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Credit Trends: The Number Of North American ‘CCC’ Rated Issuers Is Steady Despite Subdued Primary Activity


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Credit Trends: The Number Of North American ‘CCC’ Rated Issuers Is Steady Despite Subdued Primary Activity

(Editor's Note: Our "Risky Credits" series focuses on corporate issuers rated in the 'CCC' category. Because the majority of defaults are from these companies, those with negative outlooks or ratings on CreditWatch negative are even more important to monitor in this uncertain economic recovery.)


March 2022 Highlights:

North America's 'CCC' count steadied.   The number of 'CCC+' and below rated issuers in the U.S. and Canada remained at 135 in March--the lowest level since February 2020. This number could increase due to ongoing supply chain disruptions or a persistent increase in input costs or interest rates adversely impacting operating performance or profitability. The percentage of issuers with a positive bias (either with a positive outlook or CreditWatch) is twice its five-year average at 12%, signaling potential for upgrades out of the 'CCC' rating category (see chart 1).

U.S. defaults are less than half of last year's levels.   So far in 2022, there have been only seven defaults from the U.S., compared to 15 at this point in 2021. The U.S. default rate remains low at just 1.5%, however, S&P Global expects it to increase to 3% by December 2022 (see "The U.S. Speculative-Grade Corporate Default Rate Could Reach 3% By Year-End As Risks Continue To Increase," Feb. 16, 2022).

'CCC+' and below issuance has fallen to a four-year low.   Issuance in the 'CCC' rating category has fallen to just US$7.5 billion year-to-date, down 84% from US$48.7 billion at this point in 2021. Reduced risk appetite and rising financing costs have weakened the favorable financing conditions we saw throughout 2021, increasing refinancing risk for 'CCC' rated issuers.

U.S. 'CCC' composite spreads widened by 17% so far in 2022.   'CCC' spreads were at 706 basis points (bps) as of March 24 but are still considerably lower than their pandemic high of 1,828 bps in March 2020. The increase in market volatility and rising spreads primarily reflect uncertainties around the path of U.S. monetary policy in the face of inflation and the potential impact of higher rates on economic growth.

The most exposed sector is media and entertainment.   Among 'CCC' rated issuers, the media and entertainment sector has the highest debt exposure at US$41.4 billion, 50% of which has a negative bias. The sector remains the most vulnerable to a weaker-than-expected operating environment.

'CCC+' and below corporate debt due in the near term remains low.   Lower rated issuers have taken advantage of two years of cheap funding to extend maturities, leaving 'CCC+' and below corporate debt due in the near term at a manageable level (see chart 4).

Collateralized loan obligation (CLO) credit metrics remain stable.   Positive momentum for corporate ratings has been decelerating and is now returning to more typical historical patterns following the wave of upgrades in 2021. As a result, CLO credit metrics remained stable at the start of April as upgrades just outnumbered downgrades across U.S. broadly syndicated loan (BSL) CLO exposures in March 2022. A small handful of obligors (some widely held) were placed on CreditWatch negative in March, slightly increasing U.S. CLO exposure to obligors on CreditWatch negative.

Chart 1


Chart 2


Chart 3


Chart 4


Chart 5


Table 1

2022 Downgrades Into The 'CCC' Category
Rating date Issuer Country Sector Rating to Rating from Debt amount (mil. US$)


Bermuda Telecommunications CCC+ BB+ 5,306

Logan Group Co. Ltd.

Cayman Islands Homebuilders/real estate co. CCC- B- 1,280

Cooper-Standard Holdings Inc.

United States Automotive CCC+ B- 990

8th Avenue Food & Provisions Inc.

United States Consumer products CCC+ B- 750

Halo Buyer Inc.

United States Consumer products CCC+ B- 440

INW Manufacturing, LLC

United States Consumer products CCC+ B- 440

PlayPower Holdings Inc.

United States Media and entertainment CCC+ B- 400

The Cleaver-Brooks Co. Inc.

United States Capital goods CCC B- 375

Lannett Co. Inc.

United States Health care CCC+ B- 350

Moran Foods LLC

United States Retail/restaurants CCC+ B- 334

Skillz Inc.

United States Media and entertainment CCC+ B- 300

JHW Alphia Holdings Inc.

United States Consumer products CCC+ B- 285

Data Axle Inc.

United States Media and entertainment CCC B- 250
Data as of March 31, 2022. Source: S&P Global Ratings.

Table 2

2022 Upgrades From The 'CCC' Category
Rating date Issuer Country Sector Rating to Rating from Debt amount (mil. US$)

Nabors Industries Ltd.

Bermuda Oil and gas exploration and production B- CCC+ 5,101

Syniverse Holdings Inc.

United States Telecommunications B- CCC+ 2,922

Apex Tool Group LLC

United States Forest products and building materials B- CCC 2,729

National CineMedia Inc.

United States Media and entertainment B- CCC+ 1,220

Electronics for Imaging Inc.

United States High technology B- CCC+ 1,100

Yellow Corp.

United States Transportation B- CCC+ 600

Screenvision LLC

United States Media and entertainment B- CCC+ 350

JW Aluminum Continuous Cast Co.

United States Metals, mining, and steel B- CCC+ 300

Crew Energy Inc.

Canada Oil and gas exploration and production B- CCC+ 235

Salem Media Group Inc.

United States Media and entertainment B- CCC+ 370
Data as of March 31, 2022. Source: S&P Global Ratings.

Table 3

CLO BSL Index Metrics (CLO Insights 2022 U.S. BSL Index)
BSL 'B-' bucket (%) 'CCC' bucket (%) Nonperform bucket (%) S&P Global Ratings' weighted average rating factor CreditWatch negative (%) Outlook negative (%)
Jan-22 26.41 4.94 0.17 2,700 0.88 12.33
Feb-22 27.16 4.27 0.37 2,708 0.28 11.94
Mar-22 27.09 4.26 0.39 2,708 0.11 11.35
Apriil 2022 27.44 4.17 0.13 2,690 1.06 10.86
BSL CLO--Broadly syndicated loan collateralized loan obligation.

Related Research

This report does not constitute a rating action.

Credit Markets Research:Nicole Serino, New York + 1 (212) 438 1396;
Patrick Drury Byrne, Dublin (00353) 1 568 0605;
Leveraged Finance:Ramki Muthukrishnan, New York + 1 (212) 438 1384;
Minesh Patel, CFA, New York + 1 (212) 438 6410;
Secondary Contact:Daniel Hu, FRM, New York + 1 (212) 438 2206;
Research Contributors:Yogesh Kumar, CRISIL Global Analytical Center, an S&P affiliate, Mumbai
Vaishali Singh, Pune;

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