Following the brief but deep recession in 2020, U.S. economic growth surged to a multi-decade high in 2021. There were just 40 U.S. corporate defaulters during the year (down from 146 in 2020), with issuers broadly supported by the strong economic recovery and accommodative financial conditions. Over 80% of the 29 rated defaulters--those with active ratings at the start of the year--began the year in the 'CCC'/'C' category and the remainder were in the 'B' category (see chart 1 and table 1).

Few defaults during the year led to the second sharpest year-over-year drop in the speculative-grade default rate since 1981, falling to 1.54% from 6.66% in 2020. This is the lowest annual speculative-grade default rate since 2007 and the fourth lowest speculative-grade default rate on record

While U.S. corporate credit quality has broadly improved, the credit impact of the 2020 recession lingers. The proportion of U.S. corporate issuers rated 'B-' or lower has recovered just halfway to 20%. This proportion was 17% at the end of 2019, the record high at that time, before rising to 23% amid the recession and remaining near that level into the second quarter of 2021. A high proportion of weaker-rated speculative-grade issuers could contribute to more defaults in an economic downturn. However, this may largely depend on prevailing financial conditions, as evident in the most recent cycle.

Table 1

For the purposes of this study, we consider issuers that reemerge from default--including after a distressed exchange according to our criteria--to be new entities and consider the ratings on these newly emerged entities to be initial ratings. We make our best effort to capture these defaults in the database, and we include them in the annual default rate calculations if the entity was rated by Jan. 1 of the year it defaulted. However, if S&P Global Ratings withdrew the rating before Jan. 1 of the year the issuer defaulted, we do not include the issuer in the default rate calculation for that year.

Of the 40 U.S. corporate defaulters in 2021, 29 had active ratings at the start of the year and 11 were not rated when the year began. Of these 11, four had the issuer rating withdrawn prior to Jan. 1, 2021, three were first rated after Jan. 1, 2021, and four (from three issuers) followed prior defaults earlier in 2022, after these issuers received new initial ratings following an earlier default (see table 2).

Our study of corporate defaults in the U.S. region (which includes the tax havens Bermuda and the Cayman Islands) identified a clear correlation between low ratings and the probability of default. The one-year Gini ratio (a measure of the rank-ordering power of ratings over a given time horizon) held largely stable, even as it decreased slightly to 83.3% in 2021 from 83.5% in 2020. It remained higher than the 80.6% long-term weighted average one-year Gini ratio for U.S. corporate ratings going back to 1981. High Gini scores reflect a high proportion of the lowest-rated issuers among defaulters in a given period, and over four-fifths of rated defaulters in the U.S. were rated 'CCC+' or lower at the beginning of the year.

This study includes industrials, utilities, financial institutions (including banks, brokerages, asset managers, and other financial entities), and insurance companies from the U.S. region. We calculated default and transition rates based on the number of issuers in the sample period. The weighted average default rates in this study use the number of issuers at the beginning of each year as the basis for each year's weight (see Appendix 1 for terms and definitions). The data we present in this study, unless labeled otherwise, refers to only public and confidential issuer credit ratings on nonfinancial and financial issuers and excludes credit estimates.

Table 2

Distressed Exchanges Led Defaults

Distressed exchanges, as defined under our criteria, were the most common reason for default in 2021, with 25, and accounted for the highest share of affected debt, at 55%. By sector, consumer services and energy and natural resources (six each), and real estate and high tech/computers/office equipment (three each) had the most distressed exchanges.

These distressed exchanges typically involve entities in distress that restructure their obligations in a way that offers less than the original promise. A distressed exchange is an alternative to a conventional default, in which the investor or counterparty stands to fare even worse, and this motivates (at least partially) their acceptance of such an offer. S&P Global Ratings treats such offers and buybacks analytically as de facto restructuring--and, accordingly, as equivalent to a default on the part of the issuer. Given this analytical treatment, distressed exchanges are included in default rates and other relevant statistics.

S&P Global Ratings will typically lower the issuer credit rating to 'SD' (selective default) if the issuer conducts a distressed exchange. An 'SD' rating is assigned if the issuer 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.

Selective defaults accounted for nearly two-thirds of defaults in 2021. Since 2013, selective defaults have accounted for about one-third or more of annual defaults as distressed exchanges have become more common.

Missed principal and interest payments were the second most common cause of default in 2021, with 10, and accounted for the second highest share of affected debt, at 43%. Real estate (four) and energy and natural resources (two) had the most defaults due to missed principal and interest payments.

The largest default of the year was due to missed interest payments. China Evergrande Group defaulted on Dec.17, 2021, when it missed coupon payments on outstanding U.S.-dollar senior notes, with affected debt totaling $11 billion. All ratings were subsequently withdrawn at the issuer's request. The issuer primarily engages in property development in the People's Republic of China, but is incorporated in the Cayman Islands, a tax haven that we group in the U.S. region (along with Bermuda). Property developers in China faced increasing difficulty accessing funding and disposing of assets in 2021.

Chapter 11 bankruptcy was the least common type of default in 2021, with five, and accounted for just 2% of affected debt.

The U.S. Accounts For Most Of The World's Speculative-Grade Issuers

Speculative-grade issuers have grown as a share of rated U.S. corporate issuers in recent years as investors have shown willingness to accept higher credit risk for additional yield. The share of U.S. corporate ratings that are speculative grade ended the year at 58%, just below the all-time high (59% in September 2021) and up nearly 13 percentage points since 2004.

Newly assigned ratings have contributed to most of this growth. Since 1980, 67% of new ratings annually have been speculative grade on average, and this proportion has been rising. Since 2009, speculative-grade ratings have accounted for 86% of new ratings annually on average. In 2021, 420 corporate issuers were assigned new ratings in the U.S., and 90% of these were speculative grade.

The U.S. accounts for nearly half of all global corporate issuer ratings. With the high proportion of speculative-grade ratings in the U.S., it also accounts for most global speculative-grade corporate issuers (see chart 2). Globally, there were 3,701 speculative-grade issuers at the end of 2021, with 52% of these based in the U.S. Furthermore, the U.S. accounts for 64% of issuers rated 'B-' or lower--the lowest-rated speculative-grade issuers--globally.

With more than half of the world's speculative-grade issuers and nearly two-thirds of the weakest-rated issuers, the U.S. typically experiences a higher number of rated corporate defaults annually than other regions. In 2021, 56% of global defaults were from issuers based in the U.S, slightly down from 65% in 2020.

In 2021, for the first time in the 41-year history of this study, there were more annual speculative-grade defaults globally outside of the U.S. than there were in the U.S. This led to a lower speculative-grade default rate in the U.S. than globally, which last occurred in 2013. Since 1992, the global speculative-grade default rate has been greater than the U.S. speculative-grade default rate in only six calendar years (see chart 3).

No investment-grade issuers defaulted in the U.S. in 2021, and most defaults came from issuers rated in the lowest rating categories. The preponderance of defaults from the lowest rating categories supports the view that ratings are effective indicators of relative credit risk. All speculative-grade rating categories' one-year default rates decreased in 2021, and all were well below long-term averages (see table 3).

Table 3

Corporate Ratings Follow A Gradual Path To Default

As an issuer's credit quality weakens and it moves toward default, the ratings should reflect that. When we look at the path to default for U.S. corporate issuers since 1981, we see that the median rating for an issuer five years prior to default was 'B+' (for all defaulters since 1981). The median U.S. corporate rating falls to 'B' 27 months prior to default, to 'B-' eight months prior to default, and to 'CCC+' three months prior to default (see chart 4).

U.S. corporate issuers that have defaulted within the past 12 quarters have shown lower median ratings along the path to default. These issuers had a median rating of 'B' five years prior to default. This median rating drops to 'B-' 25 months prior to default, to 'CCC+' 10 months prior to default, and to 'CCC' two months prior to default. The number of issuer defaults over the trailing 12 quarters is considerably smaller (264) than the full pool from 1981 to 2021 (2,314).

The median path to default for nonfinancial issuers is similar to the total sample, given most defaults in this study are from nonfinancial issuers (see chart 5). Nonfinancial issuers have historically had a smoother, more gradual path to default than financial issuers, albeit with a much larger sample. There were 2,142 nonfinancial issuer defaults from 1981 to 2021, while the total from the most recent 12-quarter period is 256.

By comparison, financial services defaults are less frequent, yet some of these issuers have historically experienced relatively swift transitions to default. Financial services companies are typically more confidence-sensitive than nonfinancial companies, and the loss of confidence from stakeholders (such as counterparties or funding sources) can contribute to a rapid decline in liquidity and credit quality. This was evident during the global financial crisis, when many highly rated financial services issuers defaulted within a short time.

Since 1981, the median rating for financial services issuers was 'BBB-' five years prior to default, notably higher than the 'B+' median rating for a nonfinancial corporate issuer five years prior to default. Financial entities that defaulted over the past 12 quarters (from 2019 to 2021) experienced a much more gradual path to default from a lower rating level. These issuers displayed a median rating of 'B+'/'B' five years prior to default, which is in line with the median rating for a nonfinancial corporate issuer that defaulted over the same period. Notably, for financial services entities, these median ratings are based on a much smaller sample of just 172 issuer defaults (for the period from 1981 to 2021).

Defaults By Industry

For the fifth consecutive year, the energy and natural resources and the consumer/service industries led the default tally. Issuers in energy and natural resources (nine), consumer services (eight), real estate (seven), and leisure time/media (four) accounted for 70% of defaults during the year. The industries with the highest default rates were real estate (3.38%), energy and natural resources (2.69%), telecommunications (2.44%), consumer services (1.52%), and transportation (1.32%).

Real estate was the only nonfinancial industry that had a higher default rate in 2021 than in 2020 and was the only industry that had a default rate above its long-term average (see table 4). Over 70% of 2021 defaults in the industry were from issuers that primarily engage in property development in the People's Republic of China but are incorporated in the Cayman Islands, a tax haven that we group in the U.S. region (along with Bermuda). In 2021, property developers in China had difficulty accessing funding and disposing of assets, with some defaulting due to insufficient liquidity.

The financial institutions and insurance default rates were both zero in 2021. There was one financial services default during the year, but the issuer was not rated when the year began.

Table 4

In most periods, nonfinancial issuers have higher cumulative default rates than financial issuers, which reflects the higher proportion of speculative-grade issuers within U.S. nonfinancial sectors (table 5).

Table 5

The consumer/service (54), health care/chemicals (46), and leisure time/media (29) industries had the highest net positive rating actions in 2021 (more issuer upgrades than downgrades or defaults).

Just three industries--forest and building products/homebuilders, real estate, and utilities--had negative net rating actions in 2021 (more issuer downgrades or defaults than upgrades, see table 6).

Table 6

To measure upgrades and downgrades in this study, we compared the rating on an issuer as of Jan. 1 with that as of Dec. 31 of the same year. Using this approach, issuers downgraded (or upgraded) multiple times during the year are counted as one downgrade (or upgrade).

The number of issuer upgrades reached an all-time high in 2021, after the number of issuer downgrades reached an all-time high in 2020 (see table 7). The share of issuers that were upgraded in 2021 reached the highest level since 2013, and the share of issuers that were downgraded reached a record low. In 2021, there were more than two issuers upgraded for each that was downgraded, a record high for the ratio of upgrades-to-downgrades.

Even so, upgrades in 2021 far from matched the scale of downgrades in 2020, and the credit impact of the recession lingers for some issuers. The proportion of rated corporate issuers in the weakest speculative-grade rating categories remains historically high, particularly the proportion of 'B-' rated issuers.

Table 7

Transition Tables And Cumulative Default Rates

One-year rating transitions in the U.S. were generally consistent with rating transitions globally in 2021. U.S. investment-grade ratings tend to have more stability (as measured by transition rates) than speculative-grade ratings (see table 8). For example, 92.54% of U.S. issuers rated 'BBB' on Jan. 1 were still rated 'BBB' on Dec. 31, whereas 83.71% of 'BB' rated issuers maintained a 'BB' rating over the same period. As you move diagonally from 'BBB' across the table, the transition rate should generally fall as the likelihood that ratings move down or up increases further down the ratings scale.

Table 8

In any given year, this relationship may not hold true, but it is clear when multiple samples are averaged together (see table 9). Of the U.S. issuers rated 'AAA', 87.36% retained the rating after one year, whereas only 75.57% of issuers rated 'B' maintained the rating after one year, on average. The stability of higher-rated issuers in the U.S. is largely consistent with global corporate ratings performance (see tables 9-11).

The lowest transition rate (one minus the diagonal rate) is observed not in the 'AAA' rating category but the 'A' rating category, and this becomes more pronounced as the time horizon lengthens. The smaller sample sizes of issuers in the 'AAA' and 'AA' categories likely contribute to this.

Table 9

Table 10

Table 11

When we look at rating transitions in more detail by including the rating modifier (the plus [+] or minus [-] following the rating), the same relationship generally holds true. Differences in stability rates frequently exist among rating modifiers within the same rating category. For example, within the 'AA' category, the 'AA+' rating has a stability rate of 81.5%, which is lower than the stability rate of 82.1% for debt rated 'AA' (see table 12). Differences in the sample size of issuers for each rating contribute to this.

Table 12

In addition to greater ratings stability, higher-rated issuers also have lower default rates over time. In the U.S., defaults are less frequent among higher-rated entities than they are for lower-rated entities. This relationship remains true over time, as the cumulative average default rates illustrate (see tables 13 and 14 and chart 7, which illustrates the data in the top half of table 13).

Table 13

Table 14

Just one of the 40 U.S. corporate defaulters in 2021, real estate issuer Washington Prime Group Inc., was initially rated investment-grade. All 29 rated defaulters were rated speculative-grade when the year began.

The average number of years between the initial rating and default for the 40 U.S. corporate defaulters in 2021 was 3.8 years, higher than the average 7.9 years in 2020. The defaulter with the longest time to default in 2021 was Awesome Acquisition Co. L.P. at 13.7 years. The company was initially rated 'B-' in 2007 and its rating was withdrawn in 2011. A confidential issuer had the shortest time to default in 2021, at 18 days.

Historically, issuers rated in higher rating categories exhibit longer times to default on average than issuers rated in lower rating categories (see chart 8 and tables 15-16). For example, from 1981 to 2021, the average time to default from the initial rating for U.S. issuers rated 'B' averaged 5.5 years, while issuers rated 'BB' had an average time to default of 7.8 years. This relationship is true for every sequential rating category from 'AAA' to 'CCC'/'C'. The relationship also holds when the time to default is measured using post-original issuer credit ratings.

In the 41 years covered in this study, from 1981 to 2021, seven U.S. issuers initially rated 'AAA' defaulted: Macy's Inc., Ally Financial Inc. (formerly known as GMAC Financial--a subsidiary of General Motors Corp.), Ambac Assurance Corp., Mutual Benefit Life Insurance Co., Executive Life Insurance Co. CA, Motors Liquidation Co. (formerly known as General Motors Corp.), and Eastman Kodak Co. The average time between initial rating and default for these issuers was 19.4 years.

Table 15

Table 16

Gini Ratios And Lorenz Curves

A quantitative analysis of the performance of S&P Global Ratings' corporate issuer credit ratings shows they continue to correlate with the level of default risk across several time horizons. To measure ratings performance, the cumulative share of defaulters is plotted against the cumulative share of issuers by rating in a Lorenz curve to visually render the accuracy of the rank ordering (see charts 9-11 and Appendix 3). Over the long term, the U.S. weighted average one-year transition to default has a one-year Gini coefficient of 80.57%, a three-year Gini coefficient of 72.85%, a five-year Gini coefficient of 69.03%, and a seven-year Gini coefficient of 66.48% (see table 17). These weighted average Gini ratios are weighted by yearly issuer counts since 1981 (see Appendix 2).

Table 17

As expected, Gini coefficients decline as the time horizon lengthens because longer time horizons increase the likelihood of credit degradation among higher-rated entities. In the one-year U.S. Lorenz curve, for example, speculative-grade issuers accounted for 96.6% of total corporate defaults from 1981 to 2021 but only 43.7% of total issuers during that time (see chart 9). The five-year Lorenz curve shows that over a longer time horizon, speculative-grade issuers accounted for 91.5% of defaulters but just 41.9% of total issuers (see chart 11).

If the rank ordering of ratings had little predictive value, the cumulative share of defaulting corporate entities and the cumulative share of all entities at each rating level would be nearly the same, producing a Gini ratio of zero.

Trends in the one-year Gini ratio emerge during periods of extreme highs and lows in the default cycle. In periods with a high number of defaults, there tends to be greater variation in the distribution of defaults across the ratings spectrum, which reduces the Gini ratio--that is, when default pressure is high, economic conditions are such that issuers across the rating spectrum are more likely to suffer a rapid deterioration of credit quality.

The one-year Gini ratio for U.S. corporate ratings decreased to 83.3% in 2021 from 83.5% in 2020 (the lowest recorded was 57.6% in 2008).

Appendix 1: Methodology And Definitions

This long-term corporate default and rating transition study uses the CreditPro database of long-term local currency issuer credit ratings. The analysis excludes public information (pi) ratings and ratings based on the guarantee of another company or government entity. We also do not include short-term issuer credit ratings. S&P Global Ratings does not require all issuers with rated debt to have an issuer credit rating. Therefore, if an issuer has rated debt but not an issuer credit rating, we assign a proxy rating so the CreditPro corporate dataset accurately represents the complete universe of ratings. The local currency senior unsecured rating is the preferred debt rating for the proxy because it is usually consistent with the issuer credit rating. In a small number of cases, we use the subordinated debt rating or the senior secured rating as the proxy.

An S&P Global Ratings issuer credit rating is a forward-looking opinion about an obligor'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 any single obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation. Counterparty credit ratings, corporate credit ratings, and sovereign credit ratings are all forms of issuer credit ratings. Issuer credit ratings can be either long-term or short-term.

Our ongoing enhancement of 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, 1980. 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, the U.S. region includes the tax havens Bermuda and the Cayman Islands.

This study analyzes the rating histories of 12,293 corporate issuers in the U.S. that S&P Global Ratings rated as of Dec. 31, 1980, or that were first rated between that date and Dec. 31, 2021. These include industrials, utilities, financial institutions, and insurance companies with long-term local currency ratings. Structured finance vehicles, public-sector issuers, and sovereign issuers are the subjects of separate default and transition studies, and we exclude them from this study.

In this study, the insurance industry includes life insurance, health insurance, property/casualty insurance, reinsurance, bond insurance, mortgage insurance, and title insurance. In addition to these subsectors, this study also groups insurance service providers (such as insurance brokers and third-party administrators that are rated according to corporate criteria) with the insurance industry.

To avoid overcounting, we exclude 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 issuers 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 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 corporate rating may also be withdrawn as a result of mergers and acquisitions. Others are withdrawn because of a lack of cooperation, particularly when an issuer 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 default on one or more of its financial obligations, including rated and unrated financial obligations but excluding hybrid instruments classified as regulatory capital or in nonpayment according to terms. An obligor is considered in default unless S&P Global Ratings believes that such payments will be made within five business days of the due date in the absence of a stated grace period, or within the earlier of the stated grace period or 30 calendar days.

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. An 'SD' rating is assigned when S&P Global Ratings believes 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. S&P Global Ratings lowers its rating on an obligor to 'D' or 'SD' if the obligor is conducting a distressed exchange offer.

'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 during the period of regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. Preferred stock is not considered a financial obligation; thus, a missed preferred stock dividend is not normally equated with default. On July 5, 2019, we removed 'R' from all rating scales.

We deem 'D', 'SD', and 'R' issuer credit 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 as entirely separate from its experience leading up to its earlier default.

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

Calculations

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 issuers (for example, 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 issuers included in the study are assigned to one or more static pools. When an issuer defaults, we assign that default to all of the static pools to which the issuer belonged.

S&P Global Ratings uses the static pool methodology to avoid certain pitfalls in estimating default rates. For example, this methodology ensures that default rates account for rating migration and allows them 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 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 their membership remains 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 issuers 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 to the same starting date of Dec. 31, 1980, to avoid continuity problems.

Entities 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 entities with active ratings as of the beginning date of a given pool, we exclude issuers 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 issuer 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 1981 static pool consists of all issuers rated as of 12:00 a.m. on Jan. 1, 1981. Adding those issuers first rated in 1981 to the surviving members of the 1981 static pool forms the 1982 static pool. All rating changes that took place are reflected in the newly formed 1982 static pool through the ratings on these entities as of 12:00 a.m. on Jan. 1, 1982. We used the same method to form static pools for 1983 through 2021. From Jan. 1, 1981, to Dec. 31, 2021, a total of 10,975 first-time-rated organizations were added to form new static pools, while we excluded 2,314 defaulting issuers and 6,647 issuers with last ratings of NR.

Consider the following example: An issuer is originally rated 'BB' in mid-1986 and is downgraded to 'B' in 1988. This is followed by a rating withdrawal in 1990 and a default in 1993. We would include this hypothetical issuer in the 1987 and 1988 pools with the 'BB' rating, which was the rating at the beginning of those years. Likewise, it would be included in the 1989 and 1990 pools with the 'B' rating. It would not be part of the 1986 pool because it was not rated as of the first day of that year, and it would not be included in any pool after the last day of 1990 because the rating had been withdrawn by then. Yet each of the four pools in which this issuer was included (1987-1990) would record its 1993 default at the appropriate time horizon.

Default rate calculation.  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 41 years the study covers.

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 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 accumulating the average conditional marginal default rates (see tables 5, 13-14, and 20-22). 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).

For instance, in table 22, the weighted average first-year default rate for all speculative-grade-rated issuers in the U.S. for all 41 pools was 4.04%, meaning an average of 95.96% survived one year. Similarly, the second- and third-year conditional marginal averages--shown in the summary statistics at the bottom of the table--were 4.03% for the first 40 pools (95.97% of issuers that did not default in the first year survived the second year) and 3.64% for the first 39 pools (96.36% of issuers that did not default by the second year survived the third year), respectively. Multiplying 95.96% by 95.97% results in a 92.1% survival rate to the end of the second year, which is a two-year average cumulative default rate of 7.9%. Multiplying 92.1% by 96.36% results in an 88.74% survival rate to the end of the third year, which is a three-year average cumulative default rate of 11.26%.

Transition analysis

Transition rates compare issuer credit ratings at the beginning of a period with the 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 to 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, 2021, had 41 one-year transitions, while issuers first rated on Jan. 1, 2021, 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 (see table 25).

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, 2021, and 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' 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 we would consider it to be rated 'D' or not rated as of Dec. 31 of that particular year.

Multiyear transitions

To calculate multiyear transition matrices, we compared the ratings at the beginning of the multiyear period with the ratings at the end. For example, three-year transition matrices were the result of comparing ratings at the beginning of the years 1981-2019 with the ratings at the end of the years 1983-2021. 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 (see tables 25-28). 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 the 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 changes because the rating remained within the rating category.

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 13 is equivalent to column 'D' of the average one-year transition matrix in table 9 and the cumulative average in the summary statistics of the year one column in table 20.

However, the three-year default rate column in table 13 is not the same as column 'D' of the average three-year transition matrix in table 10. This difference results from the different methods of calculating default rates. The default rates in table 10 are calculated as not conditional on survival, while those in table 13 are average default rates, conditional on survival. The three-year default rates in table 13 are calculated in the same way as those in the cumulative average section for the year three column in table 20, while those in the 'D' column of table 10 are equivalent to adding up all the defaults behind the year three column's annual default rates in table 20, divided by the sum of all the issuers in table 20 for the years 1981-2019.

The links between transition matrices and average cumulative default rates are best illustrated through tables 20-22. The default rates in the columns of these tables, associated with each static pool year, are calculated in the same way as they would be for individual years' one-year transition matrices. Tables 20-22 are broken out by the broadest rating classifications (all rated, investment-grade, and speculative-grade, respectively). These tables can also be constructed for each rating category.

As an example, the year two column in table 20 shows the two-year default rates (conditional on survival) for each static pool. These are calculated in the same way as the default column in table 7, though table 7 shows the one-year default rates exclusively. In the summary section at the bottom of tables 20-22, the first row shows the issuer-weighted averages of the marginal default rates. These marginal averages are then used to calculate the cumulative average default rates in the row directly beneath them, as explained in the average cumulative default rate section above. These default rates are the same that appear in table 13 and are average cumulative default rates conditional on survival.

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 in 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 in tables 9-12 and 25-28, 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 global transition matrix in table 9, each cell's weighted standard deviation is calculated from the series of that particular cell in each of the 41 cohorts beginning with the 1981 cohort and ending with the 2021 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 each cohort's rating level's contribution to the 41-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.

For the Gini ratios in table 17, the standard deviations are derived from the time series of Gini ratios for all of their constituent annual cohorts. As an example, the standard deviation applied to the seven-year weighted average U.S. Gini ratio in table 17 (6.13) 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 from the 1981 cohort through the 2015 seven-year cohort. We calculated standard deviations for Gini ratios in this study as the standard deviations of a sample, and not those of a population.

Time sample

This study limits the reporting of default rates to the 15-year time horizon. However, the data was gathered for 41 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.

Appendix 2: Additional Tables

Table 18

Table 19

Table 20

Table 21

Table 22

Table 23

Table 24

Table 25

Table 26

Table 27

Table 28

Appendix 3: Gini Methodology

To measure relative ratings performance, we utilize the Lorenz curve as a graphical representation of the proportionality of a distribution, and we summarize this via the Gini coefficient. For this study, the Lorenz curve is plotted with the x-axis showing the cumulative share of issuers, arranged by rating, while the y-axis represents the cumulative share of defaulters, also arranged by rating. On both axes of the Lorenz curve, the observations are ordered from the low end of the ratings scale ('CCC'/'C') to the high end ('AAA').

As an example, if 'CCC'/'C' rated entities made up 10% of the total population of issuers at the start of the time frame examined (x-axis) and 50% of the defaulters (y-axis), then the coordinate (10, 50) would be the first point on the curve. If S&P Global Ratings' corporate ratings only randomly approximated default risk, the Lorenz curve would fall along the diagonal. Its 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 entities, the curve would capture all of the area above the diagonal on the graph (the ideal curve), and its Gini coefficient would be 1 (see chart 13).

The procedure for calculating the Gini coefficients is illustrated in chart 13: Area B is bounded by the random curve and the Lorenz curve, while area A is bounded by the Lorenz curve and the ideal curve. The Gini coefficient is defined as area B divided 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.

Appendix 4: Defaults In Profile

In 2021, there were 40 issuer defaults (including four confidential defaults) on $52.7 billion of debt. Two issuers defaulted twice, and one issuer defaulted three times. This appendix provides summaries of the events leading up to each default and, in some cases, events following the default. We also list the defaulting instruments that S&P Global Ratings rates for each issuer.

HGIM Corp.

• US$350 million floating-rate first-lien term bank loan due July 2, 2023

On Jan. 5, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Louisiana-based marine transportation services provider HGIM Corp. to 'SD' from 'CC' following the company's announcement of a distressed term loan repurchase. The noteholders would receive a 50% discount to par value. The issuer announced a cash tender offer to repurchase a portion of its US$350 million first-lien term loan, tendering US$11.4 million in face value for US$5.7 million in cash.

On Jan. 14, 2021, we raised our issuer credit rating on HGIM to 'CCC+' from 'SD'. The rating reflected the company's unsustainable leverage, with debt to EBITDA of more than 8x in 2021. The issuer announced a follow-up offer seeking another US$30 million at a 45%-50% discount to par.

Table 29

Burger BossCo Intermediate Inc.

• US$25 million floating-rate revolving bank loan due April 25, 2022
• US$192.5 million floating-rate first-lien term bank loan due April 25, 2024

On Jan. 8, 2021, S&P Global Ratings lowered its issuer credit rating on Delaware-based quick-service restaurant operator and franchisor Burger BossCo Intermediate Inc. to 'SD' from 'CCC'. The issuer executed a transaction that included conversion of accrued principal on a second lien to preferred equity and an extension of maturities on a revolver. The company converted accredited value of US$52 million on the second lien to series C paid-in-kind preferred equity.

On Jan. 15, 2021, we raised our issuer credit rating on the company to 'CCC' from 'SD', following the close of the distressed exchange transactions. The negative outlook reflected our view that the issuer faced continued default risk over the next 12 months because of high leverage and significant execution risk.

Table 30

Riverbed Parent Inc.

• US$77 million floating-rate term bank loan due April 24, 2022
• US$525 million 8.875% notes due March 1, 2023
• US$1.07 billion floating-rate first-lien term bank loan due Dec. 31, 2025

On Jan. 8, 2021, S&P Global Ratings lowered its long-term issuer credit rating on California-based network performance software solutions provider Riverbed Parent Inc. to 'SD' from 'CC', after the issuer announced a debt restructuring. The transaction was viewed as distressed on account of unsecured debtholders receiving US$850 in new second-lien loans per US$1,000 principal amount. Not all of the lenders participated; about US$77 million in principal remained outstanding under first-lien term notes due April 2022, and US$9 million in principal remained for notes due 2023.

On Jan. 26, 2021, we raised our issuer credit rating on the issuer to 'CCC+' from 'SD' following the completion of the debt restructuring. The transactions increased the company's interest expense and extended its debt maturity profile. The cost-savings measures improved the issuer's EBITDA margin, but we still believed its capital structure was unsustainable.

On Sept. 16, 2021, we lowered our issuer credit rating on Riverbed to 'CCC' from 'CCC+' and placed it on CreditWatch with negative implications. These actions reflected the mounting risk that Riverbed would default on its upcoming $77 million term loan B maturity in April 2022, given its continued poor performance through the second quarter of fiscal year 2021.

On Oct. 13, 2021, we lowered our issuer credit rating on Riverbed to 'CC' from 'CCC' following company's announcement that it entered into a restructuring support agreement with its equity sponsors and an ad hoc group of lenders around a comprehensive financial restructuring that would allow it to reduce its funded secured debt by over $1 billion and also provide a $100 million cash infusion. The negative outlook reflected our expectation that we would lower the issuer credit rating on Riverbed to 'SD' if the transaction closed, given that we would consider it to be a distressed exchange.

On Nov. 17, 2021, we lowered our issuer credit rating on Riverbed to 'D' from 'CC' after the company and its subsidiaries filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code. At the same time, we lowered all of our ratings on the company's debt to 'D'.

On Dec. 21, 2021, we discontinued all of our ratings on Riverbed Parent Inc. and Riverbed Technology Inc., including our 'D' issuer credit ratings, following the completion of the company's financial restructuring and subsequent emergence from Chapter 11 bankruptcy.

Table 31

AMC Entertainment Holdings Inc.

• US$225 million floating-rate revolving facility bank loan due April 22, 2024
• £500 million 6.375% senior notes due Nov. 15, 2024
• US$500 million 10.50% first-lien notes due April 15, 2025
• US$600 million 5.75% senior subordinated notes due June 15, 2025
• US$2 billion floating-rate initial B-1 term bank loan due April 22, 2026
• US$200 million 10.50% first-lien notes due April 24, 2026
• US$1.46 billion 12.00% second-lien notes due June 15, 2026
• US$595 million 5.875% senior notes due 2026
• US$475 million 6.125% notes due May 15, 2027

On Jan. 21, 2021, S&P Global Ratings lowered its issuer credit rating on Missouri-based theatrical exhibition business operator AMC Entertainment Holdings Inc. to 'SD' from 'CC', after the issuer completed a distressed exchange of its US$100 million second-lien notes. The transactions included debt- to-equity conversion and payment-in-kind options. The new US$100 million first-lien notes would provide incremental liquidity, as in late 2020 AMC's cash burn was about US$125 million.

On Jan. 25, 2021, we raised our issuer credit rating on AMC Entertainment Holdings to 'CCC-' from 'SD'. The negative outlook reflected our view that the issuer would face a liquidity shortfall over the next six months. We expected the issuer's revenue and cash flow would not recover to pre-COVID-19 levels until at least 2022.

On June 10, 2021, we raised our rating on AMC to 'CCC+' from 'CCC-'. AMC had raised nearly $818 million in gross equity proceeds and roughly $1.83 billion in total equity so far in the year. The incremental liquidity, combined with improved debt-trading levels, made it less likely that AMC would pursue a subpar debt exchange or other forms of debt restructuring in the near future. The positive outlook reflected the potential for a higher rating if AMC prioritized its sizable cash balance toward reducing its heavy debt load and interest burden, thereby improving its cash flow prospects and the sustainability of its capital structure.

Table 32

Alpha Media LLC

On Jan. 25, 2021, Oregon-based radio broadcast media company Alpha Media LLC defaulted after it filed for Chapter 11 bankruptcy under the U.S. Bankruptcy Code. The issuer planned to restructure its US$267 million of debt through transactions that would help the company to sustain through the economic downturn brought on by COVID-19 and emerge from bankruptcy.

On July 19, 2021, Alpha Media emerged from Chapter 11 bankruptcy.

Table 33

Awesome Acquisition Co. L.P.

On Jan. 25, 2021, Texas-based restaurants owner and franchiser Awesome Acquisition Co. L.P. defaulted after filing voluntary petitions seeking relief under Chapter 11 of the U.S. Bankruptcy Code.

Table 34

The Imagine Group LLC

• US$30 million floating-rate revolver bank loan due May 31, 2022
• US$409 million floating-rate first-lien bank loan due June 21, 2022
• US$25 million floating-rate term B-2 bank loan due June 21, 2022
• US$90 million floating-rate second-lien bank loan due June 21, 2023

On Jan. 27, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Minnesota-based marketing solutions provider The Imagine Group LLC to 'D' from 'CCC' after the issuer completed a debt recapitalization. The transaction involved a combination of repurchases and debt exchanges that would reduce its outstanding debt burden to US$100 million from about US$550 million. This would provide greater operational and financial flexibility for the issuer. On the same day, we discontinued all our issuer credit ratings at the issuer's request.

Table 35

Belk Inc.

• US$100.6 million floating-rate first-lien B bank loan due Dec. 12, 2022
• US$957 million variable-rate first-lien term bank loan due July 31, 2025

On Feb. 2, 2021, S&P Global Ratings lowered its issuer credit rating on North Carolina-based department store operator Belk Inc. to 'D' from 'CC', after the issuer missed interest payments on its second-lien term loan and scheduled amortization payment due on its first-lien term loan. The issuer entered Chapter 11 restructuring under the U.S. Bankruptcy Code, which would reduce debt by US$450 million and halve the interest burden to about US$75 million.

On Feb. 25, 2021, we raised our issuer credit rating on the issuer to 'CCC+ from 'D' after it emerged from bankruptcy with US$225 million of new capital, debt reduction of about US$450 million, and interest savings of about US$70 million.

Table 36

Peabody Energy Corp.

• US$500 million 6.00% notes due March 31, 2022
• US$324 million 6.00% letter of credit facility notes due Dec. 31, 2024
• US$194 million 8.50% pay-in-kind notes due Dec. 31, 2024
• US$400 million floating-rate term bank loan due March 31, 2025
• US$500 million 6.375% notes due March 31, 2025

On Feb. 3, 2021, S&P Global Ratings lowered its long-term issuer credit rating on the Missouri-based coal producer Peabody Energy Corp. to 'SD' from 'CC' after the company's completed distressed exchange of its senior secured notes due 2022. After the exchange, nonparticipatory lenders' notes (about 13% of the 2022 notes) would become junior to those of the lenders that participated. The issuer also extended the maturity on its revolving credit facility, with adequate compensation provided to all parties.

On Feb. 8, 2021, we raised our issuer credit rating on the issuer to 'CCC+' from 'SD' on a reassessment of the issuer's credit quality after the distressed exchanges. The exchanges lowered the company's debt profile but increased the interest costs. In addition, considering Peabody's shrinking U.S. thermal power operations and struggling metallurgical coal business bear nearly all of its debt burden, the issuer's leverage was quite high.

On June 3, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Peabody Energy Corp. to 'SD' from 'CCC+'. The issuer completed debt-for-equity exchanges for a total of $26.5 million of principal outstanding of 6% senior notes. This was the second time we lowered our rating on the issuer to 'SD' in 2021.

On June 9, 2021, we raised our long-term issuer credit rating on Peabody Energy Corp. to 'CCC' from 'SD' after it restructured its issue of senior unsecured notes due 2022. The issuer had nearly $1.6 billion in debt, most of which would come due between 2022 and 2025. While the company's leverage ratio (7.5x-8.5x debt to EBITDA) did not indicate an unsustainable capital structure, the 'CCC' rating and negative outlook factored in environmental, social, and governance issues that might pose risks to refinancing debt obligations before or at maturity.

On July 12, 2021, S&P Global Ratings lowered its issuer credit rating on Peabody Energy Corp. to 'SD' from 'CCC' after the announcement of a tender offer to purchase up to US$13.281 million of its 8.5% senior secured notes due 2024 and a letter-of-credit revolving facility due 2024 at a discount to par. The offer was made to satisfy the requirements under the indenture and the credit agreement. The downgrade followed the debt repurchases and announced below-par tender offer, which we viewed as a distressed debt exchange.

On Aug. 20, 2021, we raised our issuer credit rating on the company to 'CCC+' from 'SD' after it had materially lowered its nearest maturity, leading to improved liquidity. We still viewed the capital structure as unsustainable over the long term, however. The negative outlook reflected the potential for a downgrade over the next 12 months if the risk of default, conventional or otherwise, appeared more imminent because of unanticipated liquidity shortfalls.

Table 37

Renfro Corp.

• US$209.9 million floating-rate term loan B bank loan due June 14, 2021
• US$20.2 million floating-rate priming term bank loan due June 14, 2021
• US$10 million superpriming term bank loan due June 14, 2021

On Feb. 19, 2021, S&P Global Ratings lowered its long-term issuer credit rating on North Carolina-based sock manufacturer Renfro Corp. to 'SD' from 'CCC-' following completion of a transaction with approval from all its lenders whereby the company issued a new $10 million superpriming term loan facility to fund its operations. We viewed this transaction as tantamount to a default on the original $220 million term loan and $20 million priming term loan due to the company's weak operating performance, liquidity constraints, the near-term maturity of its debt facilities, the distressed trading prices of its debt on the secondary market, and the lack of adequate compensation for its existing lenders involved in the transaction.

On Feb. 22, 2021, we raised our issuer credit rating on Renfro to 'CCC-' from 'SD'. The negative outlook reflected the high probability that Renfro would default on its debt obligations or engage in a restructuring transaction over the next six months.

On June 10, 2021, we discontinued all ratings on Renfro Corp. due to its acquisition by private holding company The Renco Group Inc. All outstanding debts of the company have been satisfied with its acquisition.

Table 38

Form Technologies LLC

• US$100 million floating-rate revolver bank loan due July 30, 2021
• US$893 million floating-rate first-lien term B-2 bank loan due Jan. 28, 2022
• US$210 million floating-rate second-lien bank loan due Jan. 30, 2023
• US$100 million revolver bank loan due April 30, 2025
• US$640 million first-out first-lien term bank loan due July 31, 2025
• US$175 million last-out first-lien term bank loan due Oct. 31, 2025

On Feb. 22, 2021, S&P Global Ratings lowered its issuer credit rating on Charlotte, N.C.-based global manufacturer Form Technologies LLC to 'SD' from 'CC' following the company's completion of its recapitalization. We viewed the transaction as tantamount to a default on the second-lien term loan because the majority of lenders received a 3% discount to par value, which we viewed as less than the original promise.

On Feb. 23, 2021, we raised our issuer credit rating on the company to 'CCC+' from 'SD' following the close of Form Technologies' transaction support agreement. The stable outlook reflected our view of the company's improved operating performance and adequate liquidity following the recapitalization.

On Dec. 4, 2021, we raised our issuer credit rating on Form Technologies to 'B-' from 'CCC+'. The company had significantly improved its operating performance following the close of its refinancing transaction in early 2021, and we expected its S&P Global Ratings-adjusted EBITDA margins to improve toward the midteens in 2021 despite supply-chain challenges.

Table 39

Sunshine 100 China Holdings Ltd.

On March 2, 2021, S&P Global Ratings lowered its issuer credit rating on China-based (incorporated in Cayman Islands) company Sunshine 100 China Holdings Ltd. to 'SD' from 'CCC-'. The downgrade followed the completion of Sunshine's repurchase of HK$750 million convertible bonds below par. We considered the repurchase to be distressed and tantamount to a default given noteholders received less than the original promise.

On March 4, 2021, we raised our issuer credit rating on Sunshine 100 China Holdings to 'CCC-' from 'SD'. The negative outlook reflected our view that Sunshine's default risk remained elevated, considering its hefty maturities in 2021, including various domestic bonds, trust financing, and U.S. dollar-denominated senior notes.

On Aug. 11, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Sunshine 100 China Holdings Ltd. to 'SD' from 'CCC-' following nonrepayment of principal and interest totaling US$52.4 million on its convertible bond due Aug. 11, 2021.

On Aug. 27, 2021, we revised our long-term issuer credit rating on Sunshine 100 China Holdings Ltd. to 'D'. The company had not been able to follow through with its plan to repay principal and interest totaling US$52.4 million on its convertible bond within 10 business days from the original maturity of Aug. 11, 2021. The company's management did not provide a new repayment timeline on this selective default after it failed to raise necessary funds, as originally planned. As the China-based developer struggled to obtain new financing, this could also trigger cross-defaults and accelerated repayment demand on the company's other debts, including its U.S. dollar bonds and domestic borrowings.

On Sept. 27, 2021, we withdrew our long-term issuer credit rating at the company's request.

Table 40

HighPoint Resources Corp.

• US$400 million 7.00% senior notes due Oct. 15, 2022
• US$275 million 8.75% notes due June 15, 2025

On March 16, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Colorado-based oil and gas exploration and production company HighPoint Resources Corp. to 'D' from 'CC' following the company's filing of voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code.

In April 2021, Bonanza Creek Energy Inc. completed its previously announced $376 million merger with HighPoint Resources Corp.

On April 22, 2021, we withdrew our ratings on the company.

Table 41

Washington Prime Group Inc.

• US$650 million floating-rate revolver bank loan due Dec. 30, 2021
• US$350 million floating-rate term bank loan due Dec. 30, 2022
• US$340 million 3.51% term bank loan due Jan 10, 2023
• US$750 million 6.45% notes due Aug. 15, 2024

On March 17, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Indiana-based Washington Prime Group Inc. to 'D' from 'CC'. The downgrade reflected the company's announcement that it would not make the $23.2 million interest payment due Feb. 15, 2021, on its 6.45% senior notes in the 30-day grace period. The failure to make this payment could trigger the cross-default provisions under each of the company's corporate credit facilities. The company also announced the suspension of dividends on its outstanding preferred stock.

On June 25, 2021, we withdrew our long-term issuer credit ratings on Washington Prime Group Inc

Table 42

ION Geophysical Corp.

• US$120.569 million 9.125% senior secured second-priority notes due Dec. 15, 2021

On April 14, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based marine seismic data company ION Geophysical Corp. to 'SD' from 'CC', following the company's announcement of the completion of a debt exchange that extended the maturity of its second-lien bonds to 2025. The US$121 million 9.125% second-lien senior secured bonds were exchanged with a combination of cash and new 8% second-lien senior convertible notes due 2025.

On June 2, 2021, we raised the long-term issuer credit rating on the company to 'CCC' from 'SD' with a negative outlook after it completed a debt restructuring. The company raised $14 million of net proceeds after issuing $116 million. This improved its liquidity position and increased its cash balance to nearly $48 million. The company still faced business challenges as oil and gas companies continued to limit their spending.

Table 43

Summit Midstream Partners L.P.

• US$300 million 5.50% senior notes due Aug. 15, 2022
• US$500 million 5.75% senior notes due April 15, 2025

On April 15, 2021, S&P Global Ratings lowered its issuer credit rating on Texas-based natural gas and crude treatment company Summit Midstream Partners L.P. to 'SD' from 'CC'. The issuer closed its US$18.66 million preferred unit exchange, in which 30 common units were issued for each preferred unit. The exchange was considered distressed because the preferred holders would get less than what was promised. This action reduced the company's debt balance by over US$9 million.

On Oct. 13, 2021, we raised the long-term issuer credit rating on Summit to 'B' from 'SD' after it launched a refinancing transaction involving its two wholly owned subsidiaries, Summit Midstream Holdings LLC and Summit Midstream Finance Corp. Through the transaction, the company issued US$700 million of new second-priority secured notes due 2026. The proceeds of the transaction would go toward the repayment of the company's debt obligations, namely its 5.50% senior unsecured notes and revolving credit facility, both maturing in 2022.

Table 44

Basic Energy Services Inc.

• US$300 million 10.75% notes due 2023

On April 16, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Texas-based oilfield services provider Basic Energy Services Inc. to 'D' from 'CCC-' after the company chose not to make an interest payment of US$16.335 million within a 30-day grace period. The interest was due on its 10.75% senior secured notes due 2023.

On Aug. 20, 2021, we withdrew the issuer credit rating on Basic Energy Services Inc.

Table 45

Medical Depot Holdings Inc.

• US$2.5 million floating-rate revolver bank loan due Jan. 3, 2022
• US$167 million floating-rate second-lien bank loan due Jan. 3, 2024
• US$122.5 million floating-rate first-lien bank loan due June 1, 2025

On April 19, 2021, S&P Global Ratings lowered its long-term issuer credit rating on New York-based durable medical devices manufacturer Medical Depot Holdings Inc. to 'SD' from 'CCC+' after the issuer completed a distressed exchange. With this transaction, the issuer amended terms of its first-lien term loan and converted a 1.5-lien loan into preferred shares. We viewed this transaction as distressed because of an extension of the maturity of the first-lien loan, though there was incremental paid-in-kind interest of 2%. There was still US$4 million outstanding in the capital structure of the company.

On April 26, 2021, we raised our long-term issuer credit rating on the company to 'CCC+' from 'SD'. The distressed exchange improved the company's short-term liquidity position, but the market offset due to the pandemic still presented some risks.

Table 46

Serta Simmons Bedding LLC

• US$200 million floating-rate first-out superpriority bank loan due Aug. 10, 2023
• US$851 million second-out superpriority bank loan due Aug. 10, 2023
• US$1.95 billion floating-rate first-lien term bank loan due Nov. 8, 2023
• US$450 million floating-rate second-lien term bank loan due Nov. 8, 2024

On April 19, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Illinois-based mattress and bedding products manufacturer Serta Simmons Bedding LLC to 'SD' from 'CC'. The company completed a tender offer for a distressed exchange on its second-lien term loan due 2024 at US$0.60 on the dollar.

On May 12, 2021, we raised the long-term issuer credit rating to 'CCC-' from 'SD' after the issuer's liquidity position improved. After the exchange, the issuer would have US$200 million cash and another US$170 million in a revolver.

On June 30, 2021, we raised the long-term issuer credit rating to 'CCC' after the issuer announced it would potentially conduct repurchases on its first-lien debt tranche. There was a possibility of further debt restructuring because the capital structure remained unsustainable.

Table 47

Isagenix Worldwide Inc.

• US$40 million floating-rate revolver bank loan due June 14, 2023
• US$375 million floating-rate term bank loan due June 14, 2025

On April 23, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Delaware-based cosmetics products manufacturer Isagenix Worldwide Inc. to 'SD' from 'CCC'. The issuer repurchased a significant portion of its senior secured term loan at an average price well below par, about US$0.65 per dollar. The total repurchased value was about US$65.5 million of the US$375 million loan amount.

On April 30, 2021, we raised our long-term issuer credit rating on the company to 'B-' from 'SD'. Its operating performance had improved, and we expected EBITDA to grow in 2021, though the uncertainty in the post-pandemic environment could affect performance.

Table 48

Voyager Aviation Holdings LLC

• US$500 million 8.50% notes due Aug. 15, 2021

On May 10, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Delaware-based aircraft leasing company Voyager Aviation Holdings LLC to 'SD' from 'CC'. The issuer completed restructuring of its US$415 million senior unsecured notes due August 2021. About 98.5% of its bondholders approved this transaction. The US$415 million senior unsecured notes were exchanged for US$150 million 8.5% senior unsecured notes, US$200 million in preferred equity, and 100% of the issuer's common equity shares. Later on the same day, we withdrew the issuer credit rating at the issuer's request.

Table 49

CDRH Parent Inc.

• US$545 million floating-rate first-lien term bank loan due July 1, 2021
• US$82.5 million floating-rate revolver bank loan due July 1, 2021
• US$250 million floating-rate second-lien term bank loan due July 1, 2022

On May 14, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Florida-based wound care services provider CDRH Parent Inc. to 'D' from 'CC' following a distressed exchange. The issuer exchanged a portion of its outstanding principal amount under first-lien credit facilities, nearly US$150 million, with preferred equity and paid another US$440 million with new debt and equity. It also exchanged a US$269 million second-lien term loan with common equity shares.

On June 21, 2021, we withdrew the issuer credit rating on CDRH Parent Inc. at the issuer's request.

Table 50

Carlson Travel Inc.

• US$260 million 10.50% senior notes due March 31, 2025
• €325 million floating rate senior notes due June 15, 2025
• US$410.978 million 6.75% senior notes due Dec. 15, 2025
• US$250 million 11.50% senior notes due Dec. 15, 2026

On June 23, 2021, S&P Global Ratings lowered our issuer credit rating on Minnesota-based travel management company Carlson Travel Inc. to 'D' from 'CCC'. The company entered into a forbearance agreement with its lenders on June 21 to defer its interest payment due June 15, 2021. This agreement allowed the firm to preserve cash on the balance sheet.

Previously, on April 7, 2021, we had assigned a 'CCC' long-term issuer credit rating to Carlson Travel Inc., reflecting the risk of the company violating its covenants or engaging in debt restructuring over the next 12 months. The expectation of low travel volumes amid the pandemic further pressured the company's cash flow despite cost-management initiatives.

On Dec. 17, 2021, we withdrew the issuer credit rating on Carlson Travel Inc. at the issuer's request.

Table 51

GTT Communications Inc.

• US$275 million term bank loan due 2021
• US$250 million floating-rate revolver bank loan due May 31, 2023
• US$550 million 7.875% notes due 2024
• US$1.77 billion floating-rate term B bank loan due May 31, 2025
• US$140 million floating-rate incremental bank loan due May 31, 2025
• €750 million floating-rate term B bank loan due May 31, 2025

On July 1, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Virginia-based internet protocol network operator GTT Communications Inc. to 'SD' from 'CCC-' due to a missed interest payment of US$22.6 million due June 30, 2021, on the company's unsecured notes. The company was still in talks with its creditors for waivers for selling its infrastructure division for US$2.15 billion.

On Nov. 2, 2021, we lowered our issuer credit rating on GTT Communications Inc. to 'D' from 'SD'. The company had filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code.

Table 52

KCIBT Holdings L.P.

• US$65 million floating-rate first-lien revolving bank loan due June 1, 2022
• US$385 million floating-rate first-lien term loan B bank loan due June 1, 2024
• US$140 million floating-rate second-lien term bank loan due June 1, 2025

On July 8, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Virginia-based third-party travel documentation provider KCIBT Holdings L.P. to 'SD' from 'CCC'. The rating action followed an amendment to the terms of the company's first and second term loans. This amendment allowed the company to partially pay-in-kind the interest due on its second-lien term loan until March 31, 2023, and waive the interest payment on its second-lien term loan until at least March 31, 2023. Additionally, the amendment modified the minimum liquidity covenant and enabled the company to waive the total leverage covenant on its debt facilities until Dec. 31, 2023.

Further, the maturity dates on the company's first-lien facility and second-lien term loan were extended to June 1, 2025, and Dec. 1, 2025, respectively. The financial sponsors of the company agreed to contribute US$25 million for its liquidity. The slow-paced recovery from COVID-19 in business travel also affected the company's revenue.

On Aug. 13, 2021, we raised our issuer credit rating on KCIBT Holdings L.P. to 'CCC' from 'SD'. While the amendments provided additional liquidity and delayed short-term covenant risks, the downgrade reflected the likelihood of weaking liquidity over the course of the next 12 months amid the possibility of a new distressed restructuring or debt exchange.

Table 53

Glass Mountain Pipeline LLC

• US$30 million 9.50% notes due July 20, 2023

On Aug. 9, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Delaware-based Glass Mountain Pipeline LLC to 'D' from 'CC'. The company operates as a crude oil transportation system connecting the STACK, Mississippi Lime, and Granite Wash plays to Cushing, Oklahoma. The rating action followed the company's missed interest payment on its outstanding debt due July 30, 2021. The company entered into a forbearance agreement with its lenders dated Aug. 5, 2021.

On Dec. 6, 2021, we withdrew the long-term issuer credit rating on Glass Mountain Pipeline LLC.

Table 54

IPC Corp.

• US$305 million floating-rate second-lien bank loan due Feb. 6, 2021

On Oct. 4, 2021, S&P Global Ratings lowered its long-term issuer credit rating on New Jersey-based debt-issuing vehicle IPC Corp. to 'SD' from 'CCC-' due to a restructuring agreement on the company's second-lien debt. The company's second-lien debtholders were granted equity in exchange for eliminating previous claims. The distressed exchange agreement resulted in a reduction of the company's debt by more than US$400 million.

On Oct. 4, 2021, we withdrew our long-term issuer credit ratings on IPC Corp. because its new debt did not require a rating.

Table 55

Fantasia Holdings Group Co. Ltd.

• US$500 million 7.375% notes due Oct. 4, 2021
• US$300 million 11.75% notes due April 17, 2022
• US$300 million 7.95% notes due July 5, 2022
• US$200 million 12.25% callable notes due Oct. 18, 2022
• US$450 million 10.875% notes due Jan. 9, 2023
• US$200 million 14.50% callable notes due June 25, 2024

On Oct. 5, 2021, S&P Global Ratings lowered its long-term issuer credit rating on China-based (Cayman Islands-incorporated) residential and commercial property developer Fantasia Holdings Group Co. Ltd. to 'SD' from 'CCC' after it failed to repay its principal of US$206 million due Oct. 4, 2021, on its senior notes. The company's missed payment highlighted its strained liquidity position despite sufficient cash on hand. Its liquidity position was further pressured by worsening funding conditions and slower-than-expected asset disposals.

Earlier, on Sept. 29, 2021, we lowered our long-term issuer credit rating on Fantasia Holdings Group Co. Ltd. to 'CCC' from 'B', reflecting substantial risk of nonrepayment of the company's debt obligations totaling US$760 million over the next six months. The downgrade also reflected the company's failure to communicate a concrete repayment plan despite imminent maturity.

On Dec. 14, 2021, we withdrew our long-term issuer credit ratings on Fantasia Holdings Group Co. Ltd. at the issuer's request.

Table 56

Sinic Holdings (Group) Co. Ltd.

On Oct. 19, 2021, S&P Global Ratings lowered its long-term issuer credit rating on China-based (Cayman Islands-incorporated) residential property developer Sinic Holdings (Group) Co. Ltd. to 'SD' from 'CC' following nonrepayment of principal and interest on the company's US$250 million offshore senior unsecured notes due Oct. 18, 2021. The company failed to meet its obligations despite holding RMB14 billion in cash on hand as of June 30, 2021.

Later, on Nov. 4, 2021, we withdrew our long-term issuer credit rating at the company's request.

Earlier, on Oct. 4, 2021, we lowered our long-term issuer credit rating on Sinic Holdings (Group) Co. Ltd. to 'CC' from 'CCC+', reflecting the likelihood of default on its US$246 million senior unsecured notes due Oct. 18, 2021, due to strained liquidity.

Table 57

Exela Technologies Inc.

• US$100 million floating-rate revolver bank loan due July 12, 2022
• US$1 billion 10.00% senior notes due July 15, 2023
• US$396.301 million floating-rate term B bank loan due July 12, 2023

On Nov. 2, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Irving, Texas-based business process automation company Exela Technologies Inc. to 'SD' from 'CCC-'. The company announced an exchange offer for its senior secured term loans and secured notes. It had repurchased about US$95 million of debt in the open market so far in the year.

On Dec. 17, 2021, we raised our issuer credit rating on Exela Technologies Inc. to 'CCC-' from 'SD' following some exchange transactions. The company had reduced its interest expense and amortization payments and eliminated its financial covenant requirements, as well as reduced its debt.

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China Aoyuan Group Ltd.

• US$250 million 5.375% notes due Sept. 13, 2022
• US$225 million 7.95% notes due Jan. 19, 2023
• US$460 million 6.35% callable notes due Jan. 8, 2024

On Dec. 6, 2021, S&P Global Ratings lowered its long-term issuer credit rating on China-based property developer China Aoyuan Group Ltd. to 'SD' from 'CCC' following nonrepayment of principal of around US$651.2 million.

Earlier, on Nov. 16, 2021, we lowered our long-term issuer credit rating on the company to 'CCC' from 'B' because we believed the company might not have access to its cash balance to fulfill its debt obligations. The rating action reflected nonpayment risk in the absence of timely alternate fundraising plans.

On Dec. 6, 2021, we withdrew our long-term issuer credit ratings on China Aoyuan Group Ltd. at the issuer's request.

Table 59

China Evergrande Group

• US$1.45 billion 9.50% callable notes due April 11, 2022
• US$1 billion 11.50% notes due Jan. 22, 2023
• US$850 million 10.00% callable notes due April 11, 2023
• US$1.345 billion 7.50% notes due June 28, 2023
• US$1 billion 12.00% notes due Jan. 22, 2024
• US$700 million 10.50% callable notes due April 4, 2024
• US$4.68 billion 8.75% notes due June 28, 2025

On Dec. 17, 2021, S&P Global Ratings lowered its long-term issuer credit rating on Cayman Islands-based property development business company China Evergrande Group to 'SD' from 'CC'. The company had failed to make coupon payments on its outstanding U.S. dollar senior notes. The grace periods for payments had also lapsed.

On Dec. 17, 2021, we withdrew the long-term issuer credit rating on China Evergrande Group.

Table 60

Related Research

• 2021 Annual Global Corporate Default And Rating Transition Study, April 13, 2022