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Default, Transition, and Recovery: 2019 Annual Asia Corporate Default And Rating Transition Study

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Default, Transition, and Recovery: 2019 Annual Emerging Markets Corporate Default And Rating Transition Study

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Default, Transition, and Recovery: 2019 Annual Asia Corporate Default And Rating Transition Study

In 2019, 10 companies rated by S&P Global Ratings, including seven confidential issuers, defaulted in Asia, up from three corporate defaults in 2018. The total number of rated issuers in Asia increased to 911 in 2019 from 831 in 2018. The newly rated issuers in the region decreased by over 39% to 87 in 2019 from 143 in 2018, amid growing concerns about the potential for a turning credit cycle, curb in economic growth, or rise in interest rates. Issuance rose dramatically in the same period, owing to a number of companies taking advantage of comparatively low interest rates, adding on leverage to their balance sheets in the process.

For the purposes of this study, Asia consists of Bangladesh, Bhutan, Brunei Darussalam, Cambodia, China, Fiji, Hong Kong, India, Indonesia, Japan, Republic of Korea, Macao Special Administrative Region of China, Malaysia, Marshall Islands, Mongolia, Pakistan, Papua New Guinea, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam. The statistics we present in this study refer only to corporate ratings and include financial and nonfinancial entities.

Speculative-grade (rated 'BB+' or lower) issuers account for almost half (49.4%) of the newly rated companies in Asia in 2019, indicative of:

  • Growing development of Asia-Pacific credit markets generally because of demand to differentiate credit risk,
  • Higher demand for riskier assets in a "low for longer" interest rate environment, and
  • Increased globalization of investors and investible assets in Asia-Pacific.

Nevertheless, investment-grade ('BBB-' and higher) issuers still dominate the newly rated issuers for 2019. Over half of the 2019 newly rated pool (50.6%) was investment grade, while in 2018 and 2017, the newly rated investment grade portion was only 45.5% and 36.7%, respectively.

Asia's speculative-grade default rate increased to 2.5% in 2019 from 0.5% in 2018. Globally, the 2019 speculative-grade default rate was also 2.5%, up from 2.1% in 2018. In the U.S., it increased to 3.1% from 2.4% the prior year, Europe to 2.2% from 1.9%, and emerging markets to 1.8% from 1.4% (see chart 1). The COVID-19 pandemic and knock-on impact on global economic growth have been major dampers in 2020 and have already led to an increase in defaults globally. While default risk is less apparent in Asia, with its higher balance of investment-grade issuers, riskier borrowers in Asia are still vulnerable to the global issues.

Chart 1

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Market Conditions For Asia And The World

Escalating trade-technology tensions, concerns about a disorderly slowdown in China, and oil prices were the top factors throughout 2019. The region's economic slowdown continues to keep ratings on nonfinancial corporates under some pressure, especially for vulnerable issuers in lower rating categories (which historically have higher observed transition risk). Despite the relatively low benchmark rates compared with the prior year, creditors were more cautious for lower-rated issuers to refinance, thus implying higher liquidity risk. We saw stress on interest spreads and, to an extent, liquidity for the more leveraged corporate entities.

By sector, rating outlooks on financial institutions and government sectors were less negative than those on the nonfinancial sector in 2019. The key reason is eroding business confidence and weaker investment, which is going to drag on manufacturing and trade (see "Bumpy At Best: A Conversation On Credit Conditions In Asia-Pacific," Oct. 23, 2019).

Since the end of second-quarter 2019, eight central banks cut policy rates. How effective monetary easing can be varies by economy but, combined with the U.S. Federal Reserve's 75 basis points of cuts, this keeps financial conditions supportive for growth. At the same time, the U.S. and China are edging toward a partial trade deal, which has buoyed market sentiment. The final piece of good news for Asia is that the electronics inventory cycle has bottomed. This is a cycle with a relatively high frequency, and it is often hard to extricate from the business cycle (see "Asia-Pacific Quarterly: The Cost Of Uncertainty," Dec. 2, 2019).

In 2020, we saw the tide of U.S. dollar liquidity flowing slowly back to Asia. There are signs that dollar liquidity is returning to Asia for investment-grade names and, tentatively, for Chinese developers. Access to funding is likely to remain difficult or expensive for smaller issuers amid looming maturities and growing refinancing requirements. However, swathes of issuers remain locked out of fresh dollar funding, and we expect this market will be split between haves and have nots until there is greater visibility on post-COVID conditions. (See "U.S. Dollar Liquidity Returns, Selectively, To Asia," May 21, 2020.)

However, we expect the COVID-19 pandemic to leave lasting scars on Asia-Pacific, with the extraordinary measures needed to shore up economies leading to higher debt, weaker balance sheets, and less appetite for spending (see "Asia-Pacific Losses Near $3 Trillion As Balance Sheet Recession Looms," June 26, 2020). The road to recovery is hardly smooth or even. China continues to be a relative bright spot while many other emerging markets struggle to contain COVID-19. Economic fallout has bottomed but the rebound is showing a big disparity among countries as well as sectors, potentially leading to widening variation in credit trends (see "Credit Conditions Asia-Pacific: Recovery Roads Diverge," Sept. 29, 2020).

In May, China announced its "dual circulation" economic strategy, aiming to cut China's dependence on overseas markets and technology in its long-term development, a shift brought on by a deepening rift with the U.S. (source: "'Dual circulation' a way to deepen reform," China Daily).

The Regional Default Trends And Big Picture

The 10 defaults in the region in 2019 were a small fraction of the global total of 118. The regional average (since 1993) number of annual defaults is 3.6 (2.2% of the speculative-grade population on average since 1993), compared with a global average (since 1981) of 73.6 (about 4.0% of the speculative-grade population on average). Moreover, 77.7% of ratings in Asia remained unchanged between Jan. 1, 2019, and year-end, demonstrating the relative stability of the majority of credit ratings in the region. Only 5.1% of rated entities from Asia were raised during the year, and 5.9% were lowered.

The stability of total rated issuers in Asia owes partially to its high proportion of investment-grade issuers--at 76.8% at year-end 2019. Part of the reason for this could be that despite Asia's large domestic debt market, the majority of debt is held in the form of loans. The bond market is rapidly growing though rather small, and only the companies with the highest creditworthiness are able to tap the market. Over 50.1% of rated issuers globally were investment grade in 2019. Investment-grade ratings have markedly lower transition and default risk than their speculative-grade counterparts, and thus the much higher credit stability in the region is not unexpected.

The corporate net negative bias increased to 7.8% in December 2019 from 3.9% in December 2018, largely because of stable outlooks S&P Global Ratings assigned after taking rating actions on a number of sovereigns with implicit or explicit links to the respective corporate ratings. We calculate the net negative ratings bias by deducting the total number of ratings with negative outlooks or on CreditWatch with negative implications from the total number of those with positive outlooks or on CreditWatch with positive implications. The net negative bias in Asia reflects comparatively stable credit quality in 2019.

Gini ratios

Like our global corporate default and transition study, this study illustrates that ratings are effective indicators of relative credit risk. S&P Global Ratings Research has found a clear negative correspondence between ratings and defaults: The higher the issuer rating, the lower the observed default frequency.

We use Gini coefficients to measure the correspondence between ratings and defaults. Gini ratios measure the rank-ordering power of ratings over a given time horizon and compare the ratio of actual rank-ordering performance with theoretically perfect rank ordering. If corporate ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated issuers, the Gini coefficient would be 100%. The one-year weighted average (1993-2019) Gini coefficient for rated Asian corporate issuers is 86.8%. This metric is based on ratings one year prior to default rather than those immediately preceding default (see Appendix II for details).

The weighted averages in this report use the issuer counts at the beginning of the year as the weights. Unless otherwise noted, the statistics we present in this study refer to S&P Global Market Intelligence's Credit Pro® corporate local currency global-scale ratings universe. They include financial and nonfinancial Asian companies but exclude sovereigns, public finance, and project finance issuers. (For more details and definitions of the terms used, see Appendix I.)

Key Market Opportunities And Risks For Asian Economies

S&P Global Ratings raised its ratings, or revised outlooks to positive, on a number of sovereigns in 2019, including Republic of Fiji, Indonesia, Philippines, Vietnam, and Thailand:

  • On Aug. 22, 2019, S&P Global Ratings raised its long-term local- and foreign-currency sovereign credit ratings on the Republic of Fiji to 'BB-' from 'B+' showing the political stability in Fiji that has improved after two successive democratic elections, while downside risks from the post-cyclone reconstruction efforts have abated.
  • On May 31, 2019, S&P Global Ratings raised its long-term sovereign credit rating on Indonesia to 'BBB' from 'BBB-', reflecting Indonesia's strong economic growth prospects and supportive policy dynamics.
  • On April 30, 2019, S&P Global Ratings raised its long-term sovereign credit rating on the Philippines to 'BBB+' from 'BBB' based on the Philippines' strong economic growth trajectory.
  • On April 5, 2019, S&P Global Ratings raised its long-term sovereign credit rating on Vietnam to 'BB' from 'BB-', reflecting continued improvements in the government's institutional settings.
  • On Dec. 11, 2019, S&P Global Ratings revised the outlook on the sovereign credit rating on Thailand to positive from stable, reflecting our assessment that political uncertainty in Thailand has begun to ease with the return of an elected government.

On the other hand, on Feb. 4, 2019, S&P Global Ratings lowered its long-term sovereign credit rating on Pakistan to 'B-' from 'B' because of our more subdued expectations for Pakistan's economic growth, along with heightened external and fiscal risks, amid an ongoing deterioration in the country's broad macroeconomic settings.

While the outlook on the Japan sovereign remained positive in 2019, industry risks affecting banks in Japan were higher. The negative interest rate and delayed restructuring by regional banks are likely to keep industrywide profitability low. We lowered our issuer credit ratings on several Japanese banks (see "Asia-Pacific Financial Institutions Monitor 4Q 2019: Profitability Woes Weigh On Japan's Banks," Oct. 7, 2019).

We expect most Asia-Pacific sovereign credit ratings to remain unchanged in the next one to two years despite the increased COVID-19-related credit risks (see "Asia-Pacific Financial Institutions Monitor 3Q2020: Recession Risks Weigh On Banking Prospects," July 28, 2020).

Ratings Performance For Asia

We reached the following key conclusions regarding Asia's corporate ratings performance in 2019:

  • The average time to default from initial rating for defaulters in Asia in 2019 was 2.8 years, lower than the global average of 5.8 years (from 1981-2019).
  • In 2019, 92.6% of 'A' rated issuers in Asia retained that rating, and only 60.7% of the region's 'B' rated issuers retained that rating.
  • None of the issuers lost their 'AAA' ratings in 2019.
  • The Asia default rate in the 'CCC'/'C' rating category was 20.0%, lower than the 29.5% rate globally, though the low number of defaults in Asia creates volatility in the average statistics (see table 8).
  • At the end of 2019, more than three-quarters of the total ratings in Asia were investment grade. Only 50.1% of all global ratings were investment grade.

Chart 2

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Chart 3

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Table 1

Asia Corporate Default Summary§
Year Total defaults* Investment-grade defaults Speculative-grade defaults Default rate (%) Investment-grade default rate (%) Speculative-grade default rate (%) Total debt defaulting (bil. $)
1993 0 0 N/A 0.00 0.00 N/A 0.0
1994 0 0 0 0.00 0.00 0.00 0.0
1995 0 0 0 0.00 0.00 0.00 0.0
1996 0 0 0 0.00 0.00 0.00 0.0
1997 1 1 0 0.76 0.90 0.00 2.8
1998 9 2 7 4.86 1.65 10.94 8.4
1999 7 0 5 2.55 0.00 5.95 5.1
2000 5 0 3 1.29 0.00 2.97 2.0
2001 7 0 5 2.06 0.00 5.00 4.4
2002 2 0 0 0.00 0.00 0.00 1.2
2003 2 0 2 0.60 0.00 1.47 0.4
2004 3 0 2 0.37 0.00 1.08 0.0
2005 2 0 1 0.16 0.00 0.51 0.3
2006 1 0 1 0.15 0.00 0.53 0.0
2007 1 0 1 0.15 0.00 0.60 0.0
2008 7 0 6 1.05 0.00 4.00 1.3
2009 15 2 10 2.11 0.45 7.75 10.0
2010 3 0 3 0.62 0.00 3.03 1.6
2011 0 0 0 0.00 0.00 0.00 0.0
2012 5 0 2 0.39 0.00 1.82 2.9
2013 3 0 2 0.38 0.00 1.82 0.0
2014 3 0 1 0.18 0.00 0.80 1.0
2015 4 0 4 0.64 0.00 2.92 2.7
2016 3 0 2 0.29 0.00 1.44 1.1
2017 2 0 2 0.26 0.00 1.18 1.6
2018 3 0 1 0.12 0.00 0.49 0.4
2019 10 0 6 0.66 0.00 2.54 0.8
Average 4 0 3 0.73 0.11 2.19 1.78
Median 3 0 2 0.37 0.00 1.31 1.00
Standard deviation 4 1 3 1.08 0.36 2.68 2.56
Minimum 0 0 0 0.00 0.00 0.00 0.00
Maximum 15 2 10 4.86 1.65 10.94 10.04
*This column includes companies that were no longer rated at the time of default. §Includes Japan. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 2

Global Corporate Default Summary
Year Total defaults* Investment-grade defaults Speculative-grade defaults Default rate (%) Investment-grade default rate (%) Speculative-grade default rate (%) Total debt defaulting (bil. $)
1981 2.0 2.0 0.2 0.0 0.6 0.1
1982 18.0 2.0 15.0 1.2 0.2 4.5 0.9
1983 12.0 1.0 10.0 0.8 0.1 3.0 0.4
1984 14.0 2.0 12.0 0.9 0.2 3.3 0.4
1985 19.0 18.0 1.1 0.0 4.4 0.3
1986 34.0 2.0 30.0 1.7 0.2 5.8 0.5
1987 19.0 19.0 1.0 0.0 2.8 1.6
1988 32.0 29.0 1.4 0.0 3.9 3.3
1989 44.0 3.0 35.0 1.8 0.2 4.7 7.3
1990 70.0 2.0 56.0 2.7 0.1 8.1 21.2
1991 93.0 2.0 65.0 3.3 0.1 11.1 23.7
1992 39.0 32.0 1.5 0.0 6.1 5.4
1993 26.0 14.0 0.6 0.0 2.5 2.4
1994 21.0 1.0 15.0 0.6 0.1 2.1 2.3
1995 35.0 1.0 29.0 1.1 0.1 3.5 9.0
1996 20.0 16.0 0.5 0.0 1.8 2.7
1997 23.0 2.0 20.0 0.6 0.1 2.0 4.9
1998 56.0 4.0 48.0 1.3 0.1 3.7 11.3
1999 109.0 5.0 92.0 2.2 0.2 5.6 39.4
2000 136.0 7.0 109.0 2.5 0.2 6.2 43.3
2001 229.0 7.0 173.0 3.8 0.2 9.9 118.8
2002 226.0 13.0 159.0 3.6 0.4 9.5 190.9
2003 119.0 3.0 89.0 1.9 0.1 5.1 62.9
2004 56.0 1.0 38.0 0.8 0.0 2.0 20.7
2005 40.0 1.0 31.0 0.6 0.0 1.5 42.0
2006 30.0 26.0 0.5 0.0 1.2 7.1
2007 24.0 21.0 0.4 0.0 0.9 8.2
2008 127.0 14.0 89.0 1.8 0.4 3.7 429.6
2009 268.0 11.0 224.0 4.2 0.3 10.0 627.7
2010 83.0 64.0 1.2 0.0 3.0 97.5
2011 53.0 1.0 44.0 0.8 0.0 1.9 84.3
2012 83.0 66.0 1.1 0.0 2.6 86.7
2013 81.0 64.0 1.1 0.0 2.3 97.3
2014 60.0 45.0 0.7 0.0 1.4 91.6
2015 113.0 94.0 1.4 0.0 2.8 110.3
2016 163.0 1.0 143.0 2.1 0.0 4.2 239.8
2017 95.0 83.0 1.2 0.0 2.5 104.6
2018 82.0 72.0 1.0 0.0 2.1 131.7
2019 118.0 2.0 92.0 1.3 0.1 2.5 183.2
Average 73.6 3.8 58.5 1.4 0.1 4.0 74.7
Median 56.0 2.0 44.0 1.2 0.0 3.0 21.2
Standard deviation 63.5 3.9 49.9 1.0 0.1 2.7 125.2
Min 2.0 1.0 2.0 0.2 0.0 0.6 0.1
Max 268.0 14.0 224.0 4.2 0.4 11.1 627.7
*This column includes companies that were no longer rated at the time of default. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Globally, corporate defaults increased to 118 in 2019 from 82 in 2018. U.S.-based issuers accounted for the bulk of defaults. Corporate defaults affected debt worth $183.21 billion in 2019, from $131.65 billion in 2018, significantly lower than the record $627.7 billion in 2009, after the 2008 financial crisis (see table 2).

Table 3

Summary Of Asia† Net Annual Rating Activity (%)*
Year Issuers Upgrades (%) Downgrades (%)§ Defaults (%) Withdrawn ratings (%) Changed ratings (%) Unchanged ratings (%) Downgrade/upgrade ratio
1993 59.0 0.0 27.1 0.0 1.7 28.8 71.2
1994 69.0 0.0 21.7 0.0 0.0 21.7 78.3
1995 84.0 4.8 17.9 0.0 1.2 23.8 76.2 3.8
1996 96.0 4.2 6.3 0.0 3.1 13.5 86.5 1.5
1997 132.0 3.0 21.2 0.8 3.0 28.0 72.0 7.0
1998 185.0 3.8 54.1 4.9 7.0 69.7 30.3 14.3
1999 196.0 3.1 19.9 2.6 9.7 35.2 64.8 6.5
2000 233.0 10.3 4.7 1.3 6.9 23.2 76.8 0.5
2001 243.0 7.4 13.2 2.1 7.0 29.6 70.4 1.8
2002 265.0 11.3 19.2 0.0 8.7 39.2 60.8 1.7
2003 334.0 6.6 5.7 0.6 7.5 20.4 79.6 0.9
2004 534.0 20.2 2.4 0.4 3.6 26.6 73.4 0.1
2005 624.0 29.0 2.4 0.2 5.6 37.2 62.8 0.1
2006 650.0 10.5 2.6 0.2 12.6 25.8 74.2 0.3
2007 648.0 20.2 3.7 0.2 22.4 46.5 53.5 0.2
2008 574.0 7.1 6.8 1.0 10.1 25.1 74.9 1.0
2009 570.0 2.8 10.7 2.1 17.7 33.3 66.7 3.8
2010 487.0 12.5 2.5 0.6 7.0 22.6 77.4 0.2
2011 491.0 9.8 10.6 0.0 8.1 28.5 71.5 1.1
2012 507.0 6.1 8.3 0.4 7.5 22.3 77.7 1.4
2013 520.0 8.5 5.4 0.4 5.2 19.4 80.6 0.6
2014 565.0 7.4 5.8 0.2 5.5 18.9 81.1 0.8
2015 623.0 5.8 10.9 0.6 6.9 24.2 75.8 1.9
2016 683.0 7.2 9.4 0.3 7.2 24.0 76.0 1.3
2017 763.0 5.6 7.9 0.3 7.3 21.1 78.9 1.4
2018 831.0 6.6 5.8 0.1 7.0 19.5 80.5 0.9
2019 911.0 5.0 5.9 0.7 10.6 22.3 77.7 1.2
Weighted Average 9.4 8.1 0.6 8.7 26.8 73.2 1.4
Average 8.1 11.6 0.7 7.4 27.8 72.2 2.2
Median 6.6 7.9 0.4 7.0 24.2 75.8 1.2
Standard deviation 6.4 10.9 1.1 4.7 11.0 11.0 3.1
Min 0.0 2.4 0.0 0.0 13.5 30.3 0.1
Max 29.0 54.1 4.9 22.4 69.7 86.5 14.3
*This table compares the net change in ratings from the first to the last day of each year. All intermediate ratings are disregarded. §Excludes downgrades to 'D', shown separately in the default column. †Includes Japan. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

S&P Global Ratings assigned ratings to 87 new issuers in Asia in 2019, a decrease from 143 in 2018. Of the 87 new issuers, 43 (49.4%) were rated speculative grade (see table 4). Despite the increase in the share of new speculative-grade issuers in recent years, the total ratings pool in Asia remains heavily weighted toward investment grade. The proportion of speculative-grade ratings for Asia remains low, at just 23.2% at the end of 2019 (see chart 4). Asia's annual speculative-grade default rate is higher than emerging markets and is on par with global while having almost one-third less 'BB's and less than half as many 'B's in the rated portfolio. This implies that defaults will have much less impact on an Asia portfolio when compared with a global or emerging markets portfolio of the same size.

Table 4

Rating Classification Of New Corporate Issuers* In Asia§
--First rating--
Year AAA AA A BBB BB B CCC/C Total % investment grade % speculative grade
1993 1 3 1 2 2 1 10 70.0 30.0
1994 1 6 3 2 1 1 14 71.4 28.6
1995 2 7 3 1 13 92.3 7.7
1996 1 10 12 11 4 38 60.5 39.5
1997 1 3 6 18 14 16 58 48.3 51.7
1998 1 4 7 8 7 5 32 62.5 37.5
1999 5 6 14 19 18 62 40.3 59.7
2000 2 2 6 5 4 7 1 27 55.6 44.4
2001 7 10 18 2 7 44 79.5 20.5
2002 3 10 25 22 38 1 99 38.4 61.6
2003 1 13 54 82 44 27 5 226 66.4 33.6
2004 1 6 28 38 23 8 3 107 68.2 31.8
2005 2 9 17 19 12 1 60 46.7 53.3
2006 4 15 18 22 25 84 44.0 56.0
2007 2 15 21 11 20 1 70 54.3 45.7
2008 2 21 20 13 5 61 70.5 29.5
2009 1 8 8 3 5 5 30 56.7 43.3
2010 4 4 15 4 11 1 39 59.0 41.0
2011 3 6 12 17 18 56 37.5 62.5
2012 1 13 12 6 19 51 51.0 49.0
2013 2 12 28 17 13 72 58.3 41.7
2014 25 27 14 17 2 85 61.2 38.8
2015 5 26 34 16 14 1 96 67.7 32.3
2016 18 49 37 11 115 58.3 41.7
2017 4 18 22 28 46 2 120 36.7 63.3
2018 1 19 45 30 45 3 143 45.5 54.5
2019 14 30 26 14 3 87 50.6 49.4
Total 8 80 374 586 414 407 30 1,899 55.2 44.8
*Includes issuers that are assigned a new rating after default as well as those companies that receive a rating for the first time. §Includes Japan. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Chart 4

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For comparison, when including Australia and New Zealand in the calculation, the proportion of speculative-grade issuers declines to 21.8%. Conversely, emerging markets overall have a greater concentration of speculative-grade ratings, with 50.4% of all issuers rated 'BB+' or lower. For all global issuers, the proportion of speculative-grade ratings is about 49.9%, with the U.S. accounting for the bulk of them.

The number of rated issuers from Asia increased in 2019. The total number of downgrades in the region increased by 12.5%, to 54, from 48 in 2018. Upgrades decreased by 16.4% to 46, from 55 upgrades in 2018. The region's consistent growth in issuers is in tandem with the global rise to prominence of Asia, particularly China (which accounts for over one-quarter of the region's total issuers), whose rapid economic growth has been fueled, at least in part, by the expansion of its debt market. The 'BBB' category had the highest number of newly rated issuers in Asia in 2019, followed by the 'BB' category. Of the region's newly rated issuers in 2019, 49.4% were rated speculative grade, down from 54.5% in 2018 and 63.3% in 2017 (see table 4).

A Closer Look At Asia's Corporate (Financial And Nonfinancial) Defaulters

Of the three publicly rated defaulters in 2019, Indonesia-based PT Delta Merlin Dunia Textile had $300 million in outstanding debt at the time of default, India-based Jain Irrigation Systems Ltd. had $200 million in outstanding debt, and China-based Shandong Yuhuang Chemical Co. Ltd. had $300 million in outstanding debt. The seven confidential issuers had no cross-border U.S. dollar issuance outstanding in 2019. Together, these 10 defaults accounted for about 0.4% of the $183.21 billion in debt globally affected by defaults in 2019.

Table 5

Itemized 2019 Asia Corporate Defaults
Company name Reason for default Country Industry Debt amount (mil. $) Default date Next-to-last rating Date of next-to-last rating First rating Date of first rating
PT Delta Merlin Dunia Textile Missed interest Indonesia Consumer/service sector 300 9/13/2019 CC 8/22/2019 BB- 3/13/2019
Jain Irrigation Systems Ltd. Missed interest India Aerospace/automotive/capital goods/metal 200 10/14/2019 CCC 7/26/2019 B+ 4/7/2017
Shandong Yuhuang Chemical Co. Ltd. Missed principal China Health care/chemicals 300 11/29/2019 CC 11/22/2019 B+ 3/14/2017
Total* 800
*Excludes confidential issuers. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Higher Ratings Are Consistent With Fewer Defaults

From 1993-2019, corporate defaults total 98 in Asia, a fraction of the 2,872 recorded globally from 1981-2019. The small sample size introduces some challenges in the analysis. The average time to default (the average number of years elapsed between the initial rating date and the default date) for the 10 Asian defaulters in 2019 was 2.8 years. This is in line with global trends but longer than the average for the entire long-term pool of Asian defaults.

By and large, higher ratings take a longer time to default, though this trend is less evident in Asia because of the paucity of investment-grade defaults (see chart 5). For example, Asian issuers rated 'B' took an average of 3.3 years to default--less than the 4.1 years for 'BB' rated issuers (see table 6). Also, the 1997-1998 Asian financial crisis accelerated the time to default for many issuers as compared with global norms. Consequently, the mean lifetime time to default for Asia defaults (98) across all rating categories was 3.7 years, compared with 5.8 years in the global pool.

The average times to default from original rating for Asian issuers are shorter across all rating categories than they are for the global pool. This is true regardless of whether the times to default are calculated from original rating (see table 6) or from subsequent ratings (see table 7). This discrepancy in the average timing (and the associated standard deviation) results partly from the significantly smaller volume of defaults in every rating category in Asia. For example, of the global pool of issuers in the 'BBB' category, 215 defaulted during the 39 years ended in 2019, whereas the comparable number for Asia was only 10.

Table 6

Time To Default From Original Rating Among Corporate Defaulters (Asia Versus Global)
Original rating Defaults Average years from original rating* Median years from original rating Standard deviation of years from original rating
Asia (1993-2019)
AAA N/A N/A N/A N/A
AA 1.0 14.4 14.4 N/A
A 2.0 11.7 11.7 1.2
BBB 10.0 4.2 3.3 3.8
BB 29.0 4.1 4.5 2.3
B 48.0 3.3 2.5 2.9
CCC/C 8.0 1.3 0.7 1.8
Total 98.0 3.7 3.2 3.2
Global (1981-2019)
AAA 8.0 18.0 18.5 11.4
AA 30.0 16.0 16.8 9.2
A 99.0 13.8 10.8 8.8
BBB 215.0 9.1 7.2 6.7
BB 623.0 6.9 5.3 5.6
B 1,593.0 4.9 3.6 4.2
CCC/C 304.0 2.2 1.3 2.8
Total 2,872.0 5.8 4.0 5.6
N/A--Not applicable. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 7

Time To Default From Post Ratings For Asia Corporate Defaulters
Rating path to default Average years from rating category Median years from rating category Standard deviation of years from rating category
Asia (1993-2019)
AAA N/A N/A N/A
AA N/A N/A N/A
A 6.0 6.1 1.5
BBB 3.1 2.9 1.6
BB 2.6 2.2 1.9
B 1.8 1.4 1.7
CCC/C 0.5 0.2 0.7
Total 1.7 0.8 1.9
Global (1981-2019)
AAA 23.7 23.3 8.2
AA 14.1 15.5 8.9
A 11.2 9.6 8.2
BBB 8.2 6.4 6.9
BB 5.9 4.0 5.7
B 3.1 1.8 3.8
CCC/C 0.9 0.3 1.6
Total 3.3 1.3 4.8

Chart 5

image

The breakout of default rates by modifier shows that historically, lower rating categories experience higher default rates on average, though variability is possible in any given year (see table 8). Nevertheless, the data from past default cycles indicates that most defaults stemmed from the lowest rungs of the ratings ladder.

Table 8

Asia* Corporate Default Rates By Rating Modifier (%)
AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C
1993 0.0 0.0 0.0 0.0 0.0 0.0 0.0 N/A 0.0 N/A N/A N/A N/A N/A N/A N/A N/A
1994 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 N/A N/A 0.0 N/A 0.0 N/A N/A N/A
1995 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 N/A 0.0 0.0 0.0 N/A N/A 0.0
1996 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 N/A N/A N/A 0.0
1997 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.1 0.0 0.0 0.0 0.0 0.0 0.0 N/A N/A
1998 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.7 7.1 7.1 0.0 13.3 10.0 40.0 N/A
1999 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 16.7 0.0 25.0
2000 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.5 0.0 0.0 9.1
2001 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.5 57.1
2002 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2003 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.0 0.0 14.3
2004 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.9 0.0 0.0 10.0
2005 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.0
2006 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.6 0.0 0.0 0.0 0.0
2007 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50.0
2008 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.0 4.0 0.0 15.0 12.5 0.0
2009 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.5 0.0 0.0 0.0 15.0 22.2 22.2 100.0
2010 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 37.5
2011 0.0 N/A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2012 0.0 N/A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.7 0.0 16.7 0.0
2013 0.0 N/A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.4 0.0 25.0 N/A
2014 0.0 N/A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0
2015 0.0 N/A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.6 6.3 0.0 100.0
2016 0.0 N/A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.3 0.0 4.2 0.0 0.0
2017 0.0 N/A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.1 20.0
2018 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 16.7
2019 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.1 2.2 4.3 20.0
Average 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.5 0.3 0.4 0.4 2.3 3.5 6.4 25.9
Median 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.1
Std. Dev. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 1.8 1.5 1.6 1.2 4.3 6.4 10.9 34.2
Min 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Max 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.1 8.7 7.1 7.1 4.3 15.0 22.2 40.0 100.0
N/A--Not applicable. *Includes Japan. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Defaults By Industry

When combining all nonfinancial industries, the 2019 aggregate one-year default rate is 1.11%, which is less than the 1993-2019 long-term average of 1.17% (see table 9). Meanwhile, no issuers in the Asian financial sector have defaulted in recent years.

Table 9

Cumulative Asia Corporate Default Rates By Sector (%)
--All financials-- --All nonfinancials--
Year One-year Three-year 10-year One-year Three-year 10-year
1993 0.0 N/A N/A 0.0 N/A N/A
1994 0.0 N/A N/A 0.0 N/A N/A
1995 0.0 0.0 N/A 0.0 0.0 N/A
1996 0.0 0.0 N/A 0.0 0.0 N/A
1997 1.4 0.0 N/A 0.0 0.0 N/A
1998 1.2 2.0 N/A 8.0 0.0 N/A
1999 0.0 4.3 N/A 4.9 8.1 N/A
2000 0.8 2.4 N/A 1.9 13.0 N/A
2001 0.0 2.2 N/A 4.7 10.7 N/A
2002 0.0 0.8 3.0 0.0 5.8 0.0
2003 0.5 0.7 5.4 0.7 4.7 6.3
2004 0.0 0.7 4.9 0.6 0.9 9.3
2005 0.0 0.5 4.1 0.2 0.7 8.5
2006 0.0 0.0 7.1 0.2 0.6 9.7
2007 0.0 0.0 4.7 0.2 0.5 18.0
2008 0.0 0.0 4.3 1.7 0.7 10.7
2009 1.6 1.5 2.3 2.4 2.2 6.7
2010 0.4 1.4 1.5 0.8 4.5 5.7
2011 0.0 1.6 1.3 0.0 3.1 1.7
2012 0.0 0.4 1.6 0.7 1.6 2.0
2013 0.0 0.0 1.0 0.7 1.5 2.1
2014 0.0 0.0 1.4 0.3 1.4 2.5
2015 0.0 0.0 1.7 1.2 2.5 3.1
2016 0.0 0.0 1.5 0.5 1.9 3.6
2017 0.0 0.0 1.4 0.5 2.3 6.0
2018 0.0 0.0 1.6 0.2 1.3 5.2
2019 0.0 0.0 0.4 1.1 1.0 3.1
Average 0.2 0.7 2.7 1.2 2.8 5.8
Median 0.0 0.0 1.7 0.5 1.5 5.4
Std. Dev. 0.5 1.1 1.9 1.9 3.4 4.3
Min 0.0 0.0 0.4 0.0 0.0 0.0
Max 1.6 4.3 7.1 8.0 13.0 18.0
N/A--Not applicable. Note: All financials refers to financial institutions and insurance combined. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

More specifically, out of 10 defaulted Asian issuers in 2019, three came from the consumer/service sector, two each from the aerospace/automotive/capital goods/metals and forest and building products/homebuilders, and one each from health care/chemicals, telecommunications, and leisure time/media.

The default rates for 2019 exceeded their long-term averages in four sectors--aerospace/automotive/capital goods/metals, forest and building products/homebuilders, health care/chemicals, and telecommunications (see table 10), though these sector statistics are based on a limited history with a small number of defaults.

In 2019, retailers without well-integrated online-to-offline operations were at risk of losing out to bolder competitors. Yet no Asian retailer that S&P Global Ratings polled in its survey indicated that it planned to do an acquisition in the next two years to facilitate integration of offline and online, favoring less ambitious approaches such as partnerships. (See "Merge, Converge Or Conserve? Asia Rethinks Its Retail Revolution," Nov. 12, 2019.) In 2020, however, the story has changed, where the COVID-19 outbreak has accelerated the pace of digitalization to drive more traffic and volume to digital channels and contactless payment. Measures such as social distancing and branch closures have led more customers to turn to mobile and online banking. Also, following the temporary changes in regulations, certain insurance products can now be offered on digital platforms instead of mandatory face-to-face distribution (see "Tech Disruption In Retail Banking: Hong Kong's Large Banks Are Pioneering The City's Fintech Development," June 2, 2020).

Table 10

Annual Asia* Corporate Default Rates By Industry (%)
Year Aerospace / automotive / capital goods / metal Consumer / service sector Energy and natural resources Financial institutions Forest and building products / homebuilders Health care / chemicals High technology / computers / office equipment
1993 0.0 0.0 N/A 0.0 N/A N/A 0.0
1994 0.0 0.0 0.0 0.0 0.0 N/A 0.0
1995 0.0 0.0 0.0 0.0 0.0 N/A 0.0
1996 0.0 0.0 0.0 0.0 0.0 N/A 0.0
1997 0.0 0.0 0.0 1.8 0.0 0.0 0.0
1998 5.9 9.1 0.0 1.4 11.1 40.0 0.0
1999 11.1 8.3 0.0 0.0 14.3 33.3 0.0
2000 0.0 7.7 0.0 0.0 0.0 100.0 0.0
2001 0.0 7.1 0.0 0.0 100.0 0.0 0.0
2002 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2003 0.0 0.0 0.0 0.7 0.0 N/A 4.2
2004 2.6 0.0 0.0 0.0 0.0 0.0 0.0
2005 1.0 0.0 0.0 0.0 0.0 0.0 0.0
2006 1.0 0.0 0.0 0.0 0.0 0.0 0.0
2007 0.9 0.0 0.0 0.0 0.0 0.0 0.0
2008 0.0 4.8 7.1 0.0 0.0 0.0 3.1
2009 7.3 2.8 3.6 2.4 0.0 0.0 0.0
2010 2.8 0.0 0.0 0.6 0.0 0.0 0.0
2011 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2012 0.0 0.0 0.0 0.0 0.0 5.9 0.0
2013 0.0 0.0 0.0 0.0 0.0 5.9 0.0
2014 0.0 0.0 2.3 0.0 0.0 0.0 0.0
2015 0.0 3.0 2.4 0.0 14.3 0.0 3.7
2016 0.0 0.0 0.0 0.0 0.0 0.0 3.8
2017 0.0 0.0 2.3 0.0 0.0 0.0 3.7
2018 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2019 2.1 0.0 0.0 0.0 8.0 2.4 0.0
Weighted average 1.2 1.0 1.0 0.2 4.1 1.9 0.8
Average 1.3 1.6 0.7 0.3 5.7 8.5 0.7
Median 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Standard deviation 2.7 3.0 1.6 0.6 19.8 23.1 1.5
Min 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Max 11.1 9.1 7.1 2.4 100.0 100.0 4.2
Year Insurance Leisure time / media Real estate Telecommunications Transportation Utility
1993 0.0 N/A 0.0 0.0 0.0 0.0
1994 0.0 N/A 0.0 0.0 0.0 0.0
1995 0.0 N/A 0.0 0.0 0.0 0.0
1996 0.0 N/A 0.0 0.0 0.0 0.0
1997 0.0 0.0 0.0 0.0 0.0 0.0
1998 0.0 25.0 10.0 0.0 11.1 0.0
1999 0.0 0.0 0.0 0.0 0.0 0.0
2000 3.8 0.0 0.0 0.0 0.0 0.0
2001 0.0 0.0 0.0 12.5 0.0 0.0
2002 0.0 0.0 0.0 0.0 0.0 0.0
2003 0.0 0.0 0.0 0.0 0.0 0.0
2004 0.0 0.0 0.0 0.0 0.0 0.0
2005 0.0 0.0 0.0 0.0 0.0 0.0
2006 0.0 0.0 0.0 0.0 0.0 0.0
2007 0.0 0.0 0.0 0.0 0.0 0.0
2008 0.0 0.0 0.0 3.4 0.0 0.0
2009 0.0 0.0 0.0 4.2 2.5 0.0
2010 0.0 0.0 0.0 0.0 4.0 0.0
2011 0.0 0.0 0.0 0.0 0.0 0.0
2012 0.0 0.0 0.0 0.0 4.0 0.0
2013 0.0 0.0 0.0 4.8 0.0 0.0
2014 0.0 0.0 0.0 0.0 0.0 0.0
2015 0.0 0.0 0.0 0.0 0.0 0.0
2016 0.0 0.0 0.0 0.0 2.3 0.0
2017 0.0 0.0 0.0 0.0 0.0 0.0
2018 0.0 11.1 0.0 0.0 0.0 0.0
2019 0.0 0.0 0.0 3.6 0.0 0.0
Weighted average 0.1 1.0 0.1 1.1 0.7 0.0
Average 0.1 1.6 0.4 1.1 0.9 0.0
Median 0.0 0.0 0.0 0.0 0.0 0.0
Standard deviation 0.7 5.6 1.9 2.7 2.4 0.0
Min 0.0 0.0 0.0 0.0 0.0 0.0
Max 3.8 25.0 10.0 12.5 11.1 0.0
N/A--Not applicable. *Includes Japan. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Transition Tables And Cumulative Default Rates

An analysis of rating transitions in 2019 suggests that ratings behavior in Asia continues to exhibit consistency with global trends, which have shown a negative correspondence between credit rating and default probability. Investment-grade-rated issuers in Asia tend to exhibit greater credit stability (as measured by the frequency of rating transitions) than their speculative-grade counterparts (see table 11).

For instance, 92.6% of Asian issuers rated 'A' at the beginning of this period (Jan. 1, 2019) were still rated 'A' at the end of this period (Dec. 31, 2019), whereas the comparable share for issuers rated 'BB' was only 68.1%. 20% of Asia 'CCC'/'C' transitioned to 'D' in 2019, compared with 30% for global (see table 11), implying a third less probability of default and more rating stability for Asia distressed. Although, when interpreting the low stability rates associated with the 'CCC'/'C' rating category, it's important to take into account tthe small sample size in Asia as the number of issuers rated speculative-grade in Asia is relatively small, thus idiosyncratic (issuer-specific) factors may influence the default trends more than seen for global as a whole.

Table 11

2019 Corporate Transition Rates: Asia* Versus Global (%)
From/To AAA AA A BBB BB B CCC/C D NR
Asia
AAA 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 94.6 1.8 0.0 0.0 0.0 0.0 0.0 3.6
A 0.0 0.0 92.6 2.5 0.0 0.0 0.0 0.0 5.0
BBB 0.0 0.0 3.1 90.1 0.7 0.0 0.0 0.0 6.1
BB 0.0 0.0 0.0 3.4 68.1 6.7 0.0 0.0 21.8
B 0.0 0.0 0.0 0.0 0.9 60.7 3.7 3.7 30.8
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 60.0 20.0 20.0
Global
AAA 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 93.3 2.1 0.0 0.0 0.0 0.0 0.0 4.6
A 0.0 0.7 93.7 1.9 0.0 0.0 0.0 0.0 3.6
BBB 0.0 0.0 2.7 91.4 1.2 0.1 0.0 0.1 4.5
BB 0.0 0.0 0.1 2.6 83.1 5.0 0.3 0.0 8.9
B 0.0 0.0 0.0 0.0 2.2 78.6 5.1 1.5 12.6
CCC/C 0.0 0.0 0.0 0.0 0.5 8.2 46.9 29.5 15.0
*Includes Japan. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

This pattern is similar to the long-term (1981-2019) trend of ratings behavior among all global rated issuers. This study--in line with previous default studies--confirms that higher-rated companies are generally more stable than lower-rated companies. In 2019, of the Asian issuers rated 'AAA', 100% retained this rating after one year, whereas 60.8% of issuers rated 'B' retained that rating. None of the companies were downgraded to 'AA+' from 'AAA' in 2019. Nevertheless, the 1997-1998 Asian financial crisis did result in rating transitions for several rating categories exceeding the global averages (see table 12).

The smaller number of issuers and the shorter study period compared with the global pool possibly compounded volatility. Statistically, a smaller number of observations and a shorter period could contribute to a wider range in the sample mean than for the whole population. Notwithstanding the slightly higher ratings volatility, this study confirms that S&P Global Ratings' credit ratings for Asia-based issuers are generally consistent with global patterns. Based on the transition analysis for a time horizon of two years rather than one year, lower ratings also tend to display less stability than higher ratings do (see table 13).

Table 12

Average One-Year Corporate Transition Rates (%)
From/to AAA AA A BBB BB B CCC/C D NR
Asia (1993-2019)
AAA 83.7 14.4 0.7 0.0 0.0 0.0 0.0 0.0 1.3
21.3 21.7 2.1 0.0 0.0 0.0 0.0 0.0 3.6
AA 0.4 89.3 7.0 0.0 0.0 0.1 0.0 0.0 3.1
2.0 6.6 6.3 0.0 0.0 0.4 0.0 0.0 4.0
A 0.0 1.4 91.5 2.7 0.0 0.1 0.0 0.0 4.2
0.0 1.4 6.8 4.9 0.5 0.7 0.0 0.0 4.8
BBB 0.0 0.0 4.7 85.1 2.3 0.2 0.0 0.1 7.5
0.0 0.0 4.9 10.1 5.0 1.5 0.3 0.7 6.9
BB 0.0 0.0 0.0 5.9 72.7 4.3 0.7 0.3 16.0
0.0 0.0 0.0 5.3 10.4 3.7 3.7 1.0 8.6
B 0.0 0.0 0.0 0.0 6.8 65.1 2.7 3.1 22.4
0.0 0.0 0.0 0.0 7.7 8.2 3.3 4.5 9.1
CCC/C 0.0 0.0 0.0 0.0 1.8 13.3 44.2 20.4 20.4
0.0 0.0 0.0 0.0 4.6 14.4 26.8 20.3 22.9
Global (1981-2019)
AAA 87.0 9.1 0.5 0.1 0.1 0.0 0.1 0.0 3.1
7.2 7.2 0.8 0.2 0.3 0.2 0.3 0.0 2.4
AA 0.5 87.2 7.7 0.5 0.1 0.1 0.0 0.0 3.9
0.5 5.2 4.2 0.7 0.2 0.2 0.1 0.1 1.8
A 0.0 1.7 88.4 5.0 0.3 0.1 0.0 0.1 4.4
0.1 1.0 3.7 2.2 0.4 0.2 0.1 0.1 1.7
BBB 0.0 0.1 3.4 86.3 3.5 0.4 0.1 0.2 6.0
0.0 0.2 1.5 3.9 1.6 0.7 0.2 0.2 1.5
BB 0.0 0.0 0.1 4.7 77.8 6.6 0.5 0.6 9.6
0.1 0.1 0.2 1.9 4.5 3.0 0.7 0.8 2.2
B 0.0 0.0 0.1 0.2 4.8 74.8 4.5 3.3 12.4
0.0 0.1 0.2 0.2 2.1 4.0 2.0 3.1 2.2
CCC/C 0.0 0.0 0.1 0.2 0.6 12.9 43.7 27.0 15.4
0.0 0.0 0.4 0.6 0.9 7.5 8.4 10.5 5.1
Note: The Asia figures are for the time period from 1993-2019 and include Japan. Numbers in parentheses are standard deviations. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 13

Average Two-Year Corporate Transition Rates (%)
From/to AAA AA A BBB BB B CCC/C D NR
Asia (1993-2019)
AAA 70.2 26.5 2.0 0.0 0.0 0.0 0.0 0.0 1.3
26.5 25.5 5.0 0.0 0.0 0.0 0.0 0.0 4.2
AA 0.9 79.3 13.5 0.0 0.0 0.2 0.0 0.0 6.1
2.7 9.1 8.6 0.0 0.0 0.6 0.0 0.0 6.8
A 0.0 2.5 83.3 5.1 0.3 0.2 0.0 0.0 8.6
0.0 1.7 9.3 7.1 1.9 0.9 0.0 0.0 6.9
BBB 0.0 0.0 9.4 72.1 3.7 0.4 0.1 0.3 14.1
0.0 0.0 7.8 13.0 5.2 1.7 0.8 0.9 10.2
BB 0.0 0.0 0.1 11.1 54.8 5.5 1.2 1.0 26.4
0.0 0.0 0.3 7.2 11.0 3.8 3.8 2.1 10.1
B 0.0 0.0 0.0 0.5 10.6 45.4 2.8 6.1 34.5
0.0 0.0 0.0 1.1 8.4 10.9 3.0 6.9 9.5
CCC/C 0.0 0.0 0.0 0.0 2.9 19.4 19.4 25.2 33.0
0.0 0.0 0.0 0.0 5.3 19.2 18.2 22.7 30.3
Global (1981-2019)
AAA 75.7 16.2 1.4 0.1 0.2 0.1 0.1 0.0 6.2
10.1 10.6 1.5 0.3 0.5 0.2 0.4 0.2 4.2
AA 0.9 76.2 13.8 1.2 0.2 0.1 0.0 0.1 7.6
0.7 8.2 6.0 1.1 0.3 0.3 0.1 0.1 2.9
A 0.0 3.0 78.3 8.8 0.7 0.3 0.0 0.1 8.7
0.1 1.7 5.8 2.9 0.8 0.4 0.1 0.2 2.7
BBB 0.0 0.2 6.2 74.9 5.7 1.0 0.2 0.5 11.4
0.1 0.2 2.4 6.1 2.0 1.1 0.3 0.6 2.5
BB 0.0 0.0 0.3 8.5 60.7 9.8 1.0 2.0 17.7
0.1 0.1 0.5 2.8 6.4 2.7 0.9 2.2 3.0
B 0.0 0.0 0.1 0.4 8.1 55.8 5.2 7.8 22.5
0.0 0.1 0.3 0.4 3.1 5.1 1.9 5.7 3.7
CCC/C 0.0 0.0 0.1 0.5 1.0 17.2 20.8 36.5 23.9
0.0 0.0 0.5 1.1 1.1 7.4 7.5 11.8 7.0
Note: The Asia figures are for the time period from 1993-2019 and include Japan. Numbers in parentheses are standard deviations. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Transitions at the rating modifier also display the same relationship by and large, though differences in sample size occasionally create slight variations between adjacent rating categories (see table 14).

Table 14

Average One-Year Transition Rates For Asia* Corporates By Rating Modifier (1993-2019) (%)
--Rating--
From/to AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC D NR
AAA 83.7 11.1 3.3 0.0 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3
21.3 20.7 7.7 0.0 0.0 2.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.6
AA+ 5.7 68.2 18.2 5.7 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1
23.8 34.3 22.6 14.3 3.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.3
AA 0.0 1.2 77.6 15.0 2.4 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 3.2
0.0 3.4 22.3 18.9 4.4 0.0 1.6 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 0.0 0.0 5.9
AA- 0.0 0.0 5.6 81.4 9.3 0.3 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.3
0.0 0.0 11.8 13.6 8.6 1.9 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.8
A+ 0.0 0.0 0.1 4.7 82.1 7.1 1.7 0.2 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 3.9
0.0 0.0 0.4 4.8 11.4 6.3 4.5 0.8 0.0 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.0 0.0 4.0
A 0.0 0.0 0.0 0.2 6.8 81.9 5.7 0.9 0.2 0.1 0.0 0.1 0.0 0.1 0.0 0.0 0.0 0.0 4.0
0.0 0.0 0.0 1.0 5.6 11.6 6.2 3.7 1.1 1.1 0.0 0.8 0.0 0.7 0.0 0.0 0.0 0.0 5.1
A- 0.0 0.0 0.0 0.0 0.2 7.8 81.5 4.7 0.8 0.4 0.1 0.0 0.0 0.2 0.0 0.0 0.0 0.0 4.5
0.0 0.0 0.0 0.0 0.6 6.3 11.9 5.8 2.6 2.6 0.6 0.0 0.0 0.7 0.0 0.0 0.0 0.0 6.1
BBB+ 0.0 0.0 0.0 0.0 0.0 0.6 10.8 76.2 5.1 0.7 0.1 0.0 0.0 0.1 0.2 0.0 0.0 0.0 6.3
0.0 0.0 0.0 0.0 0.0 1.1 9.9 13.2 4.8 2.5 1.6 0.0 0.0 1.2 2.3 0.0 0.0 0.0 7.4
BBB 0.0 0.0 0.0 0.0 0.0 0.0 1.2 12.6 73.6 3.7 0.7 0.4 0.1 0.2 0.0 0.0 0.1 0.1 7.4
0.0 0.0 0.0 0.0 0.0 0.0 2.4 9.1 13.9 4.0 2.6 1.3 0.8 1.0 0.0 0.0 0.8 1.0 7.6
BBB- 0.0 0.0 0.0 0.0 0.0 0.0 0.2 1.5 9.9 72.4 4.7 1.2 0.4 0.3 0.0 0.0 0.0 0.4 9.0
0.0 0.0 0.0 0.0 0.0 0.0 0.8 2.6 8.6 13.9 4.1 4.6 1.2 2.0 0.0 0.0 0.0 1.5 7.9
BB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 1.5 11.0 66.7 4.4 1.9 0.1 0.1 0.1 0.7 0.1 12.8
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 3.7 8.3 15.6 4.8 2.1 0.7 0.7 0.7 5.2 1.0 11.9
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.2 2.4 11.3 59.9 6.5 1.5 0.4 0.2 0.6 0.4 16.5
0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.7 2.8 10.9 15.9 5.1 2.5 1.5 1.0 3.5 1.4 11.4
BB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.2 1.5 8.8 57.1 8.8 2.8 0.0 0.7 0.6 19.4
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 1.1 3.3 8.1 15.8 7.5 6.4 0.0 2.4 1.3 12.1
B+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 3.2 8.5 55.7 8.0 1.8 1.2 2.5 18.9
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3 7.0 6.9 12.3 7.2 2.8 2.6 4.0 9.2
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 2.1 7.3 53.2 6.8 2.4 3.1 24.7
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.8 5.5 5.7 14.4 7.2 5.5 5.8 12.1
B- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.5 2.4 6.7 51.0 7.2 4.8 26.9
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.9 1.9 5.0 9.4 21.5 9.3 8.8 18.7
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 0.9 2.7 1.8 8.8 44.2 20.4 20.4
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.8 2.9 8.7 5.0 11.9 26.8 20.3 22.9
Note: Numbers in parentheses are standard deviations. *Includes Japan. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

That higher ratings correspond with lower frequency of default--and vice versa--remains true over time, as illustrated by the cumulative average default rates in tables 15 and 16 and in chart 6. As noted earlier (chart 5), no defaults have ever occurred in the 'AAA' category in Asia. On average, from 1993-2019, 'BBB' rated Asian issuers had a less than 0.2% default rate in the first year after they were rated and a more than 0.2% default rate in the second year. Issuers rated 'B' had an average default rate of 3.1% in the first year and 6.2% in the second year (see table 15).

Our findings are qualified by the small number of issuers in the pool and the short period of the study. Although the study period for Asia is 1993-2019, almost 88.0% of the total issuer ratings were assigned after 2000. Therefore, a significant portion of the pool is not as seasoned as its global counterparts.

Table 15

Comparison Of Corporate Cumulative Average Default Rates (%)
--Time horizon (years)--
Asia (1993-2019) 1 2 3 4 5 6 7 8 9 10
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 0.0 0.0 0.0 0.1 0.2 0.3 0.4 0.5 0.6
BBB 0.1 0.2 0.4 0.5 0.7 0.8 0.8 0.8 0.8 0.8
BB 0.3 1.0 1.7 2.9 4.0 4.5 5.0 5.3 5.3 5.3
B 3.1 6.2 8.2 9.7 10.4 11.0 11.6 12.3 12.7 12.9
CCC/C 20.4 25.2 27.3 28.4 29.6 29.6 29.6 29.6 29.6 29.6
Investment grade 0.1 0.1 0.1 0.2 0.3 0.4 0.4 0.5 0.5 0.6
Speculative grade 2.2 3.9 5.2 6.4 7.4 8.0 8.4 8.9 9.0 9.1
All rated 0.6 1.1 1.4 1.8 2.2 2.4 2.5 2.7 2.7 2.8
Global (1981-2019)
AAA 0.0 0.0 0.1 0.2 0.3 0.5 0.5 0.6 0.6 0.7
AA 0.0 0.1 0.1 0.2 0.3 0.4 0.5 0.6 0.6 0.7
A 0.1 0.1 0.2 0.3 0.5 0.6 0.8 0.9 1.1 1.2
BBB 0.2 0.4 0.8 1.2 1.6 2.0 2.3 2.7 3.0 3.3
BB 0.6 1.9 3.5 5.0 6.5 7.9 9.0 10.0 11.0 11.8
B 3.3 7.7 11.5 14.6 16.9 18.8 20.4 21.6 22.7 23.7
CCC/C 27.0 36.6 41.4 44.1 46.2 47.1 48.2 49.0 49.7 50.3
Investment grade 0.1 0.2 0.4 0.6 0.9 1.1 1.3 1.5 1.7 1.9
Speculative grade 3.6 7.0 9.9 12.3 14.3 15.9 17.2 18.3 19.3 20.2
All rated 1.5 2.9 4.1 5.2 6.0 6.8 7.4 7.9 8.4 8.8
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Chart 6

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Table 16

Asia Corporate Cumulative Average Default Rates By Rating Modifier (1993-2019) (%)
--Time horizon (years)--
Rating 1 2 3 4 5 6 7 8 9 10
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 0.0 0.0 0.0 0.1 0.3 0.6 0.7 0.9 1.1
A- 0.0 0.0 0.0 0.1 0.2 0.2 0.3 0.4 0.5 0.7
BBB+ 0.0 0.0 0.2 0.4 0.4 0.5 0.5 0.5 0.5 0.5
BBB 0.1 0.2 0.3 0.5 1.0 1.2 1.2 1.2 1.2 1.2
BBB- 0.4 0.6 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7
BB+ 0.1 0.3 0.8 1.2 1.7 1.9 1.9 1.9 1.9 1.9
BB 0.4 0.8 1.8 3.4 4.6 5.6 6.4 6.7 6.7 6.7
BB- 0.6 2.0 2.8 4.5 6.2 6.7 7.5 8.1 8.1 8.1
B+ 2.5 5.9 8.1 9.5 10.2 10.7 11.0 11.6 11.9 11.9
B 3.1 4.9 7.0 9.3 10.3 11.4 12.2 12.6 13.1 13.1
B- 4.8 9.7 10.9 10.9 10.9 10.9 11.8 13.5 14.4 15.3
CCC/C 20.4 25.2 27.3 28.4 29.6 29.6 29.6 29.6 29.6 29.6
Investment grade 0.1 0.1 0.1 0.2 0.3 0.4 0.4 0.5 0.5 0.6
Speculative grade 2.2 3.9 5.2 6.4 7.4 8.0 8.4 8.9 9.0 9.1
All rated 0.6 1.1 1.4 1.8 2.2 2.4 2.5 2.7 2.7 2.8
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Gini Ratios And Lorenz Curves

A quantitative measure of ratings performance indicates that the relative rank ordering of ratings in Asia is consistent across various time horizons. To measure ratings performance, or ratings accuracy, the cumulative share of issuers by rating is plotted against the cumulative share of defaulters in a Lorenz curve to render the accuracy of their rank ordering visually (see charts 7-9). Our calculations indicate that the one-year weighted average (1993-2019) Gini coefficient for Asia was 86.8%, the three-year Gini was 82.4%, and the five-year was 76.0% (see table 17). By contrast, the global one-year weighted average Gini coefficient was 82.5%, the three-year was 75.2%, and the five-year was 71.4%.

If corporate ratings only randomly approximated default risk, the Gini coefficient would be zero. On the other hand, if corporate ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated issuers, the Lorenz curve would capture all of the area on the graph above the diagonal, and the Gini coefficient would be 1. For more, see Appendix II.

As expected, the Gini coefficients decline as the time horizon lengthens because longer time horizons allow for more credit degradation among higher-rated issuers (see table 17). In the one-year Asia Lorenz curve, for example, 92.8% of defaults occurred in the speculative-grade category, while speculative-grade ratings constituted only 26.8% of all Asian corporate issuers (see chart 7). The five-year Lorenz curve shows that speculative-grade issuers constituted 88.3% of defaulters and only 27.6% of the entire sample (see chart 9).

Table 17

Corporate Gini Coefficients By Region (%)
--Time horizon--
Region One-year Three-year Five-year Seven-year
Global 82.5 75.2 71.4 69.3
U.S. 80.7 72.8 69.0 66.8
Europe 90.3 85.2 82.6 80.0
Asia 86.8 82.4 76.0 71.7
Note: Asia figures are for the period 1993-2019. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Chart 7

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Chart 8

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Chart 9

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Appendix I: Data Approach And Definitions

This long-term corporate default and rating transition study uses S&P Global Market Intelligence's CreditPro® database of long-term local currency issuer credit ratings. Most exhibits in this study are the direct output of the CreditPro® interface, while others reflect manipulation of the underlying database.

An issuer credit rating reflects S&P Global Ratings' forward-looking opinion of a company's overall creditworthiness. This opinion focuses on the obligor's capacity and willingness to meet its financial commitments as they come due. It does not apply to any specific financial obligation because it does not take into account the nature and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation. It is not necessary for a company to have rated debt to have an issuer credit rating.

While an issue credit rating is an assessment of default risk, it may also incorporate an assessment of the relative seniority or ultimate recovery of the issue in the event of default. The junior obligations of a company are typically rated lower than the senior obligations to reflect their lower priority in bankruptcy and ultimate recovery expectations. Alternatively, secured debt may be rated higher than the issuer credit rating. Notching also applies to the structural subordination of debt issued by operating subsidiaries or holding companies that are part of an enterprise that we view as a single economic entity.

S&P Global Ratings Research's ongoing enhancement of the CreditPro® database used to generate this study could lead to outcomes that differ to some degree from those reported in previous studies. However, this poses no continuity problem because each study reports statistics going back to Jan. 1, 1993. Therefore, each annual default study is self-contained and effectively supersedes all previous versions.

Issuers included in this study

For the purposes of this study, Asia consists of Bangladesh, Bhutan, Brunei Darussalam, Cambodia, China, Fiji, Hong Kong, India, Indonesia, Japan, Republic of Korea, Macao Special Administrative Region of China, Malaysia, Marshall Islands, Mongolia, Pakistan, Papua New Guinea, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam.

This study analyzes the rating histories of 1,899 Asian companies that S&P Global Ratings rated from Jan. 1, 1993-Dec. 31, 2019. These include industrials, utilities, financial institutions, and insurance companies with long-term local currency ratings. The analysis excludes public information ("pi") ratings and ratings based on the guarantee of another company. Structured finance vehicles, public-sector issuers, and sovereign issuers are the subjects of separate default and transition studies, and we excluded these from this study.

To avoid double-counting, the CreditPro® database excludes subsidiaries with debt that is fully guaranteed by a parent or with default risk that is considered identical to that of a parent. The latter are companies with obligations that are not legally guaranteed by a parent but that have operating or financing activities that are so inextricably entwined with those of the parent that it would be impossible to imagine the default of one and not the other. At times, however, some of these subsidiaries might not yet have been covered by a parent's guarantee, or the relationship that combines the default risk of parent and subsidiary might have come to an end or might not have begun. We included such subsidiaries for the period during which they had a distinct and separate risk of default.

Issuers with withdrawn ratings

S&P Global Ratings withdraws ratings when an entity's entire debt is paid off or when the program or programs rated are terminated and the relevant debt extinguished. For the purposes of this study, a rating may be withdrawn as a result of a merger or acquisition. Others are withdrawn because of a lack of cooperation, particularly when a company is experiencing financial difficulties and refuses to provide all the information needed to continue surveillance on the ratings, or at the entity's request.

Definition of default

An obligor rated 'SD' (selective default) or 'D' (default) is in payment default on one or more of its financial obligations (rated or unrated) unless S&P Global Ratings believes that such payments will be made within five business days, irrespective of any grace period. S&P Global Ratings also lowers a rating to 'D' when an issuer files for bankruptcy or takes a similar action that jeopardizes its payments on a financial obligation.

A 'D' rating is assigned when S&P Global Ratings believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. S&P Global assigns an 'SD' rating when it believes that the obligor has selectively defaulted on a specific issue or class of obligations but will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. A selective default includes the completion of a distressed exchange offer whereby one or more financial obligations are either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

'R' (regulatory intervention) indicates that an obligor is under regulatory supervision owing to its financial condition. This does not necessarily indicate a default event, but the regulator might have the power to favor one class of obligations over another or pay some obligations and not others. Preferred stock is not considered a financial obligation, and thus a missed preferred stock dividend is not normally equated with default.

We deem 'D', 'SD', and 'R' issuer ratings to be defaults for the purposes of this study. A default is assumed to take place on the earliest of: the date S&P Global Ratings revised the rating(s) to 'D', 'SD', or 'R'; the date a debt payment was missed; the date a distressed exchange offer was announced; or the date the debtor filed for or was forced into bankruptcy.

When an issuer defaults, it is not uncommon for S&P Global Ratings to subsequently withdraw the 'D' rating. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. If any defaulting entity reemerges from bankruptcy--or otherwise restructures its defaulted debt instruments, thereby reestablishing regular, timely payment of all its debts--we reenter this issuer into the database as a new entity. Its rating history after the default event is included in all calculations, separate from its experience leading up to its earlier default.

Many practitioners use statistics from this default study to estimate "probability of default" and "probability of rating transition." S&P Global Ratings' credit ratings do not imply a specific probability of default.

Calculations

Static pools.  S&P Global Ratings Research conducts its default studies on the basis of groupings called static pools. For the purposes of this study, we form static pools by grouping issuers by rating category at the beginning of each year covered by the study. Each static pool is followed from that point forward. All companies included in the study are assigned to one or more static pools. When an issuer defaults, we assign that default back to all of the static pools to which the issuer belonged.

We use static pools to avoid certain pitfalls in estimating default rates. This is to ensure that default rates account for rating migration and to allow for default rates to be calculated across multiperiod time horizons. Some methods for calculating default and rating transition rates might charge defaults against only the initial rating on the issuer, ignoring more recent rating changes that supply more current information. Other methods calculate default rates using only the most recent year's default and rating data, which might yield comparatively low default rates during periods of high rating activity because they ignore prior years' default activity.

Membership in static pools remains constant. Each static pool can be interpreted as a buy-and-hold portfolio. Because errors, if any, are corrected by every new update and because the criteria for inclusion or exclusion of companies in the default study are subject to minor revisions as time goes by, it is not possible to compare static pools across different studies. Therefore, every new update revises results back to the starting date so as to avoid continuity problems.

Issuers that have had ratings withdrawn--that is, revised to not rated ("NR")--are surveilled with the aim of capturing a potential default. Because static pools only include issuers with active ratings as of their beginning date, we exclude companies with withdrawn ratings, as well as those that have defaulted, from subsequent static pools. If the rating on an entity is withdrawn after the start date of a particular static pool and the entity subsequently defaults, we will include it in that static pool as a default and categorize it in the rating category of which it was a member at that time.

For instance, the 2001 static pool consists of all companies rated as of 12:01 a.m. on Jan. 1, 2001. Companies first rated in 2001 and surviving members of the 2001 static pool form the 2002 static pool. All rating changes that took place are reflected in the newly formed 2002 static pool through these issuer ratings as of 12:01 a.m. on Jan. 1, 2002.

Consider the following example: An issuer is originally rated 'BB' in mid-2000, and S&P Global Ratings downgrades the company to 'B' in 2002. This is followed by a rating withdrawal in 2003 and a default in 2004. We would include this hypothetical company in the 2001 and 2002 pools with the 'BB' rating, which was the rating on the issuer at the beginning of those years. Likewise, we would include it in the 2003 pool with the 'B' rating. It would not be part of the 2004 pool because it was not rated as of the first day of that year, and we would not include it in any pool after the last day of 2004 because S&P Global Ratings had withdrawn its rating on the company by then. Yet each of the three pools in which this company was included (2001-2003) would record its 2004 default at the appropriate time horizon.

Default rates.  We calculated annual default rates for each static pool, first in units and later as percentages with respect to the number of issuers in each rating category. We combined these percentages to obtain cumulative default rates for the 39 years (globally) the study covers (27 years in Asia).

Issuer-weighted default rates.  All default rates that appear in this study are based on the number of issuers rather than the dollar amounts affected by defaults or rating changes. Although dollar amounts provide information about the portion of the market that is affected by defaults or rating changes, issuer-weighted averages are more useful measures of the performance of ratings.

Average cumulative default rates.  The cumulative default rates in this study average the experience of all static pools by first calculating marginal default rates for each possible time horizon and for each static pool, weight-averaging the marginal default rates conditional on survival (survivors being nondefaulters), and accumulating the average conditional marginal default rates. We calculated conditional default rates by dividing the number of issuers in a static pool that default at a specific time horizon by the number of issuers that survived (did not default) to that point in time. Weights are based on the number of issuers in each static pool. Cumulative default rates are one minus the product of the proportion of survivors (nondefaulters).

Transition analysis.  Transition rates compare issuer ratings at the beginning of a period with ratings at the end of the period. To compute one-year rating transition rates by rating category, we compared the rating on each entity at the end of a particular year with the rating at the beginning of the same year. An issuer that remained rated for more than one year was counted as many times as the number of years it was rated.

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. If the rating on the issuer was withdrawn in the middle of 1991, it would be included in the column representing transitions to "NR" in the 1991 transition matrix. Similarly, if it defaulted in the middle of 1991, it would be included in the column representing transitions to 'D' in the 1991 one-year transition matrix.

All 1981 static pool members still rated on Jan. 1, 2019, had 39 one-year transitions, while companies first rated on Jan. 1, 2019, had only one. Each one-year transition matrix displays all rating movements between letter categories from the beginning of the year through year-end. For each rating listed in the matrix's leftmost column, there are nine ratios listed in the rows, corresponding to the ratings from 'AAA' to 'D', plus an entry for "NR."

The only ratings considered in these calculations are those on issuers at the beginning of each static pool and those at the end. All rating changes that occur in between are ignored. For example, if an entity was rated 'A' on Jan. 1, 2019, and the rating was lowered to 'BBB' in the middle of the year and later raised to 'A' (with no other subsequent rating changes), this entity would be included only in the percentage of issuers that began the year as 'A' and ended the year as 'A'. This also applies to transition matrices that span longer time horizons. If an issuer defaults or the rating is withdrawn in the middle of the year, then the issuer would be considered rated 'D' or not rated on Dec. 31.

Multiyear transitions.  Multiyear transitions were also calculated for periods of two to five years. In this case, we compared the rating at the beginning of the multiyear period with the rating at the end. For example, three-year transition matrices were the result of comparing ratings at the beginning of the years 1993-2017 with the ratings at the end of the years 1995-2019. Otherwise, our approach was identical to that used for single-year transitions.

We calculated average transition matrices on the basis of the multiyear matrices just described. These average matrices are a true summary, the ratios of which represent the historical incidence of the ratings listed in the first column changing to the ones listed in the top row over the course of the multiyear period. Transition matrices that present averages over multiple time horizons are also calculated as issuer-weighted averages.

Rating modifiers.  We use rating modifiers (plus and minus signs) to calculate upgrade and downgrade percentages, as well as the magnitude of rating changes, throughout this study. However, some transition tables may use full rating categories for practical reasons. In other words, the use of a rating category suggests that transitions to, for example, 'AA-' from 'AA' or to 'BBB-' from 'BBB+' are not considered to be rating transitions because the rating remained within the rating category.

Standard deviations.  Many of the tables and charts in this study display averages of default rates, transition rates, and Gini ratios. Often these are issuer-weighted averages. Prior studies have shown that fluctuations within default rates and transitions can vary greatly depending on many circumstances specific to particular time frames, industries, and geographic regions. As a supplement to many of the averages and time series presented in this study, standard deviations are also shown to provide a gauge of the dispersion of data behind these averages.

For the transition matrices, the standard deviation for each cell in a given matrix is a weighted standard deviation, calculated using the data from each of the underlying cohort years that contribute to the averages, weighted by that cohort year's issuer base for each rating level. For example, in the average one-year transition matrix, each cell's weighted standard deviation is calculated from the series of that particular cell in each of the 27 cohorts beginning with the 1993 cohort and ending with the 2019 cohort. The squared difference between each cohort's transition rate and the weighted average--which is the data point in each cell--is multiplied by each cohort's weight. These weights are based on the contribution of each cohort's rating level to the 27-year total issuer base for each rating level. We then divide this by the ratio of the total number of nonzero weights minus one and the total number of nonzero weights.

The standard deviations of Gini ratios are derived from the time series for all of their constituent annual cohorts. As an example, the standard deviation applied to the seven-year weighted average global Gini ratio was calculated from the time series of all available seven-year Gini ratios by cohort. In this case, these are the seven-year Gini ratios beginning with the 1993 cohort through the 2013 seven-year cohort. We calculated standard deviations for Gini ratios in this study as the standard deviations of a sample, not those of a population.

Time sample.  This update limits the reporting of default rates to the 10-year time horizon. However, the Asia data were gathered for 27 years, and all calculations are based on the rating experience of that period. 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.

Additional Tables

Table 18

Static Pool Cumulative Corporate Default Rates Among All Asia Ratings (1993-2019) (%)
--Time horizon (years)--
Year Issuers 1 2 3 4 5 6 7 8 9 10
1993 59.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 1.7 1.7 1.7
1994 69.0 0.0 0.0 0.0 0.0 1.4 4.3 4.3 5.8 5.8 5.8
1995 84.0 0.0 0.0 0.0 1.2 6.0 6.0 7.1 7.1 7.1 7.1
1996 96.0 0.0 0.0 1.0 5.2 5.2 6.3 6.3 6.3 6.3 6.3
1997 132.0 0.8 3.0 6.1 6.8 7.6 7.6 8.3 8.3 8.3 8.3
1998 185.0 4.9 7.6 8.1 10.3 11.4 11.9 11.9 11.9 11.9 11.9
1999 196.0 2.6 4.6 6.6 7.1 7.7 7.7 7.7 7.7 7.7 7.7
2000 233.0 1.3 3.0 3.0 3.4 3.4 3.4 3.4 3.9 3.9 4.3
2001 243.0 2.1 2.1 2.5 2.5 2.5 2.5 2.9 2.9 3.3 3.3
2002 265.0 0.0 0.8 0.8 0.8 0.8 1.1 1.1 1.5 1.5 1.5
2003 334.0 0.6 0.6 0.6 0.6 0.9 1.2 1.8 1.8 1.8 1.8
2004 534.0 0.4 0.4 0.4 0.6 0.6 1.3 1.5 1.5 1.5 1.7
2005 624.0 0.2 0.2 0.3 0.5 1.4 1.6 1.6 1.9 2.1 2.1
2006 650.0 0.2 0.3 0.5 1.8 2.0 2.0 2.3 2.5 2.5 2.6
2007 648.0 0.2 0.5 2.0 2.3 2.3 2.5 2.6 2.6 2.9 2.9
2008 574.0 1.0 3.0 3.3 3.3 3.8 3.8 3.8 4.2 4.2 4.2
2009 570.0 2.1 2.5 2.5 3.0 3.0 3.0 3.3 3.5 3.7 3.7
2010 487.0 0.6 0.6 1.0 1.0 1.2 1.6 1.6 1.8 1.8 1.8
2011 491.0 0.0 0.6 0.8 1.0 1.6 1.6 1.8 1.8 1.8
2012 507.0 0.4 0.6 0.8 1.6 1.6 2.0 2.0 2.0
2013 520.0 0.4 0.6 1.3 1.3 1.7 1.7 1.7
2014 565.0 0.2 0.9 1.1 1.4 1.6 1.6
2015 623.0 0.6 1.0 1.3 1.4 1.6
2016 683.0 0.3 0.6 0.7 0.7
2017 763.0 0.3 0.4 0.5
2018 831.0 0.1 0.6
2019 911.0 0.7
Summary statistics 1 2 3 4 5 6 7 8 9 10
Marginal average 0.6 0.5 0.4 0.4 0.3 0.2 0.2 0.1 0.1 0.1
Cumulative average 0.6 1.1 1.4 1.8 2.2 2.4 2.5 2.7 2.7 2.8
Standard deviation 1.1 1.7 2.2 2.6 2.8 2.9 2.9 2.9 2.9 2.9
Median 0.4 0.6 1.0 1.4 1.7 2.2 2.6 2.8 3.3 3.5
Min 0.0 0.0 0.0 0.0 0.0 0.0 1.1 1.5 1.5 1.5
Max 4.9 7.6 8.1 10.3 11.4 11.9 11.9 11.9 11.9 11.9
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 19

Static Pool Cumulative Corporate Default Rates Among Investment-Grade Asia Ratings (1993-2019) (%)
--Time horizon (years)--
Year Issuers 1 2 3 4 5 6 7 8 9 10
1993 59.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 1.7 1.7 1.7
1994 66.0 0.0 0.0 0.0 0.0 1.5 3.0 3.0 3.0 3.0 3.0
1995 77.0 0.0 0.0 0.0 1.3 2.6 2.6 2.6 2.6 2.6 2.6
1996 89.0 0.0 0.0 1.1 2.2 2.2 2.2 2.2 2.2 2.2 2.2
1997 111.0 0.9 1.8 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7
1998 121.0 1.7 1.7 1.7 1.7 2.5 2.5 2.5 2.5 2.5 2.5
1999 112.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2000 132.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8
2001 143.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.7
2002 168.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.6 0.6
2003 198.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.5 0.5 0.5
2004 349.0 0.0 0.0 0.0 0.0 0.0 0.6 0.6 0.6 0.6 0.6
2005 427.0 0.0 0.0 0.0 0.0 0.5 0.5 0.5 0.5 0.5 0.5
2006 460.0 0.0 0.0 0.0 0.4 0.4 0.4 0.4 0.4 0.4 0.7
2007 481.0 0.0 0.0 0.4 0.4 0.4 0.4 0.4 0.4 0.6 0.6
2008 424.0 0.0 0.5 0.5 0.5 0.5 0.5 0.5 0.7 0.7 0.7
2009 441.0 0.5 0.5 0.5 0.5 0.5 0.5 0.7 0.7 0.7 0.7
2010 388.0 0.0 0.0 0.0 0.0 0.0 0.3 0.3 0.3 0.3 0.3
2011 396.0 0.0 0.0 0.0 0.0 0.3 0.3 0.3 0.3 0.3
2012 397.0 0.0 0.0 0.0 0.3 0.3 0.3 0.3 0.3
2013 410.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2014 440.0 0.0 0.0 0.0 0.0 0.0 0.0
2015 486.0 0.0 0.0 0.0 0.0 0.0
2016 544.0 0.0 0.0 0.0 0.0
2017 593.0 0.0 0.0 0.0
2018 625.0 0.0 0.0
2019 675.0 0.0
Summary statistics 1 2 3 4 5 6 7 8 9 10
Marginal average 0.1 0.0 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0
Cumulative average 0.1 0.1 0.1 0.2 0.3 0.4 0.4 0.5 0.5 0.6
Standard deviation 0.4 0.5 0.6 0.8 0.9 1.1 1.0 1.0 1.0 1.0
Median 0.0 0.0 0.0 0.0 0.3 0.3 0.5 0.5 0.6 0.7
Min 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Max 1.7 1.8 2.7 2.7 2.7 3.0 3.0 3.0 3.0 3.0
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 20

Static Pool Cumulative Corporate Default Rates Among Speculative-Grade Asia Ratings (1993-2019) (%)
--Time horizon (years)--
Year Issuers 1 2 3 4 5 6 7 8 9 10
1993 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
1994 3.0 0.0 0.0 0.0 0.0 0.0 33.3 33.3 66.7 66.7 66.7
1995 7.0 0.0 0.0 0.0 0.0 42.9 42.9 57.1 57.1 57.1 57.1
1996 7.0 0.0 0.0 0.0 42.9 42.9 57.1 57.1 57.1 57.1 57.1
1997 21.0 0.0 9.5 23.8 28.6 33.3 33.3 38.1 38.1 38.1 38.1
1998 64.0 10.9 18.8 20.3 26.6 28.1 29.7 29.7 29.7 29.7 29.7
1999 84.0 6.0 10.7 15.5 16.7 17.9 17.9 17.9 17.9 17.9 17.9
2000 101.0 3.0 6.9 6.9 7.9 7.9 7.9 7.9 8.9 8.9 8.9
2001 100.0 5.0 5.0 6.0 6.0 6.0 6.0 7.0 7.0 7.0 7.0
2002 97.0 0.0 2.1 2.1 2.1 2.1 3.1 3.1 3.1 3.1 3.1
2003 136.0 1.5 1.5 1.5 1.5 2.2 2.9 3.7 3.7 3.7 3.7
2004 185.0 1.1 1.1 1.1 1.6 1.6 2.7 3.2 3.2 3.2 3.8
2005 197.0 0.5 0.5 1.0 1.5 3.6 4.1 4.1 5.1 5.6 5.6
2006 190.0 0.5 1.1 1.6 5.3 5.8 5.8 6.8 7.4 7.4 7.4
2007 167.0 0.6 1.8 6.6 7.8 7.8 8.4 9.0 9.0 9.6 9.6
2008 150.0 4.0 10.0 11.3 11.3 13.3 13.3 13.3 14.0 14.0 14.0
2009 129.0 7.8 9.3 9.3 11.6 11.6 11.6 12.4 13.2 14.0 14.0
2010 99.0 3.0 3.0 5.1 5.1 6.1 7.1 7.1 8.1 8.1 8.1
2011 95.0 0.0 3.2 4.2 5.3 7.4 7.4 8.4 8.4 8.4
2012 110.0 1.8 2.7 3.6 6.4 6.4 8.2 8.2 8.2
2013 110.0 1.8 2.7 6.4 6.4 8.2 8.2 8.2
2014 125.0 0.8 4.0 4.8 6.4 7.2 7.2
2015 137.0 2.9 4.4 5.8 6.6 7.3
2016 139.0 1.4 2.9 3.6 3.6
2017 170.0 1.2 1.8 2.4
2018 206.0 0.5 2.4
2019 236.0 2.5
Summary statistics 1 2 3 4 5 6 7 8 9 10
Marginal average 2.2 1.8 1.3 1.3 1.0 0.6 0.5 0.5 0.2 0.1
Cumulative average 2.2 3.9 5.2 6.4 7.4 8.0 8.4 8.9 9.0 9.1
Standard deviation 2.7 4.4 6.2 10.4 12.8 15.1 17.1 20.4 20.7 21.1
Median 1.3 2.7 4.5 6.4 7.3 8.2 8.3 8.9 9.2 9.6
Min 0.0 0.0 0.0 0.0 0.0 2.7 3.1 3.1 3.1 3.1
Max 10.9 18.8 23.8 42.9 42.9 57.1 57.1 66.7 66.7 66.7
N/A--Not applicable. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 21

Average Multiyear (Two-Year) Asia Corporate Transition Matrix (1993-2019) (%)
From/to AAA AA A BBB BB B CCC/C D NR
AAA 70.2 26.5 2.0 0.0 0.0 0.0 0.0 0.0 1.3
26.5 25.5 5.0 0.0 0.0 0.0 0.0 0.0 4.2
AA 0.9 79.3 13.5 0.0 0.0 0.2 0.0 0.0 6.1
2.7 9.1 8.6 0.0 0.0 0.6 0.0 0.0 6.8
A 0.0 2.5 83.3 5.1 0.3 0.2 0.0 0.0 8.6
0.0 1.7 9.3 7.1 1.9 0.9 0.0 0.0 6.9
BBB 0.0 0.0 9.4 72.1 3.7 0.4 0.1 0.3 14.1
0.0 0.0 7.8 13.0 5.2 1.7 0.8 0.9 10.2
BB 0.0 0.0 0.1 11.1 54.8 5.5 1.2 1.0 26.4
0.0 0.0 0.3 7.2 11.0 3.8 3.8 2.1 10.1
B 0.0 0.0 0.0 0.5 10.6 45.4 2.8 6.1 34.5
0.0 0.0 0.0 1.1 8.4 10.9 3.0 6.9 9.5
CCC/C 0.0 0.0 0.0 0.0 2.9 19.4 19.4 25.2 33.0
0.0 0.0 0.0 0.0 5.3 19.2 18.2 22.7 30.3
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 22

Average Multiyear (Three-Year) Asia Corporate Transition Matrix (1993-2019) (%)
From/to AAA AA A BBB BB B CCC/C D NR
AAA 60.1 35.1 3.4 0.0 0.0 0.0 0.0 0.0 1.4
27.8 26.2 6.0 0.0 0.0 0.0 0.0 0.0 3.7
AA 1.3 71.0 18.4 0.0 0.0 0.3 0.0 0.0 9.0
3.0 9.4 9.6 0.0 0.0 0.7 0.0 0.0 8.8
A 0.0 3.5 75.9 6.8 0.4 0.3 0.0 0.0 13.1
0.0 1.8 11.4 8.8 2.1 1.4 0.0 0.0 9.7
BBB 0.0 0.0 12.8 60.8 4.8 0.5 0.2 0.4 20.6
0.0 0.0 10.0 15.8 5.4 1.4 0.8 1.4 12.9
BB 0.0 0.0 0.4 14.1 40.7 5.9 1.3 1.8 35.8
0.0 0.0 0.8 7.9 10.7 3.6 4.6 3.1 11.0
B 0.0 0.0 0.0 1.2 12.4 33.2 2.3 8.3 42.5
0.0 0.0 0.0 2.1 7.8 11.7 2.5 7.4 9.9
CCC/C 0.0 0.0 0.0 0.0 4.1 19.6 5.2 27.8 43.3
0.0 0.0 0.0 0.0 6.8 16.2 10.3 24.3 27.9
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 23

Average Multiyear (Five-Year) Asia Corporate Transition Matrix (1993-2019) (%)
From/to AAA AA A BBB BB B CCC/C D NR
AAA 43.9 45.5 6.8 0.0 0.0 0.0 0.0 0.0 3.8
27.3 24.4 8.6 0.0 0.0 0.0 0.0 0.0 8.6
AA 2.3 56.9 24.7 1.4 0.1 0.4 0.0 0.0 14.1
3.6 7.8 11.9 2.8 0.4 0.7 0.0 0.0 11.5
A 0.0 5.4 65.0 8.1 0.8 0.2 0.0 0.1 20.3
0.0 2.1 13.5 11.3 2.5 0.9 0.0 0.3 11.6
BBB 0.0 0.0 17.1 44.7 4.9 0.6 0.1 0.8 31.8
0.0 0.3 10.6 17.0 5.4 2.0 0.5 2.1 15.5
BB 0.0 0.0 1.7 15.1 24.0 5.0 1.0 4.3 48.9
0.0 0.0 2.6 7.8 10.2 3.9 5.4 5.4 13.7
B 0.0 0.0 0.1 2.3 10.2 18.9 1.1 11.0 56.3
0.0 0.0 0.6 3.7 6.8 11.1 2.1 9.2 10.9
CCC/C 0.0 0.0 0.0 0.0 5.7 14.8 0.0 31.8 47.7
0.0 0.0 0.0 0.0 5.9 10.5 0.0 26.6 24.7
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 24

Initial-To-Last Transition Rates By Rating Modifier For Nonfinancials (1981-2019) (%)
--Rating--
From/to Issuers AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC D NR
AAA 12.0 16.7 8.3 16.7 16.7 0.0 16.7 8.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 16.7
AA+ 8.0 0.0 12.5 12.5 25.0 12.5 12.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 25.0
AA 14.0 0.0 0.0 14.3 28.6 0.0 7.1 7.1 7.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 35.7
AA- 33.0 0.0 3.0 0.0 15.2 24.2 3.0 6.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 48.5
A+ 40.0 0.0 5.0 5.0 2.5 27.5 10.0 7.5 7.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 35.0
A 73.0 0.0 0.0 4.1 1.4 4.1 32.9 5.5 2.7 0.0 0.0 0.0 1.4 0.0 0.0 0.0 0.0 0.0 1.4 46.6
A- 91.0 0.0 0.0 3.3 1.1 2.2 6.6 30.8 6.6 1.1 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 47.3
BBB+ 85.0 0.0 0.0 2.4 0.0 1.2 1.2 10.6 29.4 8.2 1.2 0.0 1.2 0.0 0.0 0.0 0.0 0.0 0.0 44.7
BBB 111.0 0.0 0.0 0.9 0.0 0.9 0.9 4.5 9.0 31.5 6.3 0.9 0.9 1.8 0.0 0.0 0.0 0.0 0.0 42.3
BBB- 161.0 0.0 0.0 0.0 0.0 0.0 0.6 1.2 5.6 6.2 27.3 3.7 0.6 0.0 0.0 0.6 0.0 0.0 2.5 51.6
BB+ 93.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 4.3 2.2 4.3 22.6 2.2 3.2 1.1 1.1 0.0 0.0 3.2 54.8
BB 110.0 0.0 0.0 0.0 0.0 0.0 0.0 1.8 0.0 2.7 0.9 2.7 16.4 4.5 2.7 0.0 0.0 0.0 8.2 60.0
BB- 121.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 0.0 0.8 2.5 0.8 11.6 4.1 2.5 0.0 3.3 9.9 63.6
B+ 149.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.7 0.0 0.7 1.3 11.4 4.0 3.4 0.7 16.8 60.4
B 122.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 0.0 0.0 0.0 2.5 11.5 4.9 2.5 11.5 66.4
B- 58.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 1.7 0.0 0.0 10.3 1.7 12.1 72.4
CCC/C 25.0 0.0 0.0 0.0 0.0 0.0 4.0 0.0 0.0 0.0 4.0 4.0 0.0 0.0 4.0 0.0 0.0 8.0 28.0 48.0
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Table 25

Initial-To-Last Transition Rates By Rating Modifier For Financials (1981-2019) (%)
--Rating--
From/to Issuers AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC D NR
AAA 16.0 0.0 0.0 0.0 0.0 12.5 18.8 6.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 62.5
AA+ 3.0 0.0 0.0 0.0 0.0 33.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 66.7
AA 14.0 0.0 0.0 7.1 7.1 7.1 7.1 0.0 7.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 64.3
AA- 31.0 0.0 3.2 0.0 16.1 32.3 9.7 6.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.2 29.0
A+ 45.0 0.0 0.0 0.0 6.7 22.2 28.9 4.4 2.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 35.6
A 76.0 0.0 0.0 0.0 5.3 18.4 43.4 5.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 27.6
A- 67.0 0.0 0.0 0.0 0.0 7.5 14.9 49.3 7.5 1.5 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 1.5 16.4
BBB+ 77.0 0.0 0.0 0.0 1.3 1.3 13.0 14.3 32.5 5.2 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 31.2
BBB 78.0 0.0 0.0 0.0 0.0 1.3 2.6 11.5 14.1 28.2 3.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.1 33.3
BBB- 75.0 0.0 0.0 0.0 0.0 0.0 1.3 6.7 6.7 12.0 28.0 2.7 1.3 0.0 0.0 0.0 0.0 0.0 2.7 38.7
BB+ 36.0 0.0 0.0 0.0 0.0 0.0 2.8 5.6 2.8 2.8 8.3 25.0 0.0 0.0 0.0 0.0 0.0 0.0 5.6 47.2
BB 31.0 0.0 0.0 0.0 0.0 3.2 0.0 0.0 6.5 6.5 0.0 0.0 12.9 3.2 0.0 0.0 0.0 0.0 6.5 61.3
BB- 23.0 0.0 0.0 0.0 0.0 0.0 0.0 4.3 0.0 0.0 8.7 0.0 0.0 8.7 0.0 4.3 0.0 0.0 4.3 69.6
B+ 31.0 0.0 0.0 0.0 0.0 3.2 3.2 0.0 0.0 3.2 0.0 0.0 6.5 0.0 12.9 12.9 0.0 0.0 0.0 58.1
B 37.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.4 2.7 0.0 0.0 0.0 2.7 2.7 5.4 0.0 0.0 5.4 75.7
B- 10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 90.0
CCC/C 5.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20.0 80.0
Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Appendix II: Calculating Gini Coefficients

To measure ratings performance, or ratings accuracy, we plotted the cumulative share of issuers by rating against the cumulative share of defaulters in a Lorenz curve to visually render the accuracy of their rank ordering. The Lorenz curve was developed by Max O. Lorenz as a graphical representation of the proportionality of a distribution. To build the Lorenz curve, the observations are ordered from the low end of the ratings scale ('CCC'/'C') to the high end ('AAA').

If S&P Global Ratings' corporate ratings only randomly approximated default risk, the Lorenz curve would fall along the diagonal. Their Gini coefficient--which is a summary statistic of the Lorenz curve--would thus be zero. If corporate ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated issuers, the curve would capture all of the area above the diagonal on the graph, and the Gini coefficient would be 1 (see chart 10).

The procedure for calculating Gini coefficients is shown in chart 10 and is accomplished by dividing area B by the total of area A plus area B. In other words, the Gini coefficient captures the extent to which actual ratings accuracy diverges from the random scenario and aspires to the ideal scenario.

Chart 10

image

Table 26

Issuer Credit Rating--PT Delta Merlin Dunia Textile
Date To
17-Oct-2019 NR/--/--
13-Sep-2019 D/--/--
22-Aug-2019 CC/Negative/--
16-Jul-2019 CCC-/Negative/--
13-Mar-2019 BB-/Stable/--

Table 27

Issuer Credit Rating--Jain Irrigation Systems Ltd.
Date To
14-Oct-2019 SD/NM/--
26-Jul-2019 CCC/Watch Neg/--
20-Jun-2019 B-/Watch Neg/--
07-Apr-2017 B+/Stable/--

Table 28

Issuer Credit Rating--Shandong Yuhuang Chemical Co. Ltd.
Date To
29-Nov-2019 D/--/--
22-Nov-2019 CC/Negative/--
05-Sep-2019 CCC+/Watch Neg/--
14-Jun-2019 B-/Negative/--
26-Jun-2018 B+/Negative/--
14-Mar-2017 B+/Stable/--

Related Research

This report does not constitute a rating action.

Credit Markets Research:Xu Han, New York (1) 212-438-1491;
xu.han@spglobal.com
Sudeep K Kesh, New York (1) 212-438-7982;
sudeep.kesh@spglobal.com
Research Contributor:Nivritti Mishra Richhariya, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai

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