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The Essential Podcast, Episode 18: Five Days to Crisis — Slow Deterioration in Credit Quality Leads to a Breakneck Crisis

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Visit our podcast page for previous episodes of The Essential Podcast.

About this Episode

Sudeep Kesh and Robert Schulz of S&P Global Ratings join The Essential Podcast to help explain the complexities of corporate credit markets. Lower for longer interest rates, the search for yield, a false binary of investment grade vs. speculative grade and a global pandemic have all conspired to lead to a challenging environment for corporate credit.

The Essential Podcast from S&P Global is dedicated to sharing essential intelligence with those working in and affected by financial markets. Host Nathan Hunt focuses on those issues of immediate importance to global financial markets – macroeconomic trends, the credit cycle, climate risk, energy transition, and global trade – in interviews with subject matter experts from around the world.

Show Notes
  • Before the coronavirus pandemic, investors' thirst for yield amid low interest rates paved the way for riskier credit. This was significantly amplified by the pandemic and its impact on the economy, financial markets, supply chains, and the direct hit to revenues. The shape of the recovery is uncertain but likely to be relatively slow, compared to the rapid decline. Read Risky Credits: Hanging On The Edge for more insight.

  • The COVID-19 pandemic and its related social distancing measures—coupled with the sharp, sudden oil price decline—have put an abrupt halt to 11 years of global economic growth. As these events continue to play out, market participants and stakeholders have asked us many questions about the effect on ratings for nonfinancial corporate and sovereign borrowers globally and how this compares with prior periods. We have assembled 10 key points to address the most frequently asked questions. Read the report here.

  • While businesses around the world are starting to reopen, albeit unevenly, after coronavirus-driven lockdowns, S&P Global Ratings expects credit measures for some sectors to take until 2022, 2023, and beyond, to fully recover. Credit measures were weak prior to the pandemic, as demonstrated by the proliferation of low-speculative-grade ratings in non-financial corporates. The global pandemic and oil & gas price collapse and resulting economic recession have led to significant downgrade actions, particularly in the most affected sectors. The COVID-19 Heat Map features regional recovery estimates by sector for 2020-2021 compared to 2019.

  • The 2020 global corporate default tally jumped to 119 after 10 issuers defaulted since S&P Global Ratings’ last report. In just over five months, the 2020 corporate default tally has surpassed the full-year 2019 total of 118 defaults, led by the U.S. with 78 defaults so far this year. Both Europe and other developed regions have seen a considerable increase in defaults compared with previous years and have either matched or surpassed their full-year tallies in 2017, 2018, and 2019.

  • Read the latest corporate default tally from Nicole Serino and Sudeep Kesh: Consumer And Service Sector Defaults Help Push The 2020 Corporate Tally To 147

The Essential Podcast is edited and produced by Molly Mintz.