The 2020 global corporate default tally reached eight this week after U.K.-based capital goods manufacturer and marketer Doncasters Group Ltd. defaulted due to a restructuring announcement. This is the first capital goods default in 2020. The sector experienced a rise in defaults in Europe in 2019 (see chart 1), highlighting some sensitivity to cyclical and commodity-type end markets, particularly for smaller companies without market-leading competitive positions (see "European Corporate Credit Outlook 2020: In The Balance," Jan. 24, 2020).
Rating trends in the sector turned more negative in 2019, with nearly 16% of rated capital goods companies assigned negative outlooks. Moving into 2020, S&P Global Ratings expects negative rating actions to outweigh positive actions, particularly at the low end of the speculative-grade category ('BB+' or lower), which may lead to an increase in defaults for the sector's lowest-rated issuers (see "Industry Top Trends 2020: Capital Goods," Nov. 18, 2019).
Chart 1
This Week's Observations
- At this point in both 2018 and 2019, the corporate default tally had reached seven.
- In 2019, Europe led the defaults in the capital goods sector at four, followed by emerging markets at two and the U.S. at one.
- The U.S. leads the 2020 default tally at four, followed by Europe at three and emerging markets at one.
- Distressed exchanges and missed payments are the leading reasons for defaults this year, with four each (see chart 3).
Chart 2
Chart 3
Chart 4
Table 1
Europe Region Has Three Defaults So Far In 2020 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Global corporate default summary | ||||||||||||
Region | 12-month trailing speculative-grade default rate (%) | 2020 year-to-date default tally | 2019 default tally | 2018 default tally | Weakest links tally | |||||||
U.S. | 3.1 | 4 | 78 | 47 | 180 | |||||||
Emerging markets | 1.8 | 1 | 22 | 17 | 50 | |||||||
Europe | 2.2 | 3 | 15 | 13 | 36 | |||||||
Other developed | 1.3 | 0 | 3 | 5 | 6 | |||||||
Global | 2.5 | 8 | 118 | 82 | 272 | |||||||
Notes: Trailing-12-month default rates from Dec. 31, 2018-Dec. 31, 2019, are preliminary and subject to change. Other developed region consists of Australia, Canada, Japan, and New Zealand. Default counts may include confidentially rated issuers. Year-to-date data as of Jan. 29, 2020. Weakest link data as of Nov. 18, 2019. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®. |
Table 2
2020 Global Corporate Default Tally Rises To Eight | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Date | Parent company | Country | Subsector | To | From | Reason | ||||||||
1/2/2020 |
Constellis Holdings LLC |
U.S. | Aerospace and defense | SD | CC | Missed principal payments | ||||||||
1/7/2020 |
TOMS Shoes LLC |
U.S. | Consumer products | D | CCC | Distressed exchange | ||||||||
1/9/2020 |
Moran Foods LLC (SAL Acquisition Corp.) |
U.S. | Retail/restaurants | SD | CCC | Missed interest payments | ||||||||
1/13/2020 |
Lecta S.A. |
Luxembourg | Forest products and building materials | SD | CC | Missed interest payments | ||||||||
1/14/2020 |
Qinghai Provincial Investment Group Co. Ltd. |
China | Metals, mining, and steel | D | CCC- | Missed interest payments | ||||||||
1/21/2020 |
Panda Green Energy Group Ltd. |
Bermuda | Utilities | SD | CC | Distressed exchange | ||||||||
1/22/2020 |
Deoleo S.A. |
Spain | Consumer products | SD | CC | Distressed exchange/out-of-court restructuring | ||||||||
1/29/2020 |
Doncasters Group Ltd. |
U.K. | Capital goods | SD | CCC- | Distressed exchange/out-of-court restructuring | ||||||||
SD--Selective default. Data as of Jan. 29, 2020. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®. |
Related Research
- U.K.-Based Doncasters Issuer And Issue Ratings Lowered To 'SD/D' On Restructuring Announcement, Jan. 29, 2020
- Industry Top Trends 2020: Capital Goods, Nov. 18, 2019
- Capital Goods Defaults Are On The Rise, Oct. 17, 2019
Default Studies
More analysis and statistics are available in our annual default studies, published on RatingsDirect:
Corporate (financial and nonfinancial)
- 2018 Annual Infrastructure Default And Rating Transition Study
- 2018 Annual Mexican National Scale Corporate And Public Finance Default And Rating Transition Study
- 2018 Annual Latin American Corporate Default And Rating Transition Study
- 2018 Annual Global Financial Services Default And Rating Transition Study
- 2018 Annual Greater China Corporate Default And Rating Transition Study
- 2018 Annual Taiwan Ratings Corp. Corporate Default And Rating Transition Study
- 2018 Annual Global Corporate Default And Rating Transition Study
- 2018 Annual U.S. Corporate Default And Rating Transition Study
- 2018 Annual Asia Corporate Default And Rating Transition Study
- Japanese Issuer Credit Rating Transitions Study 2018
- 2017 Annual Australia And New Zealand Corporate Default Study And Rating Transitions
- 2017 Annual Emerging Markets Corporate Default Study And Rating Transitions
- 2017 Annual European Corporate Default Study And Rating Transitions
- 2017 Annual Canadian Corporate Default Study And Rating Transitions
- 2017 Inaugural Nordic Default Study And Rating Transitions
- 2017 Annual Brazil Corporate Default Study And Rating Transitions
Structured finance
- 2018 Annual Mexican Structured Finance Default And Rating Transition Study
- 2018 Annual European Structured Finance Default And Rating Transition Study
- 2018 Annual Global Leveraged Loan CLO Default And Rating Transition Study
- 2018 Annual Taiwan Structured Finance Default Study And Rating Transitions
- 2018 Annual Global Structured Finance Default Study And Rating Transitions
- 2018 Annual Japanese Structured Finance Default Study And Rating Transitions
U.S. public finance
- 2018 Annual U.S. Public Finance Default Study And Rating Transitions
- 2017 Annual U.S. Public Finance Not-For-Profit Health Care Default Study And Rating Transitions
- 2017 U.S. Public Finance Utility Default Study And Rating Transitions
- 2017 U.S. Public Finance Transportation Default Study And Rating Transitions
- 2017 Annual U.S. Public Finance Housing Default Study And Rating Transitions
- 2017 Annual U.S. Public Finance Charter School Default Study And Rating Transitions
- 2017 Annual U.S. Public Finance Higher Education And Nonprofit Organization Default Study And Rating Transitions
Sovereign and international public finance
- 2018 Annual International Public Finance Default And Rating Transition Study
- 2018 Annual Sovereign Default And Rating Transition Study
This report does not constitute a rating action.
Credit Markets Research: | Nicole Serino, New York; nicole.serino@spglobal.com |
Sudeep K Kesh, New York (1) 212-438-7982; sudeep.kesh@spglobal.com | |
Research Contributor: | Shripati Pranshu, Mumbai; shripati.pranshu@spglobal.com |
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