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Default, Transition, and Recovery: European Weakest Links Fall But Remain Above The Five-Year Average

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Default, Transition, and Recovery: European Weakest Links Fall But Remain Above The Five-Year Average

The number of weakest links--issuers rated 'B-' or lower by S&P Global Ratings with negative outlooks or ratings on CreditWatch with negative implications--decreased to 193 as of April 25, 2022, from 256 as of March 8, 2022, driven by withdrawals related to the Russia-Ukraine conflict (nearly 70% of total removals) and the consumer-driven recovery in sectors such as media and entertainment (including lodging and leisure) and consumer products (see chart 1).

Chart 1

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While the number of weakest links in the U.S. has fallen well below its five-year average, the number of weakest links in Europe remains elevated as the region continues its slower recovery. Soaring energy and food prices, primarily related to the ongoing conflict, are exacerbating inflationary pressures, leading to higher financing costs and the prospect of more immediate monetary tightening. Speculative-grade markets--most notably bonds--have seen low primary issuance and thin secondary liquidity, which could create increasingly problematic financing conditions for lower-rated issuers, although near-term refinancing risk looks manageable. Based on data as of Jan. 1, 2022, European corporate debt maturities peak at €780 billion in 2023, much sooner than U.S. peak maturity. However, near-term maturities (2022-2023) in the region are predominantly from financial services, and almost 90% of the debt maturing through 2023 is investment-grade (see "U.S. And European Refinancing: Strong Issuance In 2021 Fueled Lengthening Maturities," Feb. 28, 2022).

Chart 2

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Chart 3

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We Expect The Number Of Defaults In Europe To Rise

So far this year, there have been five defaults in Europe, all of which have been weakest links prior to default. As weakest link default rates are on average 8x higher than overall speculative-grade default rates, we expect the number of defaults in the region to increase. S&P Global expects the European trailing-12-month speculative-grade corporate default rate to hit 3% (24 defaulters) by March 2023, from 0.7% in March 2022 (see "The European Speculative-Grade Corporate Default Rate Could Rise To 3% By March 2023," May 18, 2022).

Chart 4

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Table 1

Weakest Links By Region
Number of weakest links Five-year averages 10-year averages Total rated speculative-grade issuers Weakest links to total region-wide speculative-grade rated issuers (%) Current distribution by region (%) Distribution by region 12 months prior (%)
U.S. 118 193 145 1542 7.7 46.1 66.6
Europe 48 42 32 573 8.4 18.8 20.1
Asia/Pacific 9 10 8 76 11.8 3.5 3.4
Canada 7 10 8 87 8.0 2.7 4.5
Latin America 5 13 16 119 4.2 2.0 4.0
EEMEA 6 10 11 79 7.6 2.3 1.4
Data as of April 25, 2022. EEMEA--Eastern Europe, the Middle East, and Africa. Source: S&P Global Ratings Research.

Table 2

Regional Weakest Links Are 8x More Likely To Default
(%) Weakest links default rate All speculative-grade default rate
Global 24.09 1.41
U.S. 25.52 1.40
Europe 25.28 0.69
Emerging markest 18.53 2.04
Other developed 28.55 1.48
Data as of March 31, 2022. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro.

Table 3

Issuers Rated ‘B-’ Or Lower With A Negative Outlook Or On CreditWatch With Negative Implications
Rating Outlook/CreditWatch placement Subsector Issuer Parent company New to the list this month Outlook/CreditWatch change Debt (mil. US$) Country Region
B- CreditWatch negative Capital goods CIRCOR International Inc., Yes 530 U.S. U.S.
B- CreditWatch negative Financial institutions CORESTATE Capital Holding S.A. Yes 539 Luxembourg Europe
B- CreditWatch negative Financial institutions Freedom Holding Corp. Yes - U.S. U.S.
B- CreditWatch negative Homebuilders/real estate companies Adler Group S.A. ADO Group Ltd. 4,635 Luxembourg Europe
B- CreditWatch negative Homebuilders/real estate companies Dexin China Holdings Co. Ltd. Yes 350 Cayman Islands U.S.
B- CreditWatch negative Homebuilders/real estate companies KWG Group Holdings Ltd. Yes 650 Cayman Islands U.S.
B- CreditWatch negative Metals, mining, and steel Mongolian Mining Corp. Yes 880 Cayman Islands U.S.
B- CreditWatch negative Telecommunications PrJSC VF Ukraine 1,000 Ukraine Eastern Europe/Middle East/Africa
B- CreditWatch negative Telecommunications Syniverse Technologies Corp. - U.S. U.S.
B- Outlook negative Aerospace and defense Dynasty Acquisition Co. Inc., 2,340 U.S. U.S.
B- Outlook negative Aerospace and defense F-Brasile S.p.A 1,010 Italy Europe
B- Outlook negative Automotive EnTrans International, LLC 255 U.S. U.S.
B- Outlook negative Automotive FleetPride Inc., Fastlane Parent Co. Inc., 845 U.S. U.S.
B- Outlook negative Automotive IXS Holdings Inc., 620 U.S. U.S.
B- Outlook negative Automotive Standard Profil Automotive GmbH 296 Germany Europe
B- Outlook negative Automotive TPro Acquisition Corp. 300 U.S. U.S.
B- Outlook negative Automotive UC Holdings Inc. Chassix Holdings Inc., 225 U.S. U.S.
B- Outlook negative Capital goods Brand Industrial Services Inc., 3,825 U.S. U.S.
B- Outlook negative Capital goods Hyster-Yale Materials Handling Inc. Yes 225 U.S. U.S.
B- Outlook negative Capital goods Norican Global A/S Yes 366 Denmark Europe
B- Outlook negative Capital goods QualTek LLC 380 U.S. U.S.
B- Outlook negative Capital goods Wastequip, LLC Patriot Container Corp. - U.S. U.S.
B- Outlook negative Consumer products Boparan Holdings Ltd. 610 U.K. Europe
B- Outlook negative Consumer products CB Poly Investments, LLC 4,020 U.S. U.S.
B- Outlook negative Consumer products Edward Don & Co. Holdings, LLC 210 U.S. U.S.
B- Outlook negative Consumer products Grubhub Inc. - U.S. U.S.
B- Outlook negative Consumer products Isagenix Worldwide Inc., - U.S. U.S.
B- Outlook negative Consumer products KAMC Holdings Inc., 445 U.S. U.S.
B- Outlook negative Consumer products Kiwi VFS SUB I S.ar.l 1,820 Luxembourg Europe
B- Outlook negative Consumer products Knowlton Development Corp. Inc., Knowlton Development HoldCo, Inc 1,534 Canada Canada
B- Outlook negative Consumer products Kronos Acquisition Holdings Inc. 2,070 U.S. U.S.
B- Outlook negative Consumer products pH Beauty Holdings I Inc., 340 U.S. U.S.
B- Outlook negative Consumer products Sierra Enterprises LLC 282 U.S. U.S.
B- Outlook negative Consumer products Vincent Topco BV (NL) 463 Netherlands Europe
B- Outlook negative Financial institutions Albaraka Turk Katilim Bankasi AS Al Baraka Banking Group B.S.C. 500 Turkey Eastern Europe/Middle East/Africa
B- Outlook negative Financial institutions Banco Agricola S.A Bancolombia, S. A. y Companias Subordinadas - El Salvador Latin America
B- Outlook negative Financial institutions Ravnaq-bank Private Open Joint-Stock Commercial Bank - Uzbekistan Eastern Europe/Middle East/Africa
B- Outlook negative Financial institutions Vida Capital Inc., 275 U.S. U.S.
B- Outlook negative Forest products and building materials Compact Bidco B.V. Yes 323 Netherlands Europe
B- Outlook negative Forest products and building materials Ideal Standard International S.A. Yes 350 Luxembourg Europe
B- Outlook negative Health care Alvogen Pharma US Inc., Alvogen Lux Holdings S.a.r.l. 961 U.S. U.S.
B- Outlook negative Health care Lima Corporate S.p.a. Yes 296 Italy Europe
B- Outlook negative Health care TecoStar Holdings Inc., 950 U.S. U.S.
B- Outlook negative High technology Franklin Ireland Topco Ltd. - Ireland Europe
B- Outlook negative High technology MYOB Invest Co Pty Ltd. 667 Australia Asia/Pacific
B- Outlook negative Homebuilders/real estate companies Diok Real Estate AG Yes 269 Germany Europe
B- Outlook negative Homebuilders/real estate companies Jiangsu Zhongnan Construction Group Co. Ltd. 560 China Asia/Pacific
B- Outlook negative Media and entertainment Awaze Ltd. 1,064 U.K. Europe
B- Outlook negative Media and entertainment CareerBuilder, LLC 415 U.S. U.S.
B- Outlook negative Media and entertainment ConvergeOne Holdings Inc. 1,385 U.S. U.S.
B- Outlook negative Media and entertainment EagleView Technology Corp. 800 U.S. U.S.
B- Outlook negative Media and entertainment GBT JerseyCo Ltd. 850 U.K. Europe
B- Outlook negative Media and entertainment Global University Systems Holding BV 1,078 Netherlands Europe
B- Outlook negative Media and entertainment International Park Holdings B.V. 722 Spain Europe
B- Outlook negative Media and entertainment Lindblad Expeditions Holdings Inc. 760 U.S. U.S.
B- Outlook negative Media and entertainment Peak Jersey Holdco Ltd. 928 Jersey Europe
B- Outlook negative Media and entertainment Piolin Bidco S.A.U. 1,045 Spain Europe
B- Outlook negative Media and entertainment Sugarhouse HSP Gaming Prop. Mezz. L.P. 600 U.S. U.S.
B- Outlook negative Media and entertainment Hanjin International Corp. Korean Air Lines Co. Ltd. 344 Korea, Republic of Asia/Pacific
B- Outlook negative Media and entertainment TEG Pty Ltd. 770 Australia Asia/Pacific
B- Outlook negative Metals, mining, and steel Tacora Resources Inc. 225 Canada Canada
B- Outlook negative Retail/restaurants Kirk Beauty 2 Beteiligungs GmbH and Co. KG Yes 3,519 Germany Europe
B- Outlook negative Telecommunications Intrado Corp. 5,407 U.S. U.S.
B- Outlook negative Transportation WestJet Airlines Ltd. 1,955 Canada Canada
CCC+ CreditWatch negative Consumer products JHW Alphia Holdings Inc. Yes 285 U.S. U.S.
CCC+ CreditWatch negative Financial institutions Credivalores - Crediservicios SAS Yes 625 Colombia Latin America
CCC+ CreditWatch negative Media and entertainment PlayPower Holdings Inc. 400 U.S. U.S.
CCC+ Outlook negative Aerospace and defense Forming Machining Industries Holdings, LLC 320 U.S. U.S.
CCC+ Outlook negative Aerospace and defense New Constellis Borrower, LLC New Constellis Holdings Inc. 260 U.S. U.S.
CCC+ Outlook negative Aerospace and defense Triumph Group Inc. 1,725 U.S. U.S.
CCC+ Outlook negative Aerospace and defense WP CPP Holdings LLC 1,606 U.S. U.S.
CCC+ Outlook negative Automotive Accuride Corp. 363 U.S. U.S.
CCC+ Outlook negative Automotive Cooper-Standard Holdings Inc., 990 U.S. U.S.
CCC+ Outlook negative Capital goods FGI Acquisition Corp. 200 France Europe
CCC+ Outlook negative Capital goods JSG I Inc. 460 U.S. U.S.
CCC+ Outlook negative Capital goods Mangrove Luxco III Sarl 664 Luxembourg Europe
CCC+ Outlook negative Capital goods Praesidiad Group Ltd. 343 U.K. Europe
CCC+ Outlook negative Capital goods Shape Technologies Group Inc., 350 U.S. U.S.
CCC+ Outlook negative Capital goods Yak Access, LLC 860 U.S. U.S.
CCC+ Outlook negative Chemicals, packaging, and environmental services Anchor Glass Container Corp. 857 U.S. U.S.
CCC+ Outlook negative Chemicals, packaging, and environmental services Transcendia Holdings Inc., 405 U.S. U.S.
CCC+ Outlook negative Chemicals, packaging, and environmental services Zep Inc. 725 U.S. U.S.
CCC+ Outlook negative Consumer products 8th Avenue Food & Provisions Inc., 750 U.S. U.S.
CCC+ Outlook negative Consumer products Anastasia Holdings, LLC 650 U.S. U.S.
CCC+ Outlook negative Consumer products Arctic Glacier Group Holdings Inc., 880 U.S. U.S.
CCC+ Outlook negative Consumer products Calceus Acquisition Inc., 290 U.S. U.S.
CCC+ Outlook negative Consumer products CoolSys Inc., Yes 440 U.S. U.S.
CCC+ Outlook negative Consumer products Halo Buyer Inc. 440 U.S. U.S.
CCC+ Outlook negative Consumer products INW Manufacturing, LLC 440 U.S. U.S.
CCC+ Outlook negative Consumer products Missouri TopCo Ltd. 584 U.K. Europe
CCC+ Outlook negative Consumer products MVK Intermediate Holdings, LLC 335 U.S. U.S.
CCC+ Outlook negative Consumer products Never Slip Topco Inc. 283 U.S. U.S.
CCC+ Outlook negative Consumer products New TMW LLC 465 U.S. U.S.
CCC+ Outlook negative Consumer products SIRVA Inc. 850 U.S. U.S.
CCC+ Outlook negative Financial institutions Altisource Portfolio Solutions S.A. 412 Luxembourg Europe
CCC+ Outlook negative Health care Alcami Corp. 1,425 U.S. U.S.
CCC+ Outlook negative Health care BVI Holdings Mayfair Ltd. 653 U.K. Europe
CCC+ Outlook negative Health care Endo International PLC 31,558 Ireland Europe
CCC+ Outlook negative Health care Femur Buyer Inc., 485 U.S. U.S.
CCC+ Outlook negative Health care Lannett Co. Inc., 350 U.S. U.S.
CCC+ Outlook negative Health care Medical Depot Holdings Inc., 579 U.S. U.S.
CCC+ Outlook negative Homebuilders/real estate companies IRSA Propiedades Comerciales S.A. Cresud S.A.C.I.F. y A. 360 Argentina Latin America
CCC+ Outlook negative Media and entertainment Bioplan USA Inc., 699 U.S. U.S.
CCC+ Outlook negative Media and entertainment Codere Luxembourg 2 S.a.r.l Codere New TopCo S.A. 744 Luxembourg Europe
CCC+ Outlook negative Media and entertainment Comet Bidco Ltd. 825 U.K. Europe
CCC+ Outlook negative Media and entertainment CWT Travel Group Inc., 715 U.S. U.S.
CCC+ Outlook negative Media and entertainment Diamond Sports Holdings LLC Sinclair Broadcast Group Inc. 8,722 U.S. U.S.
CCC+ Outlook negative Media and entertainment Enjoy S.A. 211 Chile Latin America
CCC+ Outlook negative Media and entertainment Fitness International, LLC 1,275 U.S. U.S.
CCC+ Outlook negative Media and entertainment iQor Holdings Inc. 395 U.S. U.S.
CCC+ Outlook negative Media and entertainment Lakeland Holdings, LLC 200 U.S. U.S.
CCC+ Outlook negative Media and entertainment Learfield Communications, LLC 1,089 U.S. U.S.
CCC+ Outlook negative Media and entertainment Monitronics International Inc. 923 U.S. U.S.
CCC+ Outlook negative Media and entertainment Tribe Buyer LLC 400 U.S. U.S.
CCC+ Outlook negative Media and entertainment United PF Holdings, LLC 706 U.S. U.S.
CCC+ Outlook negative Media and entertainment Vericast Corp. 2,832 U.S. U.S.
CCC+ Outlook negative Media and entertainment Viking Cruises Ltd. Viking Holdings Ltd 3,325 U.S. U.S.
CCC+ Outlook negative Media and entertainment Vue International Bidco plc 767 U.K. Europe
CCC+ Outlook negative Media and entertainment WeWork Companies LLC 702 U.S. U.S.
CCC+ Outlook negative Media and entertainment Spectacle Bidco Holdings Inc. 1,232 Canada Canada
CCC+ Outlook negative Media and entertainment Universal Entertainment Corp. 760 Japan Asia/Pacific
CCC+ Outlook negative Metals, mining, and steel Conuma Resources Ltd. 200 Canada Canada
CCC+ Outlook negative Midstream Altera Infrastructure L.P. Brookfield Asset Management Inc. 1,000 Marshall Islands Asia/Pacific
CCC+ Outlook negative Midstream Epic Crude Services, LP 1,175 U.S. U.S.
CCC+ Outlook negative Midstream Epic Y Grade Services, LP 950 U.S. U.S.
CCC+ Outlook negative Oil and gas HGIM Corp. 350 U.S. U.S.
CCC+ Outlook negative Oil and gas PGS ASA - Norway Europe
CCC+ Outlook negative Oil and gas Ensign Drilling Inc. Ensign Energy Services Inc. 700 Canada Canada
CCC+ Outlook negative Retail/restaurants 99 cents only stores LLC 350 U.S. U.S.
CCC+ Outlook negative Retail/restaurants Belk Inc., 1,223 U.S. U.S.
CCC+ Outlook negative Retail/restaurants Foodco Bondco SAU 722 Spain Europe
CCC+ Outlook negative Retail/restaurants Moran Foods, LLC SAL Acquisition Corp. 334 U.S. U.S.
CCC+ Outlook negative Retail/restaurants PAX Midco Spain 1,132 Spain Europe
CCC+ Outlook negative Retail/restaurants Quidditch Acquisition Inc., 204 U.S. U.S.
CCC+ Outlook negative Telecommunications U.S. TelePacific Holdings Corp. 655 U.S. U.S.
CCC+ Outlook negative Transportation Toro Private Holdings I, Ltd. 3,680 U.K. Europe
CCC+ Outlook negative Transportation URS Holdco Inc., 747 U.S. U.S.
CCC+ Outlook negative Utilities AES Argentina Generacion S.A AES Corp. (The) 300 Argentina Latin America
CCC+ Outlook negative Utilities Ellaktor S.A. 722 Greece Europe
CCC+ Outlook negative Utilities ESKOM Holdings SOC Ltd. 5,115 South Africa Eastern Europe/Middle East/Africa
CCC CreditWatch negative Financial institutions Belagroprombank JSC Yes - Belarus Eastern Europe/Middle East/Africa
CCC CreditWatch negative Health care Envision Healthcare Corp. Envision Healthcare Holdings Inc. Yes 7,570 U.S. U.S.
CCC CreditWatch negative Oil and gas DTEK Renewables B.V. - Netherlands Europe
CCC CreditWatch negative Retail/restaurants Eurotorg LLC Eurotorg Holding PLC Yes 300 Belarus Eastern Europe/Middle East/Africa
CCC Outlook negative Automotive Bright Bidco B.V. 1,683 Netherlands Europe
CCC Outlook negative Automotive K&N Parent Inc., 345 U.S. U.S.
CCC Outlook negative Capital goods Arvos LuxCo S.a.r.l. - Luxembourg Europe
CCC Outlook negative Capital goods The Cleaver-Brooks Co. Inc., Yes 375 U.S. U.S.
CCC Outlook negative Chemicals, packaging, and environmental services Strategic Materials Holding Corp. 315 U.S. U.S.
CCC Outlook negative Consumer products Boardriders Inc., 861 U.S. U.S.
CCC Outlook negative Consumer products CatLuxe Sarl CatLuxe Acquistion Sarl 232 Luxembourg Europe
CCC Outlook negative Consumer products Frigoglass SAIC Yes 280 Greece Europe
CCC Outlook negative Consumer products GEO Group (The) Inc. 2,484 U.S. U.S.
CCC Outlook negative Consumer products KCIBT Holdings LP 1,050 U.S. U.S.
CCC Outlook negative Consumer products KNB Holdings Corp. 295 U.S. U.S.
CCC Outlook negative Consumer products NSA International, LLC Yes 450 U.S. U.S.
CCC Outlook negative Consumer products Outerstuff LLC 155 U.S. U.S.
CCC Outlook negative Consumer products Output Services Group Inc., 498 U.S. U.S.
CCC Outlook negative Consumer products Premier Brands Group Holdings LLC 325 U.S. U.S.
CCC Outlook negative Consumer products Rodan & Fields, LLC 600 U.S. U.S.
CCC Outlook negative Consumer products Serta Simmons Bedding LLC 10,201 U.S. U.S.
CCC Outlook negative Consumer products TMK Hawk Parent, Corp. 1,248 U.S. U.S.
CCC Outlook negative Financial institutions Amigo Loans Ltd. 64 U.K. Europe
CCC Outlook negative Forest products and building materials PT Sawit Sumbermas Sarana Tbk - Indonesia Asia/Pacific
CCC Outlook negative Health care BW Homecare Holdings LLC 855 U.S. U.S.
CCC Outlook negative Health care Vyaire Medical Inc., 360 U.S. U.S.
CCC Outlook negative High technology 4L Topco Corp. Yes 80 U.S. U.S.
CCC Outlook negative Media and entertainment AVSC Holding Corp. 2,506 U.S. U.S.
CCC Outlook negative Media and entertainment Cineworld Group PLC 5,391 U.K. Europe
CCC Outlook negative Media and entertainment Data Axle Inc. 250 U.S. U.S.
CCC Outlook negative Media and entertainment Equinox Holdings Inc. 1,285 U.S. U.S.
CCC Outlook negative Media and entertainment Hornblower HoldCo, LLC 655 U.S. U.S.
CCC Outlook negative Media and entertainment Odyssey Europe Holdco S.a r.l. 216 Luxembourg Europe
CCC Outlook negative Media and entertainment Travel Leaders Group, LLC 629 U.S. U.S.
CCC Outlook negative Metals, mining, and steel PT Bumi Resources Tbk. - Indonesia Asia/Pacific
CCC Outlook negative Oil and gas Nine Energy Service Inc., 400 U.S. U.S.
CCC Outlook negative Oil and gas Transocean Ltd. 8,810 Switzerland Europe
CCC Outlook negative Oil and gas Vantage Drilling International 300 Cayman Islands U.S.
CCC Outlook negative Retail/restaurants Burger BossCo Intermediate Inc., 193 U.S. U.S.
CCC Outlook negative Telecommunications Dawn Acquisitions LLC Infra Colodata Holdings LLC 550 U.S. U.S.
CCC Outlook negative Telecommunications Logix Intermediate Holding Corp. 250 U.S. U.S.
CCC Outlook negative Utilities Talen Energy Supply LLC Talen Energy Corp. Yes 6,329 U.S. U.S.
CCC- CreditWatch negative Chemicals, packaging, and environmental services Schur Flexibles GmbH 512 Germany Europe
CCC- Outlook negative Automotive SK HoldCo LLC 1,525 U.S. U.S.
CCC- Outlook negative Consumer products PetroChoice Holdings Inc., 435 U.S. U.S.
CCC- Outlook negative Consumer products Revlon Inc. 2,750 U.S. U.S.
CCC- Outlook negative Consumer products Takko Fashion S.a.r.l. 550 Luxembourg Europe
CCC- Outlook negative Media and entertainment All Day AcquisitionCo LLC 200 U.S. U.S.
CCC- Outlook negative Media and entertainment Exela Technologies Inc. 2,109 U.S. U.S.
CCC- Outlook negative Metals, mining, and steel Mountain Province Diamonds Inc. 660 Canada Canada
CC Outlook negative Homebuilders/real estate companies R&F Properties (HK) Co. Ltd. Guangzhou R&F Properties Co. Ltd. Yes - Hong Kong Asia/Pacific
CC Outlook negative Media and entertainment Safari Beteiligungs Gmbh 377 Germany Europe
CC Outlook negative Transportation SAS AB - Sweden Europe
Data as of April 25, 2022. Country is based on location of incorporation. Source: S&P Global Ratings Research.

Related Research:

This report does not constitute a rating action.

Credit Markets Research:Nicole Serino, New York + 1 (212) 438 1396;
nicole.serino@spglobal.com
Patrick Drury Byrne, Dublin (00353) 1 568 0605;
patrick.drurybyrne@spglobal.com
Leveraged Finance Europe:Marta Stojanova, London + 44 20 7176 0476;
marta.stojanova@spglobal.com
Research Contributor:Nivritti Mishra Richhariya, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai

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