- The corporate default tally stands at 43 through July, well below previous year-to-date tallies of 54 (2021) and 72 (2020).
- Regional differences are becoming more pronounced as U.S. defaults remain nearly 33% lower than previous year-to-date levels, while emerging market defaults are 70% higher.
- Homebuilders and real estate contribute the highest number of defaults year to date--led by China-based issuers--followed closely by consumer products.
S&P Global Ratings' 2022 global corporate default tally has increased to 43 after five companies defaulted in July:
- Ontario-based vertically integrated cannabis company Canopy Growth Corp.
- Scandinavian Airline SAS AB
- Texas-based repair center operator SK HoldCo LLC (Service King)
- Indonesian palm oil producer PT Sawit Sumbermas Sarana Tbk
- Canada-based rough diamonds miner Mountain Province Diamonds Inc.
With just six defaults in June and five defaults in July, the pace of defaults so far in 2022 is showing no sign of picking up. We estimate that the U.S. and Europe 12-month-trailing speculative-grade default rates will both decrease further in July to 1.3% and 0.8% from 1.4% and 0.9% in June, respectively (see table 1).
We see a clear divergence in regional and sector default trends. With only 18 defaults so far this year, the percentage of U.S. defaults is at a historical low of 37% as U.S.-based issuers have thus far been largely resilient to cost pressures from rising inflation and increasingly restrictive financing conditions. However, downgrade risk is increasing for issuers rated 'B-' as their negative bias (the proportion of issuers with negative rating outlooks or CreditWatch implications) ticked up to 7.8% in June from 6.2% in May. The consumer products and capital goods sectors have the highest numbers of 'B-' rated issuers with negative outlooks or CreditWatch implications, many of which are facing inflationary cost pressures that weigh on margins (see "Risky Credits: U.S. And Canadian Companies Show Resilience To Market Pressures," July 26, 2022).
Emerging markets currently account for a very high proportion of 2022 defaults at 40% (see chart 2). This is due to an uptick in China-based homebuilder defaults as the sector continues to be hit by weaker sales and delays to housing construction and delivery (see "Sector Roundup Asia-Pacific Q3 2022: Inflation And China: Rough Ride Ahead," July 4, 2022). The homebuilders and real estate sector currently leads the 2022 default tally with nine defaults--an increase of 125% year-over-year (see chart 3 and chart 4).
|Global Corporate Default Summary|
|Region||12-Month-Trailing Speculative-Grade Default Rate (%)||Weakest Links|
|Note: *Trailing-12-month speculative-grade default rates from July 31, 2022-July 31, 2022 are preliminary and subject to change. Year-to-date data as of July 31, 2022. Weakest link data is as of June 27, 2022. Other developed includes Australia, Canada, Japan, and New Zealand. Default counts may include confidentially-rated issuers. Sources: S&P Global Ratings Research and S&P Global Market Intelligence’s CreditPro®.|
|Global Corporate Defaults, So Far In 2022|
ION Geophysical Corp.
|U.S.||Oil and gas||D||CCC||Missed principal and interest payments|
R&F Properties (HK) Co. Ltd.
|Hong Kong||Homebuilders/real estate companies||SD||CC||Distressed exchange|
|01/19/22||Confidential||Confidential||Homebuilders/real estate companies||SD||CCC-||Confidential|
Fusion Connect Inc.
Future Retail Ltd.
|India||Consumer Products||SD||CCC-||Missed principal payments|
TPC Group Inc. (TPC Group LLC)
|U.S.||Health care||D||CCC||Missed interest payments|
Credito Real S.A.B. de C.V., SOFOM, E.N.R.
|Mexico||Financial Institutions||SD||CCC-||Missed principal payments|
|02/11/22||Confidential||Confidential||Homebuilders/real estate companies||SD||CC||Confidential|
U.S. TelePacific Holdings Corp.
Diamond Sports Group LLC (Sinclair Broadcast Group Inc.)
|U.S.||Media and Entertainment||SD||CC||Distressed exchange|
Mulhacen Pte. Ltd.
|Singapore||Financial Institutions||D||CC||Distressed exchange|
|Ukraine||Consumer Products||SD||B-||Missed interest payments|
Ruby Pipeline LLC
|U.S.||Utilities||D||CC||Missed principal payments|
Owl Finance Ltd. (Hibu Group Ltd.)
|U.K.||Media and entertainment||SD||CC||Distressed exchange|
PSS Industrial Group Corp
|U.S.||Utilities||D||CCC-||Missed principal and interest payments|
Guangzhou R&F Properties Co. Ltd.
|China||Homebuilders/real estate companies||SD||CC||Distressed exchange|
Kernel Holding S.A.
|Ukraine||Consumer products||SD||B-||Missed interest payments|
|04/11/22||Confidential||Confidential||Homebuilders/real estate companies||SD||CC||Confidential|
Promotora de Informaciones S.A.
|Spain||Media and entertainment||SD||CC||Distressed exchange|
Dunn Paper Holdings Inc.
|U.S.||Chemicals, packaging, and environmental services||D||CCC||Missed interest payments|
Grupo Kaltex S.A. de C.V.
|Mexico||Consumer products||D||CCC-||Missed principal payments|
|U.K.||Metals, mining, and steel||SD||CCC-||Missed interest payments|
EuroChem Group AG
|Switzerland||Chemicals, packaging, and environmental services||SD||CCC-||Missed interest payments|
|04/22/22||Confidential||Confidential||Aerospace and defense||SD||CCC+||Confidential|
Envision Healthcare Corp. (Envision Healthcare Holdings Inc.)
|U.S.||Health Care||SD||CCC||Distressed exchange|
Safari Beteiligungs Gmbh (Dice Midco Sarl)
|Germany||Media & Entertainment||SD||CC||Distressed exchange|
Talen Energy Supply LLC (Talen Energy Corp.)
|06/01/22||Confidential||Confidential||Homebuilders/real estate companies||SD||CC||Confidential|
|06/10/22||Confidential||Confidential||Homebuilders/real estate companies||SD||CC||Confidential|
|06/13/22||Confidential||Confidential||Homebuilders/real estate companies||SD||CC||Confidential|
Greenland Holding Group Co. Ltd.
|China||Homebuilders/real estate companies||SD||CC||Distressed exchange|
Rite Aid Corp.
Canopy Growth Corp.
|Canada||Consumer products||SD||CCC||Distressed exchange|
SK HoldCo LLC
Sawit Sumbermas Sarana Tbk. PT
|Indonesia||Forest products and building materials||SD||CC||Distressed exchange|
Mountain Province Diamonds Inc.
|Canada||Metals, mining, and steel||SD||CCC-||Distressed exchange|
|Data as of July 31, 2022. NR--Not rated. SD--Selective default. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.|
This report does not constitute a rating action.
|Credit Markets Research:||Nicole Serino, New York + 1 (212) 438 1396;|
|Patrick Drury Byrne, Dublin (00353) 1 568 0605;|
|Research Contributor:||Vaishali Singh, CRISIL Global Analytical Center, an S&P affiliate, Mumbai|
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