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Default, Transition, and Recovery: 2020 Annual International Public Finance Default And Rating Transition Study

COMMENTS

Default, Transition, and Recovery: The U.S. Contributes The Most To Lower Global Corporate Defaults

COMMENTS

Credit Trends: U.S. Corporate Bond Yields As Of Oct. 13, 2021

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Default, Transition, and Recovery: 2020 Annual Infrastructure Default And Rating Transition Study

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Default, Transition, and Recovery: Quarterly Default Update Q2 2021: Upgrades Outpace Downgrades For Second Consecutive Quarter


Default, Transition, and Recovery: 2020 Annual International Public Finance Default And Rating Transition Study

For international public finance (IPF) entities, upgrades in 2020 fell to one from 34 in 2019, and downgrades rose to 41 from 30. There were seven defaults in 2020, up from two in 2019. All defaults were Argentinian provinces and defaulted in the same year as the Argentine Republic defaulted on both its foreign currency and local currency debt.

The IPF sector is divided into two main categories--local and regional governments (LRGs), like states, provinces, regions, cities, towns, and oblasts, and non-LRGs, like non-U.S. universities, hospital systems, transportation systems, and housing providers. At the start of 2021, there were 286 rated LRG issuers and 134 non-LRG issuers.

Rating Distributions

The number of IPF entities rated by S&P Global Ratings at the start of 2021 was 420, up from a low of 10 in 1989 (see chart 1). After years of only about 12 active ratings per year, the rated IPF sector grew faster in 1993, reaching approximately 300 rated entities around 2004. The first speculative-grade ratings at the start of a year were a 'BB' and a 'B' at the start of 1996. By the start of 2021, 86% of these ratings are investment grade. The highest percentage of speculative-grade ratings was at the start of 2008, when approximately 31% of the ratings were below 'BBB-' .

Chart 1

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At the start of 2021, there were 25 'AAA' LRGs, down from a high of 35 at the start of 2012 (see chart 2). By far, the largest share of LRG ratings are 'AA', representing 42% of the total at the beginning of 2021. Speculative-grade issuers commenced the year representing 20% of all LRGs, the lowest ratio of investment-grade to speculative-grade ratings in 23 years.

Chart 2

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Although smaller than the population of rated LRGs, the number of rated entities among non-LRGs has been steadily increasing since 2015 (see chart 3). Within this subsector, credit quality remains high as most issuers are rated investment grade.

Still, there has been some deterioration since 2017. At the start of 2021, there were only four non-LRG 'AAA' ratings, down from a high of eight, last seen at the start of 2012. There are three Nordic Municipal Funding Agencies, the KommuneKredit agency of Denmark, the Kommunivest I Sverige AB of Sweden, and the KBN Kommunalbanken Norwary, and one Canadian entity, the Municipal Finance Authority of British Columbia.

The most common rating for non-LRGs is 'A', which represents 60% of all non-LRG ratings. There are very few speculative-grade non-LRGs, with 97% rated 'BBB-' or higher at the start of 2021.

Chart 3

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Regional Distribution

A plurality of IPF ratings are based in Western Europe (48%) (see chart 4), followed by Asia-Pacific and Canada, with 17% of all IPF ratings. Most of these ratings (68%) are categorized as housing, followed by higher education, with 17%.

Chart 4

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Credit quality varies across regions (see chart 5). IPF ratings in Western Europe are 99% investment grade (197 investment grade versus three speculative grade), whereas Latin America is only 18% investment grade (10 investment grade versus 47 speculative grade). Canada has the highest proportion of 'AAA' ratings, with 14% (10 of 72), while only 4% of Asia-Pacific ratings are 'AAA' (three of 73). Latin America and EEMEA (Eastern Europe, the Middle East, and Africa) do not have any 'AAA' ratings.

Chart 5

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The breakdowns of LRGs and non-LRGs vary among the regions. Western Europe and Canada have a mix of both, while Asia-Pacific, Latin America, and the EEMEA regions have very few non-LRGs (see charts 6 and 7). By region and by rating for LRGs, Canada has the most 'AAA' ratings as a percentage, with 20% (nine of 45), followed by 15% for Western Europe (15 of 103), and Asia-Pacific with 1% (one of 67). Latin America and EEMEA have no 'AAA' rated LRGs. For non-LRGs, Western Europe and Canada have the largest populations by far, with 97 and 27 respectively, compared with six for Asia-Pacific, three for Latin America, and one for EEMEA.

Chart 6

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Chart 7

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Rating Actions

There was only one upgrade in IPF in 2020 (see chart 8)--French social housing issuer Grand Delta Habitat was upgraded to 'A+' from 'A' in January 2020. There has never been this few upgrades in a calendar year. There were also 41 downgrades, only slightly above the average of 37.5 downgrades for the last 10 years. Since total IPF ratings rose above 200 at the start of 2001, there has never been fewer than 14 upgrades in a year. For 2019, there were 35 upgrades and 30 downgrades. Defaults rose to seven in 2020, up from two in 2019, pushing the default rate for 2020 to 1.65%, up from 0.47% in 2019.

IPF has averaged 28 upgrades per year over the past 10 years, compared with 38 downgrades per year over the same period (see charts 8-10). In the 20 years since 2001, upgrades have outnumbered downgrades in 13 of the years. The 40 more downgrades than upgrades in 2020 is not outside the range of experience for this sector. The downgrade of the U.K. sovereign following the Brexit referendum resulted in increased defaults, with 32 more downgrades than upgrades. Downgrades were also higher than normal in 2012 in the aftermath of the financial crisis, and outnumbered upgrades by 31.

Chart 8

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Chart 9

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Chart 10

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Chart 11

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In some years there have been divergences by region, with one region or the other having more upgrades than downgrades. But 2020 was different. The only upgrade was a social housing project in France. There are some regional differences if we look at downgrades as a percentage of total ratings by regions. Latin America saw almost one-third of all ratings lowered in 2020, while Canada and Asia-Pacific saw 3% and 5%, respectively. The EEMEA region saw only one rating action in the year, with 18 total ratings.

Chart 12

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Outlooks

Outlooks have been trending negative the past five years (see chart 13), with 98 negative outlooks at the start of 2021, compared with 53 at the start of 2020 and 42 at the start of 2019. Meanwhile, positive outlooks have dwindled, starting 2021 with only 17 positive outlooks, down from 21 in 2020, and 35 in 2019. Western Europe had the most negative outlooks at the start of 2021, with 48, followed by Latin America with 21.

Chart 13

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Rating Transitions

IPF ratings generally move into lower rating categories over time, although 'A' category ratings have an upward pattern. Just 3.8% of 'A' category ratings move into lower rating categories after 15 years.

Lower ratings tend to move more frequently into higher rating categories than into lower categories, but the lower rating categories account for almost all defaults at all timeframes. Around 12.3% of 'BB' category ratings move into higher rating categories after 15 years, but 19.3% within this category default. More than 34.3% of 'B' category ratings move into categories as high as 'BBB' after 15 years, and 9.3% default. After 15 years, 66.7% of 'CCC'/'C' category ratings move to higher rating categories, 18.5% default, and 14.8% are withdrawn.

Table 1

International Public Finance Rating Transitions Without Modifiers (1975-2020)
--Rating one year later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
AAA 94.4 4.3 0.0 0.0 0.0 0.0 0.0 0.0 1.3
AA 0.9 93.3 2.6 0.3 0.0 0.0 0.0 0.0 2.9
A 0.0 4.0 89.1 2.0 0.1 0.0 0.0 0.0 4.8
BBB 0.0 0.0 4.0 82.4 4.1 0.0 0.0 0.0 9.5
BB 0.0 0.0 0.0 2.7 86.1 1.9 0.4 0.8 8.1
B 0.0 0.0 0.0 0.0 7.7 71.2 6.1 2.2 12.8
CCC/C 0.0 0.0 0.0 0.0 0.0 27.6 50.0 13.2 9.2
--Rating three years later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
AAA 84.0 11.5 0.1 0.3 0.0 0.0 0.0 0.0 4.1
AA 3.0 81.3 6.6 0.9 0.1 0.0 0.0 0.0 8.2
A 0.0 12.0 69.2 5.0 0.2 0.0 0.0 0.0 13.6
BBB 0.0 0.0 10.7 56.8 9.4 0.6 0.0 0.3 22.2
BB 0.0 0.0 0.0 6.8 68.0 3.4 0.5 3.2 18.0
B 0.0 0.0 0.0 0.0 20.4 35.1 8.8 5.6 30.0
CCC/C 0.0 0.0 0.0 0.0 2.8 60.6 8.5 12.7 15.5
--Rating five years later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
AAA 74.2 17.9 0.7 0.6 0.0 0.0 0.0 0.0 6.6
AA 5.0 71.0 9.1 1.7 0.2 0.0 0.0 0.0 13.0
A 0.2 18.4 53.4 6.9 0.2 0.1 0.0 0.0 20.9
BBB 0.0 0.0 13.7 42.2 13.2 0.8 0.2 0.8 29.2
BB 0.0 0.0 0.0 7.8 55.6 3.5 0.3 5.9 27.0
B 0.0 0.0 0.0 0.9 24.9 23.4 5.5 5.5 39.8
CCC/C 0.0 0.0 0.0 0.0 15.9 31.9 8.7 21.7 21.7
--Rating 10 years later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
AAA 52.6 35.8 1.6 0.0 0.0 0.0 0.0 0.0 10.0
AA 9.5 51.5 9.3 5.5 0.7 0.1 0.0 0.0 23.4
A 1.5 27.6 29.8 6.5 0.6 0.0 0.0 0.0 34.1
BBB 0.0 0.0 9.3 24.9 12.5 1.9 0.0 0.3 51.2
BB 0.0 0.0 0.3 8.3 32.3 3.5 0.0 13.5 42.2
B 0.0 0.0 0.0 3.7 26.3 10.7 2.5 8.6 48.1
CCC/C 0.0 0.0 0.0 14.6 17.1 9.8 4.9 26.8 26.8
--Rating 15 years later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
AAA 38.3 47.5 2.2 0.0 0.0 0.0 0.0 0.0 12.0
AA 11.3 39.8 7.9 7.6 1.2 0.2 0.0 0.3 31.8
A 2.7 30.4 24.1 3.4 0.4 0.0 0.0 0.0 38.9
BBB 0.0 1.2 9.4 18.0 9.0 0.4 0.0 0.0 61.9
BB 0.0 0.0 0.0 12.3 22.7 4.3 0.0 19.3 41.4
B 0.0 0.0 0.0 2.8 31.5 0.0 1.9 9.3 54.6
CCC/C 0.0 0.0 0.0 22.2 33.3 11.1 0.0 18.5 14.8
Source: S&P Global Ratings Research.

LRG rating movement is slightly more negative (see table 2).

The percentage of ratings that default within 15 years in all rating categories is virtually the same in the LRG sector as for IPF overall.

Table 2

Local And Regional Government Rating Transitions Without Modifiers (1975-2020)
--Rating one year later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
AAA 94.4 4.1 0.0 0.0 0.0 0.0 0.0 0.0 1.6
AA 1.0 93.3 2.1 0.3 0.0 0.0 0.0 0.0 3.2
A 0.0 4.5 87.8 2.4 0.1 0.0 0.0 0.0 5.2
BBB 0.0 0.0 3.3 83.7 4.4 0.0 0.0 0.0 8.7
BB 0.0 0.0 0.0 2.8 86.0 1.9 0.4 0.8 8.0
B 0.0 0.0 0.0 0.0 7.8 71.5 6.1 2.2 12.4
CCC/C 0.0 0.0 0.0 0.0 0.0 28.8 50.7 12.3 8.2
--Rating three years later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
AAA 83.8 10.9 0.2 0.3 0.0 0.0 0.0 0.0 4.9
AA 3.4 81.2 5.4 1.1 0.1 0.0 0.0 0.0 8.8
A 0.0 12.6 65.9 6.0 0.3 0.0 0.0 0.0 15.2
BBB 0.0 0.0 8.9 60.2 9.8 0.6 0.0 0.3 20.2
BB 0.0 0.0 0.0 6.9 67.7 3.6 0.5 3.4 17.9
B 0.0 0.0 0.0 0.0 20.5 35.4 8.9 5.7 29.5
CCC/C 0.0 0.0 0.0 0.0 2.9 63.2 8.8 11.8 13.2
--Rating five years later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
AAA 74.0 16.6 0.9 0.7 0.0 0.0 0.0 0.0 7.9
AA 5.7 71.2 7.3 2.0 0.3 0.0 0.0 0.0 13.4
A 0.0 17.8 49.5 8.7 0.2 0.1 0.0 0.0 23.7
BBB 0.0 0.0 11.4 46.3 13.7 0.9 0.2 0.9 26.6
BB 0.0 0.0 0.0 7.9 55.1 3.6 0.3 6.1 27.0
B 0.0 0.0 0.0 0.9 25.1 23.5 5.5 5.5 39.4
CCC/C 0.0 0.0 0.0 0.0 16.7 33.3 9.1 21.2 19.7
--Rating 10 years later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
AAA 51.7 34.4 1.9 0.0 0.0 0.0 0.0 0.0 12.0
AA 10.6 50.4 8.6 6.5 0.9 0.1 0.0 0.0 22.9
A 0.9 25.1 26.6 8.0 0.8 0.0 0.0 0.0 38.6
BBB 0.0 0.0 7.3 28.4 13.9 2.1 0.0 0.3 48.0
BB 0.0 0.0 0.3 8.5 31.7 3.6 0.0 13.8 42.1
B 0.0 0.0 0.0 3.7 26.6 10.8 2.5 8.7 47.7
CCC/C 0.0 0.0 0.0 15.8 18.4 10.5 5.3 26.3 23.7
--Rating 15 years later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
AAA 35.3 48.4 2.5 0.0 0.0 0.0 0.0 0.0 13.8
AA 12.1 38.7 7.2 8.8 1.4 0.2 0.0 0.3 31.3
A 1.8 30.2 22.0 4.3 0.5 0.0 0.0 0.0 41.2
BBB 0.0 0.0 8.9 21.8 10.9 0.5 0.0 0.0 57.9
BB 0.0 0.0 0.0 12.5 22.7 4.4 0.0 19.6 40.8
B 0.0 0.0 0.0 2.8 32.1 0.0 1.9 9.4 53.8
CCC/C 0.0 0.0 0.0 22.2 33.3 11.1 0.0 18.5 14.8
Source: S&P Global Ratings Research.

From a regional perspective, this analysis focuses only on LRGs. There is considerable overlap for IPF and LRGs, and the small sample size of non-LRG ratings in some regions renders breakouts misleading. In one year, an average of 16.7% of Canadian LRG ratings in the 'BBB' category are raised to the 'A' category (see table 3). In Latin America, the trend is opposite, with 8.9% of 'BBB' category ratings moving down to the 'BB' category within one year. For Western Europe, 10.1% of 'BB' category ratings move into the 'BBB' category within one year, and of 'B' category ratings in EEMEA,12.3% are raised to the 'BB' category, while just 7.0% are lowered or default.

Table 3

Local And Regional Government One-Year Rating Transitions Without Modifiers (1975-2020)
--Rating one year later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
Global
AAA 94.4 4.1 0.0 0.0 0.0 0.0 0.0 0.0 1.6
AA 1.0 93.3 2.1 0.3 0.0 0.0 0.0 0.0 3.2
A 0.0 4.5 87.8 2.4 0.1 0.0 0.0 0.0 5.2
BBB 0.0 0.0 3.3 83.7 4.4 0.0 0.0 0.0 8.7
BB 0.0 0.0 0.0 2.8 86.0 1.9 0.4 0.8 8.0
B 0.0 0.0 0.0 0.0 7.8 71.5 6.1 2.2 12.4
CCC/C 0.0 0.0 0.0 0.0 0.0 28.8 50.7 12.3 8.2
Canada
AAA 95.7 2.7 0.0 0.0 0.0 0.0 0.0 0.0 1.6
AA 0.9 97.4 0.9 0.0 0.0 0.0 0.0 0.0 0.7
A 0.0 6.2 92.1 0.3 0.0 0.0 0.0 0.0 1.4
BBB 0.0 0.0 16.7 66.7 0.0 0.0 0.0 0.0 16.7
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Asia-Pacific
AAA 93.7 4.2 0.0 0.0 0.0 0.0 0.0 0.0 2.1
AA 1.0 92.5 1.8 0.0 0.0 0.0 0.0 0.0 4.7
A 0.0 3.4 90.7 1.5 0.0 0.0 0.0 0.0 4.4
BBB 0.0 0.0 3.2 73.1 0.0 0.0 0.0 0.0 23.7
BB 0.0 0.0 0.0 0.0 41.7 0.0 0.0 0.0 58.3
B 0.0 0.0 0.0 0.0 6.7 40.0 0.0 0.0 53.3
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Latin America
AAA 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
A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB 0.0 0.0 0.0 86.4 8.9 0.0 0.0 0.0 4.7
BB 0.0 0.0 0.0 1.8 88.3 2.1 0.2 1.1 6.5
B 0.0 0.0 0.0 0.0 4.1 73.6 6.4 3.6 12.3
CCC/C 0.0 0.0 0.0 0.0 0.0 25.7 57.1 14.3 2.9
Western Europe
AAA 93.9 4.7 0.0 0.0 0.0 0.0 0.0 0.0 1.4
AA 1.1 91.9 2.6 0.6 0.0 0.0 0.0 0.0 3.7
A 0.0 4.0 83.7 4.0 0.2 0.0 0.0 0.0 8.2
BBB 0.0 0.0 5.0 84.0 2.4 0.0 0.0 0.0 8.6
BB 0.0 0.0 0.0 10.1 82.0 1.1 0.0 0.0 6.7
B 0.0 0.0 0.0 0.0 25.0 50.0 0.0 0.0 25.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EEMEA
AAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
AA 0.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A 0.0 3.2 90.3 3.2 0.0 0.0 0.0 0.0 3.2
BBB 0.0 0.0 3.5 88.2 5.9 0.0 0.0 0.0 2.4
BB 0.0 0.0 0.0 4.1 83.4 1.8 1.4 0.5 8.8
B 0.0 0.0 0.0 0.0 12.3 71.9 6.4 0.6 8.8
CCC/C 0.0 0.0 0.0 0.0 0.0 31.6 44.7 10.5 13.2
EEMEA--Eastern Europe, the Middle East, and Africa. Source: S&P Global Ratings Research.

Defaults

There were seven defaults in 2020, all related to the sovereign default in Argentina. Six of these defaults were rated 'B- at the start of the year (the Provinces of Mendoza, Neuquen, Salta, Entre Rios, La Rioja, and Rio Negro), and one was rated 'CCC' at the start of the year (the Province of Buenos Aires). The last time there were as many defaults was in 2012. Since then, there have been either zero, one, or two defaults a year.

In the aggregate, issuers rated 'CCC' through 'C' defaulted at a rate of 18.1% within 15 years (see table 4). Overall, 12.9% of speculative-grade issuers defaulted within 15 years, compared with just 0.3% of investment-grade (rated 'BBB-' or higher) issuers. In total, 3% of IPF issuers default within 15 years.

These trends are intuitive, reflecting higher default rates for lower-rated obligations. However, given the small number of ratings in the IPF sector, the data can generate tentative conclusions, such as a higher default rate for 'BB' category ratings than for the 'B' category: About 13.4% of 'BB' category issuers default within 15 years, compared with 10.4% of 'B' category issuers.

Table 4

Local And Regional Government Cumulative Yearly Average Default Rate Without Rating Modifiers (1975-2020)*
--Time horizon (years)--
Rating 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
AAA 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
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.2 0.2 0.2
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
BBB 0.0 0.1 0.3 0.5 0.8 1.2 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4
BB 0.9 2.2 3.3 4.6 5.6 6.7 7.8 9.1 10.5 11.6 12.5 13.4 13.4 13.4 13.4
B 0.8 2.1 3.9 5.1 6.0 7.0 7.7 8.1 8.1 8.5 9.1 9.7 10.4 10.4 10.4
CCC/C 11.3 12.7 12.7 12.7 16.0 18.1 18.1 18.1 18.1 18.1 18.1 18.1 18.1 18.1 18.1
Investment grade 0.0 0.0 0.0 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3
Speculative grade 1.3 2.6 3.8 5.0 6.2 7.3 8.2 9.3 10.3 11.2 12.0 12.7 12.9 12.9 12.9
All rated 0.3 0.6 0.9 1.2 1.4 1.7 2.0 2.2 2.4 2.6 2.8 3.0 3.0 3.0 3.0
*Calculated by multiplying non-default marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Because specific events may trigger defaults, they tend to happen in clusters. For example, 10 occurred in Mexico between 2010 and 2013 (State of Zacatecas, Zamora, and eight confidentially rated issuers). In addition, there were five defaults in Argentina between 2001 and 2003 (City of Buenos Aires, Province of Buenos Aires, Province of Mendoza, and two confidentially rated issuers) and three in Russia in 1999 (all confidentially rated issuers).

Two other defaults were recorded in Russia in 2008-2009 (Moscow Oblast in 2008 and Klin Rayon in 2009), and another two were recorded in 2010 (City of Lviv in Ukraine and one confidentially rated issuer). In 2014, the Autonomous Republic of Crimea defaulted, and in 2015, the City of Kyiv also defaulted. Seven of the Mexican defaults occurred in 2012, the highest number of defaults in a single year.

Table 5

Local And Regional Government Selective Defaults
'SD' date Emergence date Months in 'SD' Rating one year before 'SD' Rating at emergence from 'SD'
LRG1* 1/25/1999 Sep 3, 1999 7.26 BB- NR
LRG2* 1/25/1999 Oct 9, 2001 32.46 CCC+
LRG3* 2/22/1999 Jan 11, 2000 10.61 BB- CCC-
LRG4* 3/28/2001 Jul 26, 2002 15.93 BB
Buenos Aires (Province of) 12/3/2001 Dec 10, 2002 12.22 BB NR
Mendoza (Province of) 12/3/2001 Sep 7, 2004 33.15 BB- CCC+
Buenos Aires (City of) 4/11/2002 Mar 21, 2003 11.30 B+ CCC+
LRG5* 5/4/2002 B+
LRG6* 1/15/2003 Nov 22, 2005 34.23 CC NR
Moscow Oblast 12/18/2008 Apr 7, 2009 3.61 BB NR
Mostransavto 12/24/2008 Dec 29, 2008 0.16 CCC+ CC
LRG7* 11/5/2009 CC
Lviv (City of) 1/28/2010 Jan 28, 2010 0.00 B CCC+
LRG8* 11/5/2010 Dec 6, 2010 1.02 BB B-
LRG9* 2/3/2012 Feb 13, 2012 0.33 BB- B-
LRG10* 2/28/2012 NR
LRG11* 7/9/2012 Jun 23, 2014 23.46 BB B-
LRG12* 9/26/2012 Jan 31, 2013 4.17 BB- B-
LRG13* 10/31/2012 BB
LRG14* 10/31/2012 NR
LRG15* 12/24/2012 NR
LRG16* 1/8/2013 Mar 18, 2013 2.27 BB- B-
LRG17* 5/10/2013 May 15, 2013 0.16 BB- B-
Crimea (Autonomous Republic of) 4/1/2014 Apr 1, 2014 0.00 B NR
Kyiv (City of) 10/6/2015 Dec 22, 2015 2.53 CC CCC+
LRG18* 1/21/2016 NR
Rio de Janeiro (State of) 9/19/2016 Oct 4, 2016 0.49 BB NR
LRG19* 9/20/2018 5-Nov-18 1.51 B+ CCC-
LRG20* 12/19/2018 Mar 1, 2019 2.37 CCC-
Minas Gerais (State of) 2/25/2019 B-
LRG21* 3/21/2019 1-Oct-19 6.37 NR
Buenos Aires (Province of) 5/15/2020 B
Mendoza (Province of) 6/19/2020 B
Province of Rio Negro 7/8/2020 28-Dec-20 5.68 B CCC+
Salta (Province of) 8/7/2020 B
Entre Rios (Province of) 9/8/2020 B-
La Rioja (Province of) 9/24/2020 B-
Neuquen (Province of) 11/26/2020 9-Dec-20 0.43 B- CCC+
NR--Not rated. Source: S&P Global Ratings Research.

Gini Ratios And Lorenz Curves

In addition to examining the absolute performance of LRG ratings, we also assess their relative performance. One technique we use to measure relative performance is the Gini coefficient, a key measure of the relative ability of ratings to differentiate risk.

The Gini coefficient is a summary statistic of the Lorenz curve, a graphical representation of the proportionality of a distribution. The Lorenz curve is built by plotting the cumulative proportion of issuers by rating category (from lowest to highest) against the cumulative proportion of defaulters by rating category (see chart 17). For example, if 'CCC' issuers represented 1% of the total issuers (x-axis) and 10% of the defaulters (y-axis), that would be the first point on the curve. A Gini coefficient of one indicates perfect rank ordering, and a Gini coefficient of zero means the rank ordering is random.

We believe comparing Lorenz curves and Gini coefficients is useful. Lorenz curves for IPF closely resemble the ideal Lorenz curves (see charts 14 and 18-20). For more detail regarding the derivation and construction of Lorenz curves and Gini coefficients, see "Gini coefficient calculation" in the appendix.

Chart 14 shows the one-year Lorenz curve for LRGs. The points along the Lorenz curve represent different ratings, starting with the 'CCC' and lower category on the far left. The first point indicates the obligations rated 'CCC' and lower represent 32.14% of defaults within one year. As the ratings rise, the cumulative percentage of defaults for each rating increases in the 'B' category and then reaches 100% at the 'BB' rating. From that point, there are no defaults at higher ratings.

Chart 14

image

Table 6 further illustrates the information in the Lorenz graph. The lowest value in the left column shows the cumulative proportion of defaults at the 'CCC'/'C' category, or 32.14%, and the number to the right is the cumulative proportion of the rated universe, 1.12%. This means 32.14% of the defaults came from just over 1% of the ratings, all of which were in the 'CCC' or lower category. Moving up the table, once ratings reach 'BB', representing 19.28% of all ratings, 100% of defaults have occurred.

Table 6

LRG One-Year Lorenz Curve Values
Cumulative proportion of defaults (%) Cumulative proportion of rated universe (%)
AAA 100.00 100.00
AA+ 100.00 89.44
AA 100.00 78.35
AA- 100.00 64.93
A+ 100.00 54.29
A 100.00 44.82
A- 100.00 40.25
BBB+ 100.00 36.74
BBB 100.00 33.96
BBB- 100.00 30.87
BB+ 100.00 25.50
BB 100.00 19.28
BB- 82.14 12.83
B+ 64.29 7.38
B 60.71 4.98
B- 60.71 2.83
CCC/C 32.14 1.12
LRG--Local and regional governments. Source: S&P Global Ratings Research.

LRG And Sovereign Ratings

Some LRG ratings are tied to sovereign ratings. LRG ratings may be capped at the sovereign rating, particularly if the LRG is not expected to maintain stronger credit characteristics than the sovereign in a stress scenario, does not have an institutional framework that is predictable, stable, and limits the risk of negative sovereign intervention, and does not have the ability to mitigate intervention from the sovereign.

In the middle of the credit scale, LRG ratings maintain their ratings at virtually the same rate as sovereigns. From the 'AA' category to 'BB', LRG ratings and sovereign ratings remain in those categories in almost the same proportions from one year to 15 years. However, LRG 'AAA' ratings are much more fluid than sovereign ratings at the highest level. After one year, 94.4% of LRG 'AAA' ratings maintain that rating, similar to 96.8% of sovereign ratings. By the 15th year, just 35.3% of the original 'AAA' LRGs maintain that rating, far below 67.5% of sovereigns (see chart 15).

For 'B' category ratings, 71.5 % of LRGs remain in that category after one year, compared with 88.1% of sovereigns. By the 10th year, just 10.8% of 'B' category LRGs maintain that rating, compared with 40.5 % of sovereigns (see chart 16). The steadily decreasing percentage for LRGs is largely the result of the withdrawal of ratings.

Chart 15

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Chart 16

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Appendix: Methodology And Definitions

This IPF default and rating transition study uses an internal database of long-term local currency issuer credit ratings. It covers LRGs and other IPF entities outside the U.S. and uses public and confidential ratings. For LRGs with national scale ratings only--mainly those in Mexico and Russia--we use the equivalent local currency rating in S&P Global Ratings' global scale. This study uses LRG issuer ratings and not the ratings on specific issues of debt by these governments. We do not make any adjustment for the size of the government or for the amount of debt issued by each government.

Our ongoing improvements to the 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 back to Dec. 31, 1974. Therefore, each annual default study is self-contained and effectively supersedes all previous versions. There are no changes in methodology from the IPF default and rating transition study of 2019, which was published in 2020. The inclusion of non-LRG ratings within IPF began in the 2017 report and continues this year.

Issuers included in this study

This study analyzes the rating histories of IPF entities that S&P Global Ratings rated as of Dec. 31, 1974, or that were first rated between that date and Dec. 31, 2020. This includes defaults on an LRG's commercial debt, including bank and bond debt. We have included both public and confidential ratings when tallying the number of defaults. Even if a rating was withdrawn in a particular year and the entity went on to default on commercial debt during that year or in a subsequent year, we included the default in our statistics for that year.

For confidential ratings, we preserve anonymity by referring to the entities, typically LRGs, as "LRG 1," "LRG 2," etc. When ratings are withdrawn at the request of a particular LRG, we indicate this by the abbreviation "NR," signifying that the LRG is not rated.

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. Others are withdrawn because of a lack of cooperation, particularly when an entity fails to provide all the information needed to continue surveillance on the ratings, or at the entity's request.

Definition of default

An obligor rated 'D' (default) or 'SD' (selective 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 in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. S&P Global Ratings also lowers a rating to 'D' when an issuer takes an action that could jeopardize payments on a financial obligation, including the rare instance of a public finance entity filing for bankruptcy.

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 Ratings assigns an 'SD' rating when it is believed 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.

We deem 'D' and 'SD' ratings to be defaults for the purposes of this study. A default is assumed to take place on the earliest of the date the rating was revised to 'D' or 'SD', 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 the 'D' rating to be subsequently withdrawn. For the purposes of this study, if an issuer defaults, we end the obligor's 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 obligor into the database as a new obligor. The rating history on the obligor after the default event is included in all calculations as entirely separate from the experience leading up to its earlier default.

Static pool methodology

We conduct our default studies on the basis of groupings called static pools. For the purposes of this study, we form static pools by grouping obligors by rating category at the beginning of each year, quarter, or month that the database covers. Each static pool is followed from that point forward. All issuer credit ratings 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 the static pool methodology 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 multiple-period time horizons. Some methods for calculating default and rating transition rates might charge defaults against only the initial rating, ignoring more recent rating changes that supply more current information. Other methods may calculate default rates using only the most recent year's default and rating data, which may yield comparatively low default rates during periods of high rating activity because they ignore prior years' default activity.

The pools are static in the sense that they remain constant over time. 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 bonds 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 update revises results back to the same starting date of Dec. 31, 1974, so as to avoid continuity problems.

Ratings that have been withdrawn--that is, revised to not rated--are surveilled with the aim of capturing a potential default. Because static pools include only entities with active ratings as of the beginning date of a given pool, we exclude withdrawn ratings, as well as ratings on bonds that have defaulted, from subsequent static pools. If a rating on an entity's bond series is withdrawn after the start date of a particular static pool and there is a subsequent default, we will include that series 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 1975 static pool consists of all debt rated as of 12:00:01 a.m. on Jan. 1, 1975. Adding debt first rated in 1975 to the outstanding debt of the 1975 static pool forms the 1976 static pool. All rating changes that took place as of 12:00:01 a.m. on Jan. 1, 1976, are reflected in the newly formed 1976 static pool. We used the same method to form static pools for 1977-2020.

Consider the following example: A parity debt rating of 'BB' is assigned in mid-1986 and is lowered to 'B' in 1988, followed by a default in 1993. This hypothetical rating would be included in the 1987 and 1988 pools as 'BB' and in the 1989-1993 pools as 'B'. All pools that include this obligation would capture its 1993 default. It would not be part of the 1986 pool because it was not rated as of the first day of that year. Yet each of the pools in which this debt was included (1987-1993) would record its 1993 default at the appropriate time horizon.

Default rate calculations

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 45 years the study covers (see tables 13 and 15-17).

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. Many practitioners use statistics from this default study to estimate "probability of default" and "probability of rating transition." It is important to note that our ratings do not imply a specific probability of default.

Average cumulative default rate calculation.  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 then accumulating the average conditional marginal default rates. We calculated conditional default rates by dividing the number of issuers in a static pool that defaulted at a specific time horizon by the number of debt issues that survived (did not default) to that point in time. Weights are based on the number of issues in each static pool. Cumulative default rates are one minus the product of the proportion of survivors (nondefaulters).

For instance, the weighted average first-year default rate for entities rated in the 'BB' category was 0.87%, meaning that an average of 99.1% made payments in accordance with their terms for the first year (see table 15). Similarly, the second- and third-year conditional marginal averages were 1.28% (98.6% of those parity obligations that did not default in the first year did not default in the second year) and 1.18% (98.8% of those entities that did not default by the second year did not default in the third year either), respectively. Multiplying 99.1% by 98.6% results in a 97.8% survival rate at the end of the second year, or a two-year cumulative average default rate of 2.24%. Multiplying 97.8% by 98.8% results in a 96.6% survival rate at the end of the third year, or a three-year cumulative average default rate of 3.39%. (The table is based on numbers calculated to four decimals. Calculations using numbers rounded to two decimals, as presented here, may yield slightly different results.)

Cumulative default rate calculation.  We use cumulative default rates to average the experience of all static pools in a select period by calculating marginal default rates for each possible time horizon and for each static pool. The marginal default rates are then turned into survival rates by subtracting the marginal default rates from one. To get the cumulative default rates for a horizon, the survival rates for all previous horizons are multiplied and then subtracted from one.

In the context of LRG ratings, we treat governments that selectively default as complete defaults. In this analysis, when the LRG emerges from selective default, we then treat it as a new entity altogether. At some point, the cumulative default rate stops increasing as the time horizon lengthens, because no additional defaults are captured by the longer horizon.

Cumulative default rates differ from transition-to-default rates in that defaults are counted only once, as opposed to averaging default observations, which we do when we calculate transition rates for periods longer than 24 months. In addition, we use all annual static pools in the period, not just the static pools that have enough years to complete the horizon.

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 parity obligation at the end of a particular year with the rating at the beginning of the same year. An obligation that remained rated for more than one year was counted as many times as the number of years it was rated. For instance, an obligation continually rated from the middle of 1987 to the middle of 1991 would appear in the four consecutive one-year transition matrices from 1988-1991. If the rating on the obligation was withdrawn in the middle of 1991, it would be included in the column representing transitions to not rated 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 1974 static pool members still rated on Jan. 1, 2021, had 45 one-year transitions, while those first rated on Jan. 1, 2020, had only one. Longer time horizons, of three or more years, have fewer transitions. Various tables in this report display the transitions for international LRG ratings over several time horizons. Each transition matrix displays all rating movements between letter categories from the beginning of the period through the end.

The only ratings considered in these calculations are those on entities 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, 2020, and was downgraded to 'BBB' in the middle of the year and then upgraded to 'A' later in the year (with no other subsequent rating changes), this entity would be included only in the percentage of issuers that began the year as 'A' that ended the year as 'A'. This also applies to transition matrices that span longer time horizons. If an obligation defaults or the rating is withdrawn in the middle of the year, then we consider it to be either rated 'D' or not rated as of Dec. 31 of that particular year.

Multiyear transitions.  Multiyear transitions were also calculated for periods of two to 20 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 1974-2018 with the ratings at the end of the years 1979-2020. Otherwise, the methodology 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.

Comparing transition rates with default rates.  Rating transition rates may be compared with the marginal and cumulative default rates described in the previous sections. For example, the one-year default rate column of table 1 is equivalent to the one-year column in table 14.

Initial-to-last transition and default rates.  These transition rates compare debt ratings from the time of first rating to the last rating, regardless of the time elapsed in the interim. They provide a road map to all of the historically observed ratings held by non-U.S. LRGs during their lifetimes.

Gini coefficient calculations

The Gini coefficient, developed by Corrado Gini, is a summary statistic of the Lorenz curve and shows the accuracy of ratings' rank ordering. The Lorenz curve was developed by Max O. Lorenz as a graphical representation of the proportionality of a distribution. For this study, the Lorenz curve is built by plotting the cumulative proportion of parity obligations by rating category (from lowest to highest) with the cumulative proportion of defaulters by rating category. For example, if 'C' parity obligations represented 1% of the total parity obligations (x-axis) and 20% of the defaulters (y-axis), then the coordinate (1, 20) would be the first point on the curve.

Chart 17

image

To determine the relative performance represented by the Lorenz curve, we compare it with the random curve and the ideal curve. If the ratings' rank ordering only randomly approximated default risk, the Lorenz curve would fall along the diagonal, and its Gini coefficient would be zero.

If ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated obligations and all obligations with the lowest rating defaulted, the curve would be the ideal curve, and the Gini coefficient would be 1.

The Gini coefficient is a ratio of two areas, as illustrated in chart 17, and is derived by dividing area B by the total area A plus area B. In other words, the Gini coefficient captures the extent to which actual rating accuracy diverges from the random scenario and approaches the ideal.

The Gini coefficient can be calculated for different lengths of time--for example, one year or three years; or for a single period, such as the year ended 2018; or by aggregating a series of one-year periods. To calculate the one-year Gini for 2019, we identified the parity obligation ratings at the beginning of the year and determined which did and did not default during the year. Then we calculated the proportion of parity obligations at each rating and the proportion of defaulters at each rating, based on the ratings at the beginning of the period. The aggregate Gini for 1975-2019 combines data for each of the 44 one-year periods. The same parity obligation may be counted multiple times in the aggregate Gini coefficient.

Time samples

This update limits the reporting of default rates to the 15-year time horizon. However, the data were gathered for 45 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.

Default patterns share broad similarities across all static pools, suggesting that S&P Global Ratings' rating standards have been consistent over time. Adverse conditions tend to coincide with default upswings for all pools. Speculative-grade issuers have been hit the hardest by these upswings, but investment-grade default rates also increase in stressful periods.

Table 7

Local And Regional Government Three-Year Rating Transitions Without Modifiers (1975-2020)
--Rating three years later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
Global
AAA 83.8 10.9 0.2 0.3 0.0 0.0 0.0 0.0 4.9
AA 3.4 81.2 5.4 1.1 0.1 0.0 0.0 0.0 8.8
A 0.0 12.6 65.9 6.0 0.3 0.0 0.0 0.0 15.2
BBB 0.0 0.0 8.9 60.2 9.8 0.6 0.0 0.3 20.2
BB 0.0 0.0 0.0 6.9 67.7 3.6 0.5 3.4 17.9
B 0.0 0.0 0.0 0.0 20.5 35.4 8.9 5.7 29.5
CCC/C 0.0 0.0 0.0 0.0 2.9 63.2 8.8 11.8 13.2
Canada
AAA 87.5 8.3 0.6 0.0 0.0 0.0 0.0 0.0 3.6
AA 2.9 92.6 2.9 0.0 0.0 0.0 0.0 0.0 1.6
A 0.0 17.8 76.3 0.9 0.0 0.0 0.0 0.0 5.0
BBB 0.0 0.0 50.0 33.3 0.0 0.0 0.0 0.0 16.7
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Asia-Pacific
AAA 84.7 10.2 0.0 0.0 0.0 0.0 0.0 0.0 5.1
AA 3.3 79.2 4.8 0.0 0.0 0.0 0.0 0.0 12.7
A 0.0 10.6 74.5 2.5 0.0 0.0 0.0 0.0 12.4
BBB 0.0 0.0 15.3 39.0 0.0 0.0 0.0 0.0 45.8
BB 0.0 0.0 0.0 0.0 18.2 0.0 0.0 0.0 81.8
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Latin America
AAA 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
A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB 0.0 0.0 0.0 65.8 18.7 2.1 0.0 1.0 12.4
BB 0.0 0.0 0.0 4.1 71.4 3.9 0.5 4.0 16.1
B 0.0 0.0 0.0 0.0 11.5 42.1 13.1 6.6 26.8
CCC/C 0.0 0.0 0.0 0.0 0.0 76.7 6.7 13.3 3.3
Western Europe
AAA 81.5 12.4 0.0 0.6 0.0 0.0 0.0 0.0 5.5
AA 3.7 77.4 6.5 1.8 0.2 0.0 0.0 0.0 10.5
A 0.0 9.8 56.4 10.2 0.6 0.0 0.0 0.0 22.9
BBB 0.0 0.0 12.3 59.9 5.2 0.0 0.0 0.0 22.7
BB 0.0 0.0 0.0 23.2 59.8 2.4 0.0 0.0 14.6
B 0.0 0.0 0.0 0.0 50.0 0.0 0.0 0.0 50.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EEMEA
AAA 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
A 0.0 12.0 68.0 8.0 0.0 0.0 0.0 0.0 12.0
BBB 0.0 0.0 9.6 65.8 15.1 0.0 0.0 0.0 9.6
BB 0.0 0.0 0.0 11.7 59.0 2.9 1.0 2.4 22.9
B 0.0 0.0 0.0 0.0 31.4 32.0 5.3 5.3 26.0
CCC/C 0.0 0.0 0.0 0.0 5.3 52.6 10.5 10.5 21.1
EEMEA--Eastern Europe, the Middle East, and Africa. Source: S&P Global Ratings Research.

Table 8

Local And Regional Government Five-Year Rating Transitions Without Modifiers (1975-2020)
--Rating five years later (%)--
Rating AAA AA A BBB BB B CCC/C D NR
Global
AAA 74.0 16.6 0.9 0.7 0.0 0.0 0.0 0.0 7.9
AA 5.7 71.2 7.3 2.0 0.3 0.0 0.0 0.0 13.4
A 0.0 17.8 49.5 8.7 0.2 0.1 0.0 0.0 23.7
BBB 0.0 0.0 11.4 46.3 13.7 0.9 0.2 0.9 26.6
BB 0.0 0.0 0.0 7.9 55.1 3.6 0.3 6.1 27.0
B 0.0 0.0 0.0 0.9 25.1 23.5 5.5 5.5 39.4
CCC/C 0.0 0.0 0.0 0.0 16.7 33.3 9.1 21.2 19.7
Canada
AAA 79.1 13.7 2.0 0.0 0.0 0.0 0.0 0.0 5.2
AA 4.9 87.5 4.2 0.0 0.0 0.0 0.0 0.0 3.3
A 0.0 28.4 61.8 1.5 0.0 0.0 0.0 0.0 8.3
BBB 0.0 0.0 83.3 0.0 0.0 0.0 0.0 0.0 16.7
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Asia-Pacific
AAA 74.8 16.8 0.0 0.0 0.0 0.0 0.0 0.0 8.4
AA 5.9 67.4 8.0 0.0 0.0 0.0 0.0 0.0 18.8
A 0.0 16.7 58.3 0.8 0.0 0.0 0.0 0.0 24.2
BBB 0.0 0.0 55.6 22.2 0.0 0.0 0.0 0.0 22.2
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Latin America
AAA 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
A 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB 0.0 0.0 0.0 50.3 24.9 2.8 0.6 2.8 18.6
BB 0.0 0.0 0.0 4.9 59.1 4.4 0.4 7.4 23.8
B 0.0 0.0 0.0 0.0 17.0 33.3 10.2 2.7 36.7
CCC/C 0.0 0.0 0.0 0.0 0.0 50.0 10.7 28.6 10.7
Western Europe
AAA 70.9 17.9 0.7 1.4 0.0 0.0 0.0 0.0 9.1
AA 6.0 66.1 8.3 3.2 0.5 0.0 0.0 0.0 15.9
A 0.0 11.2 39.2 15.3 0.4 0.2 0.0 0.0 33.7
BBB 0.0 0.0 14.2 44.4 6.7 0.0 0.0 0.0 34.7
BB 0.0 0.0 0.0 26.8 46.5 1.4 0.0 0.0 25.4
B 0.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 0.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EEMEA
AAA 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
A 0.0 16.7 55.6 5.6 0.0 0.0 0.0 0.0 22.2
BBB 0.0 0.0 12.3 53.8 16.9 0.0 0.0 0.0 16.9
BB 0.0 0.0 0.0 12.6 44.3 1.6 0.0 3.3 38.3
B 0.0 0.0 0.0 1.8 33.3 17.0 1.8 8.5 37.6
CCC/C 0.0 0.0 0.0 0.0 28.9 21.1 7.9 15.8 26.3
EEMEA--Eastern Europe, the Middle East, and Africa. Source: S&P Global Ratings Research.

Table 9

Local And Regional Government Average One-Year Transition Rates With Rating Modifiers (1975-2020)
--Rating one year later (%)--
Rating AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C D NR
AAA 94.4 3.3 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 0.0 0.0 0.0 1.6
AA+ 3.3 89.4 4.4 0.3 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.3
AA 0.0 4.8 87.5 4.8 0.2 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.6
AA- 0.0 0.1 7.5 80.3 6.6 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.7
A+ 0.0 0.0 0.2 8.1 80.6 4.4 0.6 0.0 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.5
A 0.0 0.0 0.0 0.3 13.9 73.1 2.7 3.1 0.3 0.3 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 5.8
A- 0.0 0.0 0.0 0.0 0.4 11.7 78.7 3.9 0.9 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.9
BBB+ 0.0 0.0 0.0 0.0 0.0 1.1 11.5 70.3 8.8 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.7
BBB 0.0 0.0 0.0 0.0 0.0 0.0 0.5 9.4 66.3 13.4 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.9
BBB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 10.3 71.8 6.8 1.7 0.3 0.0 0.0 0.0 0.0 0.0 8.5
BB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 7.4 74.2 8.1 1.7 0.0 0.2 0.2 0.0 0.0 7.4
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.1 74.2 6.2 0.0 0.0 0.2 0.2 1.2 6.9
BB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 8.4 72.8 4.5 0.3 0.8 1.1 1.4 10.1
B+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 15.9 51.6 10.8 3.8 0.0 0.6 14.6
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 13.5 53.2 13.5 6.4 0.0 11.3
B- 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 10.7 20.5 36.6 14.3 7.1 10.7
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 28.8 50.7 12.3 8.2
NR--Not rated (withdrawn). Source: S&P Global Ratings Research.

Table 10

Local And Regional Government Average Five-Year Transition Rates With Rating Modifiers (1975-2020)
--Rating five years later (%)--
Rating AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C D NR
AAA 74.0 10.7 5.9 0.0 0.5 0.0 0.3 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.9
AA+ 15.0 57.7 11.5 2.8 1.2 0.7 0.2 0.2 0.2 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.6
AA 2.7 19.1 47.8 10.1 5.5 0.9 0.1 0.4 0.7 1.6 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 10.8
AA- 0.3 4.7 26.3 32.7 11.9 1.2 0.3 0.8 0.3 0.5 0.0 0.3 0.3 0.0 0.0 0.0 0.0 0.0 20.3
A+ 0.0 0.4 3.6 21.3 33.2 7.2 1.1 1.7 2.1 2.6 0.0 0.2 0.2 0.0 0.0 0.0 0.0 0.0 26.4
A 0.0 0.4 1.6 10.0 27.3 23.7 4.8 1.6 0.4 4.4 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 25.3
A- 0.0 0.0 0.0 4.3 9.6 20.2 34.0 12.8 2.1 3.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 13.8
BBB+ 0.0 0.0 0.0 0.0 3.3 11.7 20.0 21.7 6.7 3.3 4.2 0.0 0.8 0.0 0.0 0.0 0.0 0.0 28.3
BBB 0.0 0.0 0.0 0.0 0.0 4.2 4.9 11.9 28.0 15.4 7.7 1.4 0.0 0.0 0.0 0.0 0.0 0.0 26.6
BBB- 0.0 0.0 0.0 0.0 0.4 0.0 1.8 6.6 13.3 28.0 14.0 3.7 2.2 0.4 1.1 0.4 0.4 1.8 25.8
BB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 3.8 14.2 30.8 13.9 6.8 1.8 0.3 0.0 0.0 5.6 22.5
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 0.6 1.7 19.7 32.3 9.4 2.6 0.0 0.6 0.9 5.4 26.0
BB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 7.0 14.0 30.7 3.7 0.3 2.0 0.0 7.3 33.3
B+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 0.0 0.8 5.6 11.9 12.7 4.8 10.3 7.9 0.8 4.0 40.5
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 6.8 17.1 8.5 6.0 10.3 5.1 1.7 43.6
B- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.2 0.0 2.4 4.8 10.7 9.5 10.7 2.4 13.1 13.1 32.1
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.5 4.5 7.6 6.1 15.2 12.1 9.1 21.2 19.7
NR--Not rated (withdrawn). Source: S&P Global Ratings Research.

Table 11

Local And Regional Government Average 15-Year Transition Rates With Rating Modifiers (1975-2020)
--Rating 15 years later (%)--
Rating AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C D NR
AAA 35.3 28.0 20.0 0.4 2.5 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 13.8
AA+ 25.6 10.7 16.9 7.9 1.7 1.7 0.8 1.7 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 32.6
AA 9.9 22.0 15.4 5.2 3.0 3.0 1.4 3.6 1.9 3.0 0.0 0.0 0.3 0.5 0.0 0.0 0.0 0.8 29.9
AA- 4.3 15.8 14.3 6.5 7.5 1.2 0.6 4.3 4.7 5.3 0.0 3.1 0.6 0.0 0.0 0.0 0.0 0.0 31.7
A+ 0.5 12.8 16.3 12.3 12.8 2.0 0.0 0.0 1.5 3.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 38.4
A 4.9 4.1 3.3 18.0 7.4 5.7 8.2 4.1 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 43.4
A- 0.9 0.9 2.7 11.6 14.3 14.3 7.1 0.0 0.0 2.7 0.9 0.0 0.9 0.0 0.0 0.0 0.0 0.0 43.8
BBB+ 0.0 0.0 0.0 0.0 9.1 9.1 15.9 4.5 0.0 2.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 59.1
BBB 0.0 0.0 0.0 0.0 0.0 0.0 1.7 6.8 6.8 1.7 0.0 10.2 1.7 0.0 0.0 0.0 0.0 0.0 71.2
BBB- 0.0 0.0 0.0 0.0 1.0 0.0 1.0 10.1 7.1 15.2 10.1 4.0 1.0 1.0 0.0 0.0 0.0 0.0 49.5
BB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.3 12.6 11.5 9.2 3.4 2.3 0.0 0.0 0.0 28.7 21.8
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.5 8.4 9.8 10.5 7.7 0.0 5.6 1.4 0.0 13.3 39.9
BB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.2 1.1 3.3 8.8 1.1 1.1 1.1 0.0 0.0 20.9 60.4
B+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.7 10.8 24.3 5.4 0.0 0.0 0.0 0.0 5.4 51.4
B 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.3 2.3 6.8 2.3 15.9 0.0 0.0 0.0 2.3 6.8 61.4
B- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 28.0 4.0 0.0 0.0 0.0 0.0 4.0 20.0 44.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.4 14.8 18.5 14.8 0.0 0.0 3.7 7.4 0.0 18.5 14.8
NR--Not rated (withdrawn). Source: S&P Global Ratings Research.

Table 12

Local And Regional Government 2020 Transition Matrix With Rating Modifiers
--Rating one year later (%)--
Rating AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C D NR
AAA 89.3 7.1 3.6 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
AA+ 0.0 97.5 2.5 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
AA 0.0 0.0 100.0 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
AA- 0.0 0.0 0.0 92.0 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 8.0
A+ 0.0 0.0 0.0 0.0 100.0 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
A 0.0 0.0 0.0 0.0 0.0 91.7 8.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
A- 0.0 0.0 0.0 0.0 0.0 0.0 84.6 7.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.7
BBB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 90.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.0
BBB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 25.0
BBB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 94.7 5.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 66.7 16.7 8.3 0.0 0.0 0.0 0.0 0.0 8.3
BB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 76.5 11.8 0.0 0.0 0.0 0.0 0.0 11.8
BB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 75.0 16.7 0.0 0.0 0.0 0.0 8.3
B+ 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 33.3 0.0 0.0 0.0 16.7
B 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 75.0 0.0 25.0 0.0 0.0
B- 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 11.1 22.2 66.7 0.0
CCC/C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 66.7 33.3 0.0
NR--Not rated (withdrawn). Source: S&P Global Ratings Research.

Table 13

Local And Regional Government Cumulative Yearly Average Default Rate With Rating Modifiers (1975-2020)*
--Time horizon (years)--
Rating 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
AAA 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
AA+ 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
AA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.4 0.6 0.6 0.6
AA- 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
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
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
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
BBB+ 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
BBB 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
BBB- 0.0 0.3 0.6 1.0 1.7 2.6 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1
BB+ 0.0 0.5 1.8 3.5 5.3 6.7 8.1 10.5 12.8 14.4 16.2 17.7 17.7 17.7 17.7
BB 1.2 2.7 3.5 4.3 4.9 6.1 7.1 7.4 8.2 9.4 10.2 11.2 11.2 11.2 11.2
BB- 1.4 3.6 4.8 6.1 6.8 7.6 8.4 9.7 11.0 11.6 11.6 11.6 11.6 11.6 11.6
B+ 0.7 0.7 2.1 2.9 4.6 4.6 5.5 6.4 6.4 7.4 7.4 7.4 7.4 7.4 7.4
B 0.0 1.6 1.6 1.6 1.6 2.5 3.5 3.5 3.5 3.5 4.9 6.6 8.4 8.4 8.4
B- 1.9 4.9 9.1 12.6 13.8 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5
CCC/C 12.3 13.7 13.7 13.7 17.0 19.1 19.1 19.1 19.1 19.1 19.1 19.1 19.1 19.1 19.1
Investment grade 0.0 0.0 0.1 0.1 0.2 0.4 0.4 0.4 0.4 0.4 0.5 0.6 0.7 0.7 0.7
Speculative grade 0.4 0.8 1.2 1.6 2.0 2.4 2.7 3.0 3.4 3.6 3.9 4.1 4.2 4.2 4.2
All rated 0.3 0.6 0.9 1.2 1.4 1.7 2.0 2.2 2.4 2.6 2.8 3.0 3.0 3.0 3.0
*Calculated by multiplying non-default marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Table 14

Local And Regional Government Cumulative Average Default Rate With Rating Modifiers (1975-2020)*
--Time horizon (months)--
Rating 1 2 3 4 5 6 7 8 9 10 11 12
AAA 0.0 0.0 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 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 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 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 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 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 0.0 0.0
BBB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BBB- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BB+ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
BB 0.0 0.1 0.1 0.2 0.3 0.4 0.5 0.5 0.6 0.7 0.8 0.9
BB- 0.1 0.1 0.2 0.3 0.4 0.5 0.7 0.8 0.9 1.1 1.3 1.5
B+ 0.0 0.1 0.1 0.2 0.2 0.4 0.6 0.9 1.0 1.1 1.1 1.2
B 0.0 0.0 0.0 0.0 0.0 0.2 0.3 0.4 0.5 0.6 0.9 1.3
B- 0.3 0.5 0.9 1.3 1.7 2.0 2.6 3.3 4.0 4.7 5.1 5.5
CCC/C 2.0 3.8 5.4 6.8 8.4 9.6 10.3 10.7 11.1 11.5 12.0 12.4
Investment grade 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Speculative grade 0.1 0.3 0.4 0.5 0.7 0.8 1.0 1.1 1.2 1.4 1.5 1.7
All rated 0.0 0.1 0.1 0.1 0.2 0.2 0.2 0.3 0.3 0.4 0.4 0.4
*Calculated by multiplying non-default marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Table 15

Local And Regional Government Local Currency 'BB' Static Pools And Default Rates
Transition to default rates (%)
--Time horizon (years)--
Static pools Issuers 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
1/1/1996 1 0.0 0.0 0.0 0.0 0.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
1/1/1997 8 0.0 0.0 0.0 0.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
1/1/1998 4 0.0 25.0 25.0 50.0 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5
1/1/1999 4 0.0 0.0 50.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0
1/1/2000 26 0.0 50.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0
1/1/2001 32 7.7 15.4 15.4 15.4 15.4 15.4 15.4 15.4 15.4 19.2 19.2 30.8 30.8 30.8 30.8
1/1/2002 48 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.1 3.1 15.6 18.8 18.8 18.8 18.8
1/1/2003 58 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 2.1 12.5 14.6 14.6 14.6 14.6 14.6
1/1/2004 68 0.0 0.0 0.0 0.0 0.0 0.0 1.7 1.7 13.8 15.5 15.5 15.5 15.5 15.5 15.5
1/1/2005 71 0.0 0.0 0.0 1.5 1.5 2.9 2.9 13.2 14.7 14.7 14.7 14.7 14.7 14.7 14.7
1/1/2006 80 0.0 0.0 1.4 1.4 2.8 2.8 12.7 14.1 14.1 14.1 14.1 14.1 14.1 14.1 14.1
1/1/2007 88 0.0 1.3 1.3 2.5 2.5 11.3 12.5 12.5 13.8 13.8 13.8 13.8 13.8 13.8
1/1/2008 76 1.1 1.1 2.3 2.3 9.1 10.2 10.2 11.4 11.4 11.4 11.4 11.4 11.4
1/1/2009 73 0.0 1.3 1.3 9.2 10.5 10.5 10.5 10.5 10.5 10.5 10.5 10.5
1/1/2010 65 1.4 1.4 9.6 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0
1/1/2011 63 0.0 7.7 9.2 9.2 9.2 9.2 9.2 9.2 9.2 9.2
1/1/2012 56 6.3 9.5 9.5 9.5 9.5 9.5 9.5 9.5 9.5
1/1/2013 51 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8
1/1/2014 53 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2015 62 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2016 57 1.6 1.6 1.6 3.2 3.2
1/1/2017 50 0.0 0.0 0.0 0.0
1/1/2018 49 0.0 0.0 0.0
1/1/2019 41 0.0 0.0
1/1/2020 37 0.0
Cumulative default rate* 0.9 2.2 3.4 4.7 5.8 7.0 8.1 9.4 10.9 12.0 12.9 13.7 13.7 13.7 13.7
Summary statistics
Marginal average 0.9 1.4 1.2 1.4 1.1 1.2 1.2 1.4 1.6 1.3 1.0 1.0 0.0 0.0 0.0
Cumulative average 0.9 2.2 3.4 4.7 5.8 7.0 8.1 9.4 10.9 12.0 12.9 13.7 13.7 13.7 13.7
Standard deviation 2.0 11.3 18.4 23.0 30.6 35.3 35.4 35.3 34.9 34.9 34.7 34.7 35.0 35.3 35.6
Median 0.0 0.0 1.3 2.0 3.2 9.9 10.5 11.9 13.8 14.4 15.5 17.1 18.8 24.8 30.8
Minimum 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 3.1 10.5 10.5 11.4 13.8 14.1
Maximum 7.7 50.0 75.0 75.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
*Calculated by multiplying non-default marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Table 16

Local And Regional Government Local Currency 'B' Static Pools And Default Rates
Transition to default rates (%)
--Time horizon (years)--
Static pools Issuers 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
1/1/1996 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 0.0 0.0
1/1/1997 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 0.0 0.0
1/1/1998 2 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
1/1/1999 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 0.0 0.0
1/1/2000 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 0.0 0.0
1/1/2001 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 0.0 0.0
1/1/2002 8 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
1/1/2003 12 0.0 0.0 0.0 0.0 0.0 8.3 8.3 8.3 8.3 8.3 8.3 8.3 16.7 16.7 16.7
1/1/2004 21 0.0 0.0 0.0 0.0 4.8 9.5 9.5 9.5 9.5 9.5 9.5 14.3 14.3 14.3 14.3
1/1/2005 25 0.0 0.0 0.0 0.0 4.0 4.0 4.0 4.0 4.0 4.0 8.0 8.0 8.0 8.0 8.0
1/1/2006 27 0.0 0.0 0.0 3.7 3.7 3.7 3.7 3.7 3.7 7.4 7.4 7.4 7.4 7.4 11.1
1/1/2007 25 0.0 0.0 4.0 4.0 4.0 4.0 4.0 8.0 8.0 8.0 8.0 8.0 8.0 20.0
1/1/2008 27 0.0 3.7 7.4 7.4 11.1 11.1 14.8 14.8 14.8 14.8 14.8 14.8 25.9
1/1/2009 27 0.0 3.7 3.7 7.4 7.4 11.1 14.8 14.8 14.8 14.8 14.8 25.9
1/1/2010 28 0.0 0.0 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 14.3
1/1/2011 28 0.0 0.0 0.0 3.6 3.6 3.6 3.6 3.6 3.6 14.3
1/1/2012 20 0.0 0.0 5.0 10.0 10.0 10.0 10.0 10.0 30.0
1/1/2013 21 4.8 9.5 14.3 14.3 14.3 14.3 14.3 33.3
1/1/2014 18 5.6 11.1 11.1 11.1 11.1 11.1 11.1
1/1/2015 14 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2016 13 0.0 0.0 0.0 0.0 0.0
1/1/2017 20 0.0 0.0 5.0 35.0
1/1/2018 23 4.3 8.7 39.1
1/1/2019 21 0.0 33.3
Cumulative default rate* 0.8 2.1 3.8 5.1 6.0 7.0 7.7 8.1 8.1 8.6 9.1 9.7 10.5 10.5 10.5
Summary statistics
Marginal average 0.8 1.4 1.8 1.3 1.0 1.1 0.8 0.4 0.0 0.5 0.6 0.7 0.8 0.0 0.0
Cumulative average 0.8 2.1 3.8 5.1 6.0 7.0 7.7 8.1 8.1 8.6 9.1 9.7 10.5 10.5 10.5
Standard deviation 6.4 7.3 8.6 8.1 4.5 4.9 5.5 8.4 8.0 5.8 6.0 7.9 8.4 7.6 6.6
Median 0.0 0.0 0.0 0.0 3.6 3.6 3.7 3.6 3.6 3.8 7.4 3.7 0.0 0.0 0.0
Minimum 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
Maximum 31.6 33.3 39.1 35.0 14.3 14.3 14.8 33.3 30.0 14.8 14.8 25.9 25.9 20.0 16.7
*Calculated by multiplying non-default marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Table 17

Local And Regional Government Local Currency 'CCC'/'CC' Static Pools And Default Rates
Transition to default rates (%)
--Time horizon (years)--
Static pools Issuers 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
1/1/1999 5 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7
1/1/2000 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 0.0 0.0
1/1/2001 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 0.0 0.0
1/1/2002 2 28.6 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9 42.9
1/1/2003 1 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0
1/1/2004 2 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
1/1/2005 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 0.0 0.0
1/1/2006 0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2007 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
1/1/2008 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
1/1/2009 7 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
1/1/2010 3 14.3 14.3 14.3 14.3 28.6 42.9 42.9 42.9 42.9 42.9 42.9
1/1/2011 1 0.0 0.0 0.0 0.0 33.3 33.3 33.3 33.3 33.3 33.3
1/1/2012 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2013 7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1/1/2014 11 0.0 0.0 0.0 0.0 0.0 0.0 57.1
1/1/2015 8 9.1 9.1 9.1 9.1 9.1 45.5
1/1/2016 1 0.0 0.0 0.0 0.0 50.0
1/1/2017 1 0.0 0.0 0.0 0.0
1/1/2018 2 0.0 0.0 0.0
1/1/2019 3 50.0 50.0
1/1/2020 7 33.3
Cumulative default rate* 11.4 12.9 12.9 12.9 16.4 18.6 18.6 18.6 18.6 18.6 18.6 18.6 18.6 18.6 18.6
Summary statistics
Marginal average 11.4 1.6 0.0 0.0 4.0 2.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Cumulative average 11.4 12.9 12.9 12.9 16.4 18.6 18.6 18.6 18.6 18.6 18.6 18.6 18.6 18.6 18.6
Standard deviation 25.2 26.1 25.3 25.9 27.7 28.7 30.0 29.4 30.0 30.7 31.8 32.6 19.5 20.3 21.1
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
Minimum 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
Maximum 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 50.0 50.0 50.0
*Calculated by multiplying non-default marginal rates and then subtracting from 1 to get the cumulative default rate. Source: S&P Global Ratings Research.

Table 18

Local And Regional Government Versus Sovereign Foreign Currency Default Rates (1975-2020)*
--One-year-- --Three-year-- --Five-year-- --10-year-- --15-year--
(%) LRG Sov LRG Sov LRG Sov LRG Sov LRG Sov
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 0.1 0.0
A 0.0 0.0 0.0 0.2 0.0 1.2 0.0 3.5 0.0 5.9
BBB 0.0 0.0 0.2 1.1 0.6 3.4 0.2 6.3 0.0 7.7
BB 0.9 0.6 9.7 2.5 18.5 5.2 34.2 12.0 47.4 16.1
B 2.2 2.6 4.4 8.6 3.7 14.1 5.3 25.7 4.6 37.9
CCC/CC 15.0 43.6 12.9 67.2 20.7 73.3 26.0 76.7 13.7 85.7
Investment grade 0.0 0.0 0.0 0.4 0.1 1.1 0.0 2.5 0.1 2.8
Speculative grade 1.9 3.3 7.3 8.3 12.3 12.1 21.8 18.2 28.6 25.3
All rated 0.5 1.4 1.3 3.6 1.9 5.4 2.5 8.0 1.8 7.7
*Implied senior debt rating through 1995; sovereign credit ratings thereafter. LRG--Local and regional governments. Source: S&P Global Ratings Research.

Table 19

Local And Regional Government Versus Sovereign Foreign Currency Ratings Default Rates With Rating Modifiers (1975-2020)*
--One-year-- --Three-year-- --Five-year-- --10-year-- --15-year--
(%) LRG Sov LRG Sov LRG Sov LRG Sov LRG Sov
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 0.4 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 1.6 0.0 2.4 0.0 2.8
A 0.0 0.0 0.0 0.4 0.0 1.2 0.0 6.9 0.0 10.4
A- 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.9
BBB+ 0.0 0.0 0.0 1.2 0.0 1.3 0.0 2.8 0.0 3.3
BBB 0.0 0.0 0.0 0.5 0.0 4.5 0.0 4.9 0.0 6.4
BBB- 0.0 0.0 0.4 1.2 1.1 2.3 0.4 7.9 0.0 9.2
BB+ 0.0 0.0 1.3 1.6 8.5 1.6 27.6 6.3 40.4 12.7
BB 1.2 0.0 12.6 1.5 19.9 2.4 29.8 4.7 43.2 19.5
BB- 1.9 2.4 9.8 5.0 15.0 10.6 22.4 27.2 30.9 32.1
B+ 0.4 0.0 2.4 4.3 2.5 10.3 5.1 24.2 3.1 38.2
B 0.0 1.9 4.4 6.6 1.3 12.7 3.5 22.5 4.4 29.4
B- 4.2 7.5 13.3 18.0 18.4 22.3 22.8 28.2 17.8 22.5
CCC/CC 15.0 43.6 12.9 67.2 20.7 73.3 26.0 76.7 13.7 85.7
Investment grade 0.0 0.0 0.0 0.4 0.1 1.1 0.0 2.5 0.1 2.8
Speculative grade 1.4 1.8 8.9 6.0 14.2 10.0 24.6 16.4 33.2 23.8
All rated 0.3 0.8 1.2 2.7 1.7 4.5 2.3 7.2 1.7 7.1
*Implied senior debt rating through 1995; sovereign credit ratings thereafter. LRG--Local and regional governments. Source: S&P Global Ratings Research.

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The use of the term "methodology" in this article refers to data aggregation and calculation methods used in conducting the research. It does not relate to S&P Global Ratings' methodologies, which are publicly available criteria used to determine credit ratings.

This report does not constitute a rating action.

Ratings Performance Analytics:Nick W Kraemer, FRM, New York + 1 (212) 438 1698;
nick.kraemer@spglobal.com
Zev R Gurwitz, New York + 1 (212) 438 7128;
zev.gurwitz@spglobal.com
Research Contributor:Sundaram Iyer, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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