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In This List

Credit Trends: Risky Credits: The 'CCC' Category Remains Large As Market Risks Ease


Credit Trends: Risky Credits: The Number Of 'CCC' Category Ratings Stabilizes


Credit Trends: U.S. Corporate Bond Yields As Of Sept. 17, 2020


Default, Transition, and Recovery: Missed Interest Payments Lead The 2020 Corporate Default Tally


Default, Transition, and Recovery: Global Corporate Defaults Pick Up After Slowing In August

Credit Trends: Risky Credits: The 'CCC' Category Remains Large As Market Risks Ease

(Editor's Note: Our "Risky Credits" series focuses on U.S. and Canadian 'CCC' rated corporate issuers, as well as their first cousins rated 'B-'. Because the majority of defaults are from companies rated in the 'CCC' category, these and 'B-' rated companies with negative outlooks or ratings on CreditWatch negative are even more important to monitor in this unprecedented downturn and uncertain recovery.)


On This Month's Front Burner

The 'CCC' category shrinks:  The number of 'CCC' category ratings shrank in July to 249 from its all-time high of 256 in June. The slight drop is attributable to a consistently elevated number of defaults, offset by a downward trend of issuers transitioning into the 'CCC' category.

The category accounts for 93% of the defaults in the U.S. and Canada so far this year. Only 1.4% of 'B-' rated companies transitioned to the 'CCC' rating category in July, as opposed to 2.0% in June and 14.5% in April (an all-time high). As a result, the three-month weighted average of these transitions dropped two-thirds compared with June.

Negative bias eases:  The proportion of companies with negative outlooks or ratings on CreditWatch with negative implications marginally shrank in July among 'B-' and 'CCC' category ratings as financing conditions for U.S. corporations improved and more businesses in the U.S. and Canada gradually returned to normal operations. For more information, see "COVID-19 Impact: Key Takeaways From Our Articles."

Spreads narrow:  Market risk eased as the U.S. 'B' and 'CCC' composite spreads narrowed in July by 11% and 9%, respectively, to 662 basis points (bps) and 1,120 bps. The U.S. speculative-grade composite spread narrowed significantly in July, dropping 15% to 588 bps (as of Aug. 5), the lowest it has been since March 5, 2020.

Defaults continue to rise:  There were 15 defaults in the U.S. and Canada in July (14 from companies previously rated in the 'CCC' or 'CC' rating categories), and there have been another three so far in August (as of Aug. 10; all from companies rated 'CCC' and below).

Missed payments lead defaults:  Since defaults began to pick up in April, missed interest payments have accounted for 40% of defaults, compared with only 29% due to bankruptcy. Over 90% of total defaults in the U.S. and Canada since March were from companies rated in the 'CCC' or lower rating categories prior to default.

Bids recover:  The average bid of 'CCC' rated loans has recovered 24.5% from its 2020 low, while that of 'B' rated loans has recovered 23%.

CLO collateral actions:  Negative rating actions on U.S. corporate entities have slowed considerably since peaking in late March and early April. Since early March, we have downgraded or placed on CreditWatch with negative implications just over 30% of U.S. broadly syndicated loan (BSL) collateralized loan obligation (CLO) collateral (in comparison, about 40% of U.S. and Canadian corporate and sovereign issuer ratings have been affected by COVID-19 and oil prices). The 'CCC' buckets are now just under 11%, and 449 tranches across 259 CLO transactions are currently on CreditWatch negative.

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Top 20 Rating Changes To 'CCC' From 'B-' By Debt Amount (Year To Date)
Rating date Issuer Country Sector Rating to Rating from Debt amount (mil. US$)

Finastra Ltd.

Cayman Islands High technology CCC+ B- 36,029

Bombardier Inc.

Canada Aerospace and defense CCC+ B- 9,287

First Quantum Minerals Ltd.

Canada Metals, mining, and steel CCC+ B- 6,000

Clear Channel Outdoor Holdings Inc.

U.S. Media and entertainment CCC+ B- 5,835

Hertz Global Holdings Inc.

U.S. Transportation CCC- B- 5,050

Nabors Industries Ltd.

Bermuda Oil and gas exploration and production CCC+ B- 3,725

GTT Communications Inc.

U.S. Telecommunications CCC+ B- 3,415

Advantage Solutions Inc.

U.S. Consumer products CCC+ B- 3,345

Varsity Brands Holding Co Inc.

U.S. Consumer products CCC+ B- 2,800

CDS Group

Canada Media and entertainment CCC- B- 2,745

SM Energy Co.

U.S. Oil and gas exploration and production CC B- 2,300

Aveanna Healthcare LLC (Aveanna Healthcare Holdings Inc.)

U.S. Health care CCC+ B- 2,091

FXI Holdings Inc.

U.S. Chemicals, packaging, and environmental services CCC+ B- 2,075

Helix Acquisition Holdings Inc.

U.S. Capital goods CCC+ B- 2,055

Life Time Inc.

U.S. Media and entertainment CCC+ B- 1,984

AVSC Holding Corp.

U.S. Media and entertainment CCC B- 1,980

Syniverse Holdings Inc.

U.S. Telecommunications CCC+ B- 1,922

Callon Petroleum Co.

U.S. Oil and gas exploration and production CC B- 1,900

Mohegan Tribal Gaming Authority

U.S. Media and entertainment CCC+ B- 1,876

Flexential Intermediate Corp.

U.S. Telecommunications CCC+ B- 1,760
Source: S&P Global Ratings. Data as of July 31, 2020.

Related Research

This report does not constitute a rating action.

Credit Markets Research:Nicole Serino, New York + 1 (212) 438 1396;
Sudeep K Kesh, New York (1) 212-438-7982;
Leveraged Finance:Robert E Schulz, CFA, New York (1) 212-438-7808;
Ramki Muthukrishnan, New York (1) 212-438-1384;
Research Contributor:Lyndon Fernandes, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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