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Default, Transition, and Recovery: U.S. Defaults In August Alone Account For 25% Of Regional Year-To-Date Total

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S&P Global Ratings' 2022 global corporate default tally has increased to 52 after nine companies defaulted in August:

  • New-Jersey based OSG billing services company Output Services Group Inc.
  • Mexico based leasing company Unifin Financiera S.A.B. de C.V..
  • Texas based data center operator Dawn Acquisitions LLC
  • Ireland-incorporated (U.S. based) pharmaceutical company Endo International PLC
  • The U.S. based criminal detention and residential reentry facilities provider GEO Group Inc. (The)
  • New York based Carestream Health Inc.
  • Colorado based physician and advanced practice provider Envision Healthcare Corp.
  • A Marshall Island incorporated (United Kingdom based) oil industry service provider Altera Infrastructure L.P.
  • and two confidential issuers.

With 10 defaults in August, the pace of defaults has increased markedly from July as growth slows, inflation persists at heightened levels, and major central banks continue to hike rates resulting in increasing financing costs and tighter financing conditions.

With six defaults in the U.S. and only one default in Europe ,we estimated the U.S. 12-month trailing speculative-grade default rate to have increased in August 2022 to 1.5% while we estimate the Europe 12-month trailing speculative-grade default rate to have remained at 0.9%.Negative bias (the percentage of issuers with a negative outlook or on CreditWatch negative) is also increasing in both regions and we expect the 12-month-trailing speculative-grade default rate for the U.S. and the Europe could rise to 3.5% and 3% by June 2023, respectively (see "The U.S. Speculative-Grade Corporate Default Rate Could Reach 3.5% By June 2023," Aug. 18, 2022 and "The European Speculative-Grade Corporate Default Rate Could Rise To 3% By June 2023," Aug. 22, 2022).

Table 1

Global Corporate Default Summary
Region 12-Month trailing speculative-grade default rate (%) Weakest links
U.S. *1.5 127
Emerging market 1.9 19
Europe *0.9 46
Other developed 1.5 10
Global 1.3 202
Note: *Trailing-12-month speculative grade default rates for from Aug. 31, 2022- Aug. 31, 2022 are preliminary and subject to change.Trailing-12-month speculative grade default rates for from July 31, 2022- July 31, 2022. Year-to-date data as of Aug. 31, 2022. Weakest link data is as of June 27, 2022. Other developed region 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®.

Regional Divergences And Sectoral Trends

A clear divergence in regional and sector default trends remains. Half of the U.S. region's six defaults in August were concentrated within the U.S. health care sector as some lower-rated issuers in the sector face higher input costs on health care products, transportation, and labor because of higher and persistent inflation, which is weighing on EBITDA margins and cash flows. Although a steep recession would challenge sector revenues, we believe the pressure on margins and cashflow is manageable and the industry will see continued, albeit lower, growth (see "Industry Top Trends Update Health Care Inflationary Pressures On Margins," July 14, 2022).

Overall year to date, the homebuilders and real estate and consumer products sectors currently co-lead the 2022 default tally with 10 each. Meanwhile, other sectors that have benefited from higher for longer prices, including the oil and gas sector, have seen far fewer defaults than previous years. So far in 2022, there has been only one oil and gas default, compared with seven and 34, respectively, at this point in 2021 and 2020, the majority being U.S. and Canadian-based.

Despite the sharp rise in U.S. defaults last month, the regional tally is still nearly 20% below its 2021 year-to-date tally of 31 defaults, and at its lowest year-to-date level since 2014. The European default tally also remains historically low and is over 45% below previous year levels. In contrast, defaults in the emerging markets region are over 60% above 2021 year-to-date levels and emerging markets currently accounts for 38% of global defaults, considerably higher than previous year levels. A primary contributing factor is 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). (see chart 3).

Chart 1

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Chart 2

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Chart 3

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Chart 4

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Table 2

So Far In 2022, Total Global Default Tally Reaches 53
Date Parent company Country/Market Subsector To From Reason
January 4, 2022

ION Geophysical Corp.

U.S. Oil and gas D CCC Missed principal and interest payments
January 4, 2022 Confidential Confidential Utilities D NR Confidential
January 13, 2022

R&F Properties (HK) Co. Ltd.

Hong Kong Homebuilders/real estate companies SD CC Distressed exchange
January 19, 2022 Confidential Confidential Homebuilders/real estate companies SD CCC- Confidential
January 24, 2022

Fusion Connect Inc.

U.S. Telecommunications SD CC Distressed exchange
February 1, 2022

Future Retail Ltd.

India Consumer products SD CCC- Missed principal payments
February 1, 2022

TPC Group Inc., (TPC Group LLC)

U.S. Health care D CCC Missed interest payments
February 4, 2022 Confidential Confidential Consumer products D NR Confidential
February 9, 2022 Confidential Confidential Consumer products SD CCC Confidential
February 10, 2022

Credito Real, S.A.B. de C.V., SOFOM, E.N.R.

Mexico Financial institutions SD CCC- Missed principal payments
February 11, 2022 Confidential Confidential Homebuilders/real estate companies SD CC Confidential
February 17, 2022

U.S. TelePacific Holdings Corp.

U.S. Telecommunications SD CCC- Distressed exchange
March 15, 2022

Diamond Sports Group LLC

U.S. Media and entertainment SD CC Distressed exchange
March 21, 2022

Mulhacen Pte. Ltd.

Singapore Financial institutions D CC Distressed exchange
March 24, 2022

MHP SE

Ukraine Consumer products SD B- Missed interest payments
April 1, 2022

Ruby Pipeline LLC

U.S. Utilities D CC Missed principal payments
April 7, 2022

Owl Finance Ltd.

U.K. Media and entertainment SD CC Distressed exchange
April 7, 2022

PSS Industrial Group Corp.

U.S. Utilities D CCC- Missed principal and interest payments
April 8, 2022

Guangzhou R&F Properties Co. Ltd.

China Homebuilders/real estate companies SD CC Distressed exchange
April 8, 2022

Kernel Holding S.A.

Ukraine Consumer products SD B- Missed interest payments
April 11, 2022 Confidential Confidential Homebuilders/real estate companies SD CC Confidential
April 11, 2022

Promotora de Informaciones S.A.

Spain Media and entertainment SD CC Distressed exchange
April 12, 2022

Dunn Paper Holdings Inc.

U.S. Chemicals, packaging, and environmental services D CCC Missed interest payments
April 12, 2022

Grupo Kaltex S.A. de C.V.

Mexico Consumer products D CCC- Missed principal payments
April 12, 2022

Petropavlovsk PLC

U.K. Metals, mining, and steel SD CCC- Missed interest payments
April 13, 2022 Confidential Confidential High technology D CCC Confidential
April 14, 2022

EuroChem Group AG

Switzerland Chemicals, packaging, and environmental services SD CCC- Missed interest payments
April 22, 2022 Confidential Confidential Aerospace and defense SD CCC+ Confidential
May 3, 2022

Envision Healthcare Corp. (Envision Healthcare Holdings Inc.)

U.S. Health care SD CCC Distressed exchange
May 6, 2022

Safari Beteiligungs Gmbh

Germany Media and entertainment SD CC Distressed exchange
May 10, 2022

Talen Energy Supply LLC

U.S. Utlities D CCC Bankruptcy
May 26, 2022 Confidential Confidential Financial institutions SD CCC- Confidential
June 1, 2022 Confidential Confidential Homebuilders/real estate companies SD CC Confidential
June 10, 2022 Confidential Confidential Homebuilders/real estate companies SD CC Confidential
June 13, 2022 Confidential Confidential Homebuilders/real estate companies SD CC Confidential
June 16, 2022

Revlon Inc.

U.S. Consumer products D CCC- Bankruptcy
June 21, 2022

Greenland Holding Group Co. Ltd.

China Homebuilders/real estate companies SD CC Distressed exchange
June 30, 2022

Rite Aid Corp.

U.S. Retail/restaurants SD CC Distressed exchange
July 6, 2022

Canopy Growth Corp.

Canada Consumer products SD CCC Distressed exchange
July 7, 2022

SAS AB

Sweden Transportation D CC Bankruptcy
July 14, 2022

SK HoldCo LLC

U.S. Automotive SD CC Distressed exchange
July 18, 2022 PT Sawit Sumbermas Sarana Tbk Indonesia Forest products and building materials SD CC Distressed exchange
July 28, 2022

Mountain Province Diamonds Inc.

Canada Metals, mining, and steel SD CCC- Distressed exchange
August 9, 2022

Output Services Group Inc.

U.S. Consumer products D CC Bankruptcy
August 9, 2022

Unifin Financiera S.A.B. de C.V.

Mexico Financial institutions D B+ Missed principal and interest payments
August 11, 2022

Dawn Acquisitions LLC (Infra Colodata Holdings LLC)

U.S. Telecommunications SD CCC Distressed exchange
August 12, 2022 Confidential Confidential Retail/restaurants SD CCC- Confidential
August 17, 2022

Endo International PLC

Ireland Health care D CC Bankruptcy
August 19, 2022

GEO Group Inc. (The)

U.S. Consumer products SD CC Distressed exchange
August 23, 2022

Carestream Health Inc.

U.S. Health care D CC Bankruptcy
August 29, 2022 Confidential Confidential Homebuilders/real estate companies SD CCC Confidential
August 30, 2022

Envision Healthcare Corp. (Envision Healthcare Holdings Inc.)

U.S. Health care SD CCC Distressed exchange
Data as of Aug. 31, 2022. NR--Not rated. SD--Selective default. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro® Copyright © 2018 by Standard & Poor’s Financial Services LLC. All rights reserved.

Related Research

Default Studies

More analysis and statistics are available in our annual default studies, published on RatingsDirect:

Corporate (financial and nonfinancial)
Structured finance
U.S. public finance
Sovereign and international public finance

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
Research Contributor:Vaishali Singh, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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