuer obtained an amendment for extending the grace period until June 12 for the payment of interest of around US$4.1 million. Of the 10 that were initially investment grade, the average time to default--the time between first rating and date of default--was 21.8 years, with an associated standard deviation of 14.1 years. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. 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. On Aug. 17, 2020, we withdrew the rating on the company at its request. 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+'. The amendment includes a discount on debt for some of its debtholders, which we assess as equivalent to default. to 'SD' from 'CCC-' after the issuer missed principal payment on its IDR150 billion domestic notes and entered a 10-day grace period. But in both cases, defaults and downgrades were largely limited to the lowest rating categories, resulting in generally strong ratings performance in 2020. The remaining SEK1,615 million was converted into new hybrid notes. Earlier, on March 3, 2020, we lowered our long-term issuer credit rating to 'CCC-' from 'BB' after the issuer announced the financial statement discrepancies and asked its lenders to support an informal standstill request. S&P Global Ratings does not require all issuers with rated debt to have an issuer credit rating. The transaction was viewed as distressed because lenders got less than they were originally promised. Earlier, on April 8, 2020, we lowered our issuer credit rating on W&T Offshore to 'CCC+' from 'B-'. 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. Issuer credit ratings can be either long-term or short-term. On Oct. 21, 2020, S&P Global Ratings withdrew its ratings at the issuer's request. (For a detailed explanation of our data sources and methodology, see Appendix I.). 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. 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. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro. Data provided in table 13 also differ from default rates in table 24 owing to the use of the static pool methodology. On May 15, 2020, S&P Global Ratings lowered its issuer credit rating on Colorado-based oil and gas exploration and production company Extraction Oil & Gas Inc. to 'D' from 'CC' after the issuer missed the interest payment on its 7.375% senior notes due 2024. Sources: High yield spreads, default rate and unemployment assumptions sourced from Moody's Investors Service . S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. 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. On July 20, 2020, we withdrew the ratings on the issuer. To facilitate the proposed exchange, the issuer entered a new term loan facility of US$190 million maturing in 2024. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated. Weights are based on the number of issuers in each static pool. Speculative-grade bond spreads in the U.S. widened to 991 basis points (bps) on March 23, but finished the year at 434 bps. 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. Later, the issuer commenced a Chapter 11 bankruptcy and was looking to restructure its capital structure. On Nov. 2, 2020, Tennessee-based real estate company CBL & Associates Properties Inc. defaulted after the issuer filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The largest gap between the two was in financial institutions, which had a five-notch difference: The 233 financial institutions that defaulted had a median original rating of 'B+', compared with a sector median of 'BBB'. This transaction of extending the maturity date and 40% discount at par was not a healthy sign for the company's operational performance. The issuer's operation was suffering from weak crude oil prices and depressed demand. Over the long term, defaults in nonfinancial sectors have tended to be more cyclical than defaults in the financial sectors. 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. 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 estimated cross section of recovery rates is plausible, with an average recovery rate of 54% and substantial cross-sectional variation. On May 22, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based Guitar Center Inc. to 'SD' from 'CCC'. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. Average cumulative default rate calculation. 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 shows the ratio of actual rank-ordering performance to theoretically perfect rank ordering. 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. Other sectors, such as consumer services, have had more frequent default cycles, both during and between economic cycles. Over this same period, as the number of the highest-rated investment-grade companies dwindled, the count of the lowest-rated investment-grade companies surged. On March 26, 2020, we withdrew our issuer ratings at the company's request. This transaction was aimed at preserving liquidity as sales volume and operating income had been adversely affected by the pandemic. On May 19, 2020, S&P Global Ratings lowered its issuer credit rating on German value retailer Takko Fashion S.a.r.l. On Sept. 4, 2020, S&P Global Ratings lowered its long-term issuer credit rating on New York-based action sports apparel company Boardriders Inc. to 'SD' from 'CCC+' after the issuer completed a distressed transaction to increase its liquidity and fund operations. On June 3, 2020, S&P Global Ratings lowered its issuer credit rating on U.K.-based offshore drilling contractor Valaris PLC to 'D' from 'CCC-' because the company did not paid the June 1 interest payments on its senior notes due 2022 and 2042, and the company continued to discuss the terms of a comprehensive debt restructuring with its debtholders. On Oct. 28, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Sweden-based passenger flight transportation services company SAS AB to 'SD' from 'CC' after the issuer completed a distressed debt restructuring of its SEK2,250 million senior unsecured bond due 2022 into about 547 million common shares, at SEK1.16 per share. Finally, PD estimates should also be compared across banks (EBA 2020). 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. On July 2, 2020, S&P Global Ratings lowered its long-term issuer credit rating on California-based specialty apparel retailer Tailored Brands Inc. to 'D' from 'CCC+', reflecting interest payment default on its senior notes due 2022. On Jan. 8, 2021, S&P Global Ratings withdrew its issuer credit rating. 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%. However, defaults from most other sectors increased as well. In contrast, table 21 reports transition-to-default rates using the static pool methodology, which calculates movements to default from the beginning of each static pool year. The issuer was also planning for a comprehensive debt restructuring involving debt-for-equity swaps. In nearly all instances, the financial services sector's longer-term default rates were lower in 2020 than long-term averages. 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. PFS also announced an agreement to merge with Animal Supply Co. On May 6, 2020, S&P Global Ratings lowered its ratings on the issuer to 'D' from 'SD' upon missed interest payments, following which, on May 14, 2020, the ratings on the issuer were withdrawn. CPK's performance was weak prior to the disruption stemming from the coronavirus pandemic; however, we believe the pandemic contributed additional operating pressure and potentially accelerated the need to restructure its debt. S&P Global Ratings considered this a distressed transaction because of the discounted trading levels and noteholders receiving less than the original promise of the securities. Among all Moody's-rated 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 April 14, 2020, S&P Global Ratings withdrew the issuer credit rating at the issuer's request. We believe the company is unlikely to make this interest payment within the 30-day grace period as it has pursued a comprehensive capital restructuring or bankruptcy filing. Throughout the 40-year span, only eight companies initially rated 'AAA' have ever defaulted. On July 14, 2020, we withdraw our ratings on the issuer. The issuer borrowed a US$20.2 million new term loan, including US$10.1 million of priming new money and rolling up an existing US$10.1 million term loan. On May 27, 2020, we withdrew the ratings on the issuer. On Aug. 18, 2020, S&P Global Ratings withdrew its ratings on the issuer. Later, on May 2, 2020, the issuer entered into standstill agreement with the lenders of the notes due 2021 and the term loan due 2023, until July 31, 2020. In return, the issuer agreed to a small increase in overall interest (cash interest plus PIK) for the first quarter. Liquidity also weakened as cash flows for debt repayment diminished. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. The negative outlook reflects the risk of a lower rating if operating performance continues to deteriorate and the company fails to meet our expectations. Second-lien lenders agreed to convert scheduled cash interest payments to payment-in-kind (PIK) interest for three quarters (starting Sept. 30, 2020). The MarketWatch News Department was not involved in the creation of this content. 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. 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 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. Earlier, on April 8, 2020, we lowered the issuer credit rating on Fieldwood to 'CCC' from 'B-', reflecting the issuer's weak credit metrics, constrained liquidity, and the potential that it may breach covenants on its first-lien term loan. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. Earlier, on Feb. 27, 2020, we revised our outlook on the issuer to negative from stable because of high refinancing risks given the high leverage and significant portion of debt maturing in 2022. Many events over the long term have contributed to the decline of global 'AAA' rated issuers. On Dec. 9, 2020, S&P Global Ratings withdrew its 'D' issuer credit rating at the issuer's request. This usually leads to shorter time frames from which to calculate default statistics. 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. The issuer missed the aggregate interest payments on first-, second-, and 1.5-lien term loans due in 2021 and 2022, which was unlikely to be paid in the 30-day grace period. An analysis of transition rates for 2020 suggests that ratings behavior continues to exhibit consistency with long-term trends. Structured finance vehicles, public-sector issuers, and sovereign issuers are the subjects of separate default and transition studies, and we exclude them from this study. We used the same method to form static pools for 1983-2020. On June 19, 2020, S&P Global Ratings lowered its long-term issuer credit rating on Hudson, Ohio-based fabric and crafts retailer Jo-Ann Stores LLC to 'SD' from 'CCC' as the company repurchased $5.6 million of its second-lien term loan at a 57% discount in the first quarter of fiscal 2021 ended May 2, 2020, and subsequently agreed to repurchase $206 million face value of first- and second-lien debt at approximately 50% discount in the second quarter ended Aug. 1, 2020. On June 18, 2020, we raised the issuer credit rating to 'CCC+' from 'SD' after the debt exchange was completed.