articles Ratings /ratings/en/research/articles/220929-default-transition-and-recovery-2021-annual-european-corporate-default-and-rating-transition-study-12494582 content esgSubNav
In This List
COMMENTS

Default, Transition, and Recovery: 2021 Annual European Corporate Default And Rating Transition Study

COMMENTS

Credit Trends: 'BBB' Pulse: Fallen Angel Trend Resists Pressures

COMMENTS

Credit Trends: Risky Credits: North America's 'CCC+' And Below Rated Debt Reaches $230 Billion

COMMENTS

Credit Trends: Risky Credits: In Emerging Markets, Downward Rating Transitions Prevail

COMMENTS

Default, Transition, and Recovery: The U.S. Speculative-Grade Corporate Default Rate Could Reach 3.75% By September 2023


Default, Transition, and Recovery: 2021 Annual European Corporate Default And Rating Transition Study

A Dearth Of Defaults

S&P Global Ratings' European corporate default tally (including financial and nonfinancial sectors) fell to 14 in 2021, from 42 in 2020, with only one default between July 31 and year-end (see chart 1). This resulted in an overall default rate of less than 1% (0.8%). The lone default in December was the only default for an eight-month period through March 31, 2022, and it has been unrated since June 2020, thus removing it from the trailing-12-month default calculations starting from June 2021. This gap in rated defaults helped push the trailing-12-month speculative-grade default rate down to a multiyear low of 0.69% through March 2022.

Chart 1

image

With a drop-off in defaults in 2021 amid an economic recovery, defaults tended to originate from fewer industries than 2020. The consumer/service and transportation sectors led with four defaults each, followed by the leisure time/media sector with three. The aerospace/automotive/capital goods/metals; energy and natural resources; and financial institutions sectors each had one default.

So far in 2022, credit quality has remained broadly stable, but stressors are building. The Russia/Ukraine conflict, which began in February, is still unresolved, and natural gas prices rose dramatically along with inflation. Though employment trends remain strong, consumer sentiment has fallen to new lows in anticipation of even higher energy prices in the upcoming winter. Through July, there had only been six defaults, with four in April, and upgrades have far exceeded downgrades so far.

But since then, there have been four more defaults, with three coming by the end of September. It may be too early to say this is the beginning of a sustained increase in defaults, but we anticipate defaults rising over the near-term given existing pressures along with rising interest rates.

On a country basis, defaults in 2021 were also rather sporadic. Spain led with three defaults, followed by both the Netherlands and U.K. with two each. The other half of 2021's total were individual defaults from seven separate countries.

The annual default rate fell to 0.8% in 2021, from 2.3% in 2020. For the 12th year in a row, no corporate issuers that we rated investment grade ('BBB-' or higher) at the beginning of 2021 defaulted during the year. The speculative-grade ('BB+' or lower) default rate also fell, to 1.8% from 5.3% a year earlier. This was the lowest annual speculative-grade default rate (0.97%) and the lowest amount of affected debt since 2014 (see table 1).

Table 1

Europe Corporate Default Summary
Year Total defaults* Investment grade defaults Speculative grade defaults Default rate (%) Investment grade default rate (%) Speculative grade default rate (%) Total debt outstanding (Bil. $)
1991 1 0 1 0.76 0.00 50.00
1992 0 0 0 0.00 0.00 0.00
1993 1 0 1 0.51 0.00 20.00
1994 0 0 0 0.00 0.00 0.00
1995 1 0 1 0.31 0.00 9.09
1996 0 0 0 0.00 0.00 0.00
1997 0 0 0 0.00 0.00 0.00
1998 0 0 0 0.00 0.00 0.00
1999 6 0 6 0.91 0.00 6.32 0.9
2000 4 1 3 0.54 0.16 2.56 0.6
2001 13 1 11 1.45 0.14 8.46 2.7
2002 23 1 18 2.07 0.13 12.59 16.2
2003 9 2 6 0.84 0.25 3.73 13.7
2004 3 0 3 0.30 0.00 1.61 1.3
2005 2 0 2 0.19 0.00 0.95 0.0
2006 4 0 4 0.37 0.00 1.80 0.0
2007 2 0 2 0.18 0.00 0.96 0.5
2008 9 1 5 0.54 0.11 2.50 80.1
2009 22 1 16 1.51 0.11 8.08 39.7
2010 4 0 2 0.18 0.00 1.02 9.3
2011 4 0 4 0.35 0.00 1.58 5.0
2012 9 0 7 0.59 0.00 2.23 19.7
2013 16 0 11 0.90 0.00 2.87 17.8
2014 6 0 5 0.37 0.00 0.97 1.7
2015 16 0 13 0.87 0.00 2.11 10.6
2016 15 0 12 0.80 0.00 1.95 22.0
2017 17 0 16 1.06 0.00 2.59 11.9
2018 13 0 12 0.79 0.00 1.95 22.3
2019 15 0 15 0.94 0.00 2.23 26.0
2020 42 0 38 2.31 0.00 5.33 110.3
2021 14 0 13 0.80 0.00 1.80 7.0
Average 9 0 7 0.66 0.03 5.01 18.2
Median 6 0 5 0.54 0.00 2.11 10.6
Std. Dev. 9 0 8 0.58 0.06 9.39 26.8
Min 0 0 0 0.00 0.00 0.00 0.0
Max 42 2 38 2.31 0.25 50.00 110.3
*This column includes companies that were no longer rated at the time of default. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

In aggregate, credit quality improved in 2021, with upgrades reaching 9.7% against a 7% downgrade rate. Nevertheless, the proportion of speculative-grade issuers rated 'B-' and lower remained high by year-end, at 28%.

Our credit ratings continue to serve as effective indicators of relative creditworthiness. The one-year Gini coefficient--a measure of the rank-ordering power of ratings--for European corporate issuers was 91% in 2021, up from 87% in 2020. From 1981 to 2021, the one-year weighted average Gini coefficient was 90.1%, the three-year average was 85.2%, and the five-year average was 82.3%.

We base this study on our public and confidential issuer credit ratings on both nonfinancial and financial companies, but we exclude credit estimates, which we typically base on private information we receive from investors. We include European industrials, utilities, financial institutions--including banks, brokerages, asset managers, and other financial entities--and insurance companies.

We base our calculations of default and transition rates on the number of issuer credit ratings rather than the affected debt volumes. Where we refer to the weighted average values of certain statistics across different periods, we weight the statistics for each period by the number of issuer credit ratings outstanding at the beginning of each period. Further details on our calculation approaches and the terminology we use in this study, including a list of the European countries that we included, are in Appendix I. Further details on the Gini coefficient methodology are in Appendix II.

2021 Observations

Below are key observations from our review of European corporate defaults and rating transitions in 2021:

  • Of the European defaulters in 2021, 57% were from two sectors: consumer services and transportation, with four defaults each (see table 2).
  • Of the total 14 European defaults in 2021, three came from Spain, with another two each from the Netherlands and the U.K.
  • As of Jan. 1, 2021, we publicly rated 13 of the European corporate issuers that defaulted over the course of the year.
  • Only one of the 2021 defaulters were initially rated investment grade: Vallourec was first rated 'BBB+' in November 2011.
  • French Steel Tube Producer Vallourec had the highest debt associated with default in 2021, with only $1.6 billion in outstanding debt at the time of its selective default on Feb. 11.
  • We estimate the volume of outstanding debt associated with European corporate defaulters in 2021 was $7 billion, down considerably from $110.3 billion in 2020. Globally, there were 72 defaulters that accounted for about $66.3 billion in debt in 2021.
  • Expressing defaults as a proportion of total ratings, the European speculative-grade corporate default rate fell to 1.8% in 2021 from 5.3% in 2020, roughly in line with the 1.5% in the U.S., 1.8% in emerging markets, and 1.7% globally (see chart 2).
  • For the 14 European companies that defaulted in 2021, the average time to default from the initial rating was 3.9 years, down from 4.8 years in 2020 and the long-term average of 4.3 years.
  • At year-end 2021, speculative-grade issuers accounted for 46.3% of all European corporate ratings, higher than 44.3% at the end of 2020, and up considerably from 16.3% at the end of 2009 (see chart 3).
  • Of the 14 defaults in 2021, nine were selective defaults, and 10 were the result of distressed exchanges.

Table 2

2021 Publicly Rated European Corporate Defaults
Company name Reason for default Country Industry Debt amount (mil. $) Default date Rating one year prior to default Rating three years prior to default First rating Date of first rating
Promotora de Informaciones S.A. Distressed exchange Spain Leisure time/media 0.0 1/6/2021 B - B- 9/28/2018
Vallourec Missed principal France Energy and natural resources 1,758.1 2/11/2021 B- B BBB+ 11/10/2011
CatLuxe Sarl Distressed exchange Luxembourg Consumer/service sector 315.9 2/22/2021 B- - B 10/23/2018
AI Mistral Holdco Ltd. Distressed exchange U.K. Transportation 687.5 3/23/2021 B- B B 6/9/2017
Avation PLC Distressed exchange U.K. Transportation 350.0 3/26/2021 BB- B+ B 5/20/2015
Codere S.A. Distressed exchange Spain Leisure time/media 1,202.5 4/30/2021 - - CCC 11/6/2020
gategroup Holding AG Distressed exchange Switzerland Transportation 0.0 5/10/2021 B B- BB 2/28/2012
Joye Media SLU Missed interest Spain Leisure time/media 1,091.0 7/9/2021 B- - BB- 10/10/2018
Total 5,405
Note: Table does not include confidentially rated defaulters or their associated debt amounts. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.
  • No European corporate entities that we rated higher than 'B+' at the beginning of 2021 defaulted during the year.
  • Once again, defaults from the lowest ratings ('CCC'/'C') far exceeded those from any other rating (see table 3).

Table 3

Annual European Corporate Default Rates By Rating Modifier (%)
AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC/C
1981 0.00 n/a 0.00 n/a n/a 0.00 n/a n/a 0.00 n/a 0.00 n/a n/a n/a n/a n/a n/a
1982 0.00 n/a 0.00 n/a 0.00 0.00 n/a n/a 0.00 n/a 0.00 n/a n/a n/a n/a n/a n/a
1983 0.00 n/a 0.00 n/a 0.00 0.00 0.00 n/a 0.00 n/a 0.00 n/a n/a n/a n/a n/a n/a
1984 0.00 0.00 0.00 n/a 0.00 0.00 0.00 n/a 0.00 n/a n/a 0.00 0.00 n/a n/a n/a n/a
1985 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a n/a n/a n/a 0.00 0.00 n/a n/a n/a n/a
1986 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a n/a n/a n/a 0.00 0.00 n/a n/a n/a n/a
1987 0.00 0.00 0.00 0.00 n/a 0.00 0.00 n/a 0.00 n/a 0.00 0.00 n/a 0.00 n/a n/a n/a
1988 0.00 0.00 0.00 0.00 n/a 0.00 0.00 n/a 0.00 n/a 0.00 0.00 n/a 0.00 n/a n/a n/a
1989 0.00 0.00 0.00 0.00 n/a 0.00 0.00 n/a 0.00 n/a 0.00 n/a n/a 0.00 n/a n/a n/a
1990 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a n/a n/a 0.00 n/a n/a 0.00 n/a n/a n/a
1991 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a n/a n/a 0.00 n/a n/a n/a n/a 100.00 n/a
1992 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a 0.00 n/a n/a n/a n/a n/a n/a
1993 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a n/a 0.00 50.00 n/a n/a
1994 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a n/a n/a 0.00 n/a 0.00
1995 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a 0.00 33.33 0.00 0.00
1996 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1997 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a
1998 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a
1999 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.55 0.00 0.00 9.09 18.18 50.00
2000 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.45 0.00 0.00 0.00 0.00 0.00 10.53 33.33
2001 0.00 0.00 0.00 0.00 0.00 0.91 0.00 0.00 0.00 0.00 0.00 0.00 7.69 6.45 15.38 13.33 42.86
2002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.92 0.00 0.00 0.00 3.03 6.90 11.76 9.09 44.44 75.00
2003 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.06 1.96 0.00 0.00 0.00 0.00 0.00 0.00 60.00
2004 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 42.86
2005 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.08 0.00 0.00 0.00 14.29
2006 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.82 2.44 5.56 16.67
2007 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.55 25.00
2008 0.00 0.00 0.00 0.00 0.00 0.00 0.65 0.00 0.00 0.00 0.00 0.00 0.00 2.94 2.78 11.11 25.00
2009 0.00 0.00 0.00 0.00 0.00 0.58 0.00 0.00 0.00 0.00 0.00 0.00 2.94 0.00 19.23 11.76 57.14
2010 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10.53
2011 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.63 3.85 14.29
2012 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.08 0.00 0.00 3.70 25.00
2013 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.33 0.00 12.82 25.00
2014 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.31 4.00 3.57
2015 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.02 1.61 33.33
2016 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.48 5.17 13.79
2017 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.53 1.56 28.57
2018 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.57 2.86 18.42
2019 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.96 0.43 1.11 34.38
2020 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.74 2.00 2.01 6.48 45.83
2021 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.35 0.00 0.00 13.48
Average 0.00 0.00 0.00 0.00 0.00 0.04 0.02 0.03 0.03 0.19 0.00 0.24 0.84 0.93 5.29 9.38 27.24
Median 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.53 3.77 25.00
Std. Dev. 0.00 0.00 0.00 0.00 0.00 0.17 0.10 0.17 0.17 0.73 0.00 0.95 1.99 2.38 11.35 19.94 19.71
Min 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Max 0.00 0.00 0.00 0.00 0.00 0.91 0.65 0.92 1.06 3.45 0.00 4.55 7.69 11.76 50.00 100.00 75.00
Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Chart 2

image

Chart 3

image

Recent Defaults Remain Low, Despite Growth In Spec-Grade

The count of active corporate ratings in Europe has increased noticeably since the financial crisis, in large part driven by the increase in new issuers (see table 4). Of note, new speculative-grade issuers have made up most of the annual totals since 2010. For the purposes of our default studies, we consider issuers that have reemerged from a prior default as a new issuer once they receive their post-default rating. Many new issuers in this table are the result of a completed distressed exchange, particularly at the lowest rating levels. In 2021, we saw another year with a high number of new 'CCC'/'C' issuers (14), but eight of these were issuers that previously defaulted.

Table 4

Rating Classification Of New Europe Corporate Ratings*
First rating
Year AAA AA A BBB BB B CCC/C Total % IG % SG
1981 2 0 0 0 0 0 0 2 100.0 0.0
1982 5 0 1 0 0 0 0 6 100.0 0.0
1983 6 2 1 0 1 0 0 10 90.0 10.0
1984 4 3 0 0 0 0 0 7 100.0 0.0
1985 1 2 2 0 0 0 0 5 100.0 0.0
1986 8 0 1 1 0 0 0 10 100.0 0.0
1987 4 7 2 0 0 0 0 13 100.0 0.0
1988 3 10 1 0 0 0 0 14 100.0 0.0
1989 3 15 4 0 0 1 0 23 95.7 4.3
1990 11 14 11 0 0 0 0 36 100.0 0.0
1991 5 13 9 2 1 0 0 30 96.7 3.3
1992 4 13 14 7 0 2 0 40 95.0 5.0
1993 7 17 22 9 0 1 0 56 98.2 1.8
1994 4 18 36 13 2 4 0 77 92.2 7.8
1995 1 8 19 12 5 2 0 47 85.1 14.9
1996 8 24 40 18 7 3 0 100 90.0 10.0
1997 4 22 33 30 14 12 0 115 77.4 22.6
1998 2 33 52 19 23 27 1 157 67.5 32.5
1999 4 26 44 36 24 22 0 156 70.5 29.5
2000 3 20 46 39 17 21 0 146 74.0 26.0
2001 3 26 51 51 27 7 0 165 79.4 20.6
2002 1 12 30 27 28 13 1 112 62.5 37.5
2003 0 4 23 36 17 22 0 102 61.8 38.2
2004 3 5 45 26 32 33 1 145 54.5 45.5
2005 1 16 29 28 15 39 2 130 56.9 43.1
2006 2 11 24 24 11 26 1 99 61.6 38.4
2007 3 19 38 19 24 19 1 123 64.2 35.8
2008 0 20 44 14 10 10 2 100 78.0 22.0
2009 0 6 29 18 8 13 14 88 60.2 39.8
2010 0 6 16 12 15 49 7 105 32.4 67.6
2011 1 3 14 19 24 62 6 129 28.7 71.3
2012 0 3 12 27 22 64 4 132 31.8 68.2
2013 0 4 29 27 31 128 13 232 25.9 74.1
2014 0 3 17 32 32 131 4 219 23.7 76.3
2015 0 2 14 28 27 78 5 154 28.6 71.4
2016 0 1 14 26 19 73 11 144 28.5 71.5
2017 0 1 11 38 30 101 7 188 26.6 73.4
2018 0 2 16 34 44 127 3 226 23.0 77.0
2019 0 3 16 20 26 108 10 183 21.3 78.7
2020 0 4 8 25 19 65 19 140 26.4 73.6
2021 0 0 7 28 33 112 14 194 18.0 82.0
Total 103 398 825 745 588 1,375 126 4,160 49.8 50.2
*Includes issuers that are assigned a new rating after default as well as those companies that receive a rating for the first time. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®. Excludes rating as of Dec. 31, 1980.

Transportation companies had the highest default rate in 2021, at 4.4%, well higher than any other sector, but still below this sector's 2020 default rate of 6.7% (see table 5).

Table 5

Annual European Corporate Default Rates By Industry (%)
Year Aerospace / automotive / capital goods / metal Consumer / service sector Energy and natural resources Financial Institutions Forest and building products / homebuilders Health care / chemicals High technology / computers / office equipment
1991 0.00 0.00 0.00 0.00 n/a 0.00 33.33
1992 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1993 0.00 0.00 0.00 0.00 0.00 0.00 14.29
1994 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1995 0.00 0.00 0.00 0.69 0.00 0.00 0.00
1996 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1997 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1998 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1999 2.44 0.00 0.00 0.00 0.00 0.00 0.00
2000 2.00 0.00 0.00 0.00 0.00 0.00 0.00
2001 4.55 1.54 0.00 0.00 0.00 2.50 0.00
2002 2.63 1.41 0.00 0.33 0.00 2.08 0.00
2003 0.00 1.28 3.57 0.00 0.00 0.00 0.00
2004 2.25 0.00 0.00 0.00 0.00 0.00 0.00
2005 0.00 1.23 0.00 0.00 0.00 0.00 0.00
2006 1.83 0.00 0.00 0.00 0.00 0.00 0.00
2007 1.01 1.52 0.00 0.00 0.00 0.00 0.00
2008 0.00 4.48 0.00 0.28 0.00 1.85 0.00
2009 2.30 3.33 0.00 0.28 2.78 1.85 12.50
2010 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2011 0.00 0.00 0.00 0.00 2.78 1.79 0.00
2012 0.96 0.00 2.38 0.00 0.00 0.00 0.00
2013 0.88 0.00 2.00 0.32 5.00 0.00 0.00
2014 0.00 2.44 3.57 0.00 0.00 0.00 0.00
2015 0.70 0.00 7.69 1.22 1.92 0.00 0.00
2016 1.41 0.00 10.34 0.30 1.72 0.00 0.00
2017 0.77 3.87 5.45 0.30 1.59 1.79 2.04
2018 1.52 1.81 3.45 0.92 0.00 0.00 0.00
2019 2.86 2.62 3.08 0.00 0.00 2.22 0.00
2020 0.71 5.14 10.45 0.00 1.56 1.32 5.00
2021 0.68 1.85 1.61 0.29 0.00 0.00 0.00
Average 1.10 1.62 2.88 0.18 0.83 0.65 1.11
Weighted Average 0.95 1.05 1.73 0.16 0.58 0.50 2.17
Median 0.70 0.00 0.00 0.00 0.00 0.00 0.00
Std. Dev. 1.16 1.50 3.01 0.30 1.20 0.87 6.72
Min 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Max 4.55 5.14 10.45 1.22 5.00 2.50 33.33
Year Insurance Leisure time / media Real estate Telecommunications Transportation Utility
1991 0.00 0.00 n/a 0.00 0.00 0.00
1992 0.00 0.00 n/a 0.00 0.00 0.00
1993 0.00 0.00 n/a 0.00 0.00 0.00
1994 0.00 0.00 n/a 0.00 0.00 0.00
1995 0.00 0.00 0.00 0.00 0.00 0.00
1996 0.00 0.00 0.00 0.00 0.00 0.00
1997 0.00 0.00 0.00 0.00 0.00 0.00
1998 0.00 0.00 0.00 0.00 0.00 0.00
1999 0.00 0.00 0.00 0.00 17.24 0.00
2000 0.00 0.00 0.00 2.63 7.14 0.00
2001 1.03 5.71 0.00 6.67 3.33 0.00
2002 0.97 2.86 0.00 23.40 0.00 0.83
2003 0.93 0.00 0.00 8.33 2.70 0.81
2004 0.00 0.00 0.00 0.00 0.00 0.81
2005 0.00 0.00 0.00 0.00 2.38 0.00
2006 0.00 0.00 0.00 1.85 2.22 0.00
2007 0.00 0.00 0.00 0.00 0.00 0.00
2008 0.00 0.00 0.00 0.00 2.08 0.00
2009 0.00 7.32 7.14 6.52 2.44 0.00
2010 0.00 4.35 0.00 0.00 0.00 0.00
2011 0.00 4.17 0.00 0.00 0.00 0.00
2012 0.00 3.85 0.00 1.72 3.92 0.00
2013 0.00 5.56 0.00 1.56 4.08 0.00
2014 0.00 0.00 0.00 0.00 0.00 0.00
2015 0.00 0.99 0.00 0.00 1.56 0.00
2016 0.00 0.94 0.00 1.52 0.00 0.00
2017 0.00 0.00 0.00 1.64 0.00 0.00
2018 0.00 0.98 0.00 1.61 0.00 0.00
2019 0.00 0.93 0.00 0.00 0.00 0.00
2020 0.00 5.71 1.59 1.61 6.67 0.00
2021 0.00 2.91 0.00 0.00 4.41 0.00
Average 0.07 1.91 0.34 2.21 2.15 0.10
Weighted Average 0.09 1.49 0.32 1.91 1.94 0.08
Median 0.00 0.00 0.00 0.00 0.00 0.00
Std. Dev. 0.29 2.25 1.40 4.54 3.51 0.25
Min 0.00 0.00 0.00 0.00 0.00 0.00
Max 1.03 7.32 7.14 23.40 17.24 0.83
Includes investment-grade and speculative-grade-rated entities. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Due to the lingering impact from 2020, the aggregate 2021 default rates for nonfinancial companies still met or exceeded the long-term averages across their one-, three-, and 10-year averages. Similarly, defaults among financial services since 2015 have kept their 10-year default rates ending 2021 above historical averages (see table 6).

Table 6

Cumulative European Corporate Default Rates By Sector (%)
Financial Institutions Insurance All Financials All Nonfinancials
Year One-Year Three-Year 10-Year One-Year Three-Year 10-Year One-Year Three-Year 10-Year One-Year Three-Year 10-Year
1991 0.00 n/a n/a 0.00 n/a n/a 0.00 n/a n/a 1.96 n/a n/a
1992 0.00 n/a n/a 0.00 n/a n/a 0.00 n/a n/a 0.00 n/a n/a
1993 0.00 0.00 n/a 0.00 0.00 n/a 0.00 0.00 n/a 1.22 1.96 n/a
1994 0.00 0.00 n/a 0.00 0.00 n/a 0.00 0.00 n/a 0.00 0.00 n/a
1995 0.69 0.00 n/a 0.00 0.00 n/a 0.52 0.00 n/a 0.00 1.22 n/a
1996 0.00 0.93 n/a 0.00 0.00 n/a 0.00 0.68 n/a 0.00 0.00 n/a
1997 0.00 0.69 n/a 0.00 0.00 n/a 0.00 0.52 n/a 0.00 0.00 n/a
1998 0.00 0.00 n/a 0.00 0.00 n/a 0.00 0.00 n/a 0.00 0.00 n/a
1999 0.00 0.00 n/a 0.00 0.00 n/a 0.00 0.00 n/a 1.83 0.00 n/a
2000 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.04 1.63 1.96
2001 0.00 0.00 0.00 1.03 1.10 0.00 0.26 0.30 0.00 2.51 4.59 0.00
2002 0.33 0.00 0.00 0.97 2.04 0.00 0.49 0.56 0.00 3.31 6.48 1.22
2003 0.00 0.35 0.93 0.93 3.09 2.56 0.24 1.04 1.37 1.31 8.43 0.00
2004 0.00 0.33 0.69 0.00 1.94 2.08 0.00 0.74 1.04 0.54 5.07 0.79
2005 0.00 0.00 0.00 0.00 0.93 1.92 0.00 0.24 0.47 0.34 2.06 1.92
2006 0.00 0.00 0.00 0.00 0.00 2.82 0.00 0.00 0.78 0.65 1.27 3.52
2007 0.00 0.00 0.00 0.00 0.00 3.80 0.00 0.00 1.00 0.34 1.01 6.12
2008 0.28 0.00 0.00 0.00 0.00 3.30 0.19 0.00 0.90 0.87 1.47 8.26
2009 0.28 0.89 0.00 0.00 0.00 3.06 0.17 0.60 0.85 2.87 3.21 8.81
2010 0.00 0.56 0.35 0.00 0.00 3.09 0.00 0.37 1.04 0.37 3.64 9.79
2011 0.00 0.28 0.33 0.00 0.00 1.94 0.00 0.17 0.74 0.67 3.59 6.24
2012 0.00 0.00 0.32 0.00 0.00 0.93 0.00 0.00 0.47 1.07 2.04 3.55
2013 0.32 0.31 0.31 0.00 0.00 0.00 0.19 0.18 0.23 1.43 2.50 3.07
2014 0.00 0.31 0.30 0.00 0.00 0.00 0.00 0.19 0.21 0.60 2.91 3.54
2015 1.22 1.59 1.55 0.00 0.00 0.00 0.74 0.96 1.07 0.95 3.14 4.58
2016 0.30 1.21 2.07 0.00 0.00 0.00 0.19 0.74 1.39 1.13 2.17 5.58
2017 0.30 1.52 1.97 0.00 0.00 0.00 0.19 0.92 1.30 1.53 3.27 6.59
2018 0.92 0.61 1.69 0.00 0.00 0.00 0.59 0.37 1.05 0.90 3.20 6.28
2019 0.00 0.60 1.46 0.00 0.00 0.00 0.00 0.38 0.89 1.38 3.67 4.44
2020 0.00 0.92 1.53 0.00 0.00 0.00 0.00 0.59 0.92 3.35 4.89 6.16
2021 0.29 0.00 1.54 0.00 0.00 0.00 0.20 0.00 0.94 1.07 5.35 6.73
Average 0.16 0.38 0.68 0.09 0.31 1.16 0.13 0.33 0.76 1.07 2.72 4.51
Median 0.00 0.28 0.32 0.00 0.00 0.00 0.00 0.24 0.90 0.95 2.50 4.51
Std. Dev. 0.30 0.49 0.75 0.29 0.77 1.41 0.20 0.34 0.44 0.95 2.07 2.81
Min 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Max 1.22 1.59 2.07 1.03 3.09 3.80 0.74 1.04 1.39 3.35 8.43 9.79
Note: All Financials refers to financial institutions and insurance combined. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Cumulative Default Rates Rise With Relative Credit Risk

Our default studies all show a clear negative correspondence between ratings and defaults: The higher the issuer credit rating, the lower the observed default frequency, and vice versa. This relationship holds over time (see chart 4 and tables 7-8). For example, on average, from 1981 to 2021, European corporate issuers rated in the 'AA' category had a 0% default rate in the following year, a 0.02% default rate in the second year, and a 0.05% default rate in the third year. By comparison, issuers rated in the 'B' category recorded, on average, default rates of 2% in the first year, 5.2% in the second, and 8.2% in the third.

Europe has historically had fewer entities rated in the 'CCC'/'C' category than other regions, so the cumulative average default rate for this category might be less meaningful. The European region didn't have a significant proportion of speculative-grade ratings until 1996, so European cumulative average default rates are only now starting to fall more in line with the rates elsewhere.

Chart 4

image

Table 7

Comparison Of Corporate Cumulative Average Default Rates, 1981-2021 (%)
Europe From/To Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.02 0.05 0.10 0.15 0.21 0.23 0.26 0.29 0.29
A 0.03 0.06 0.10 0.14 0.22 0.28 0.36 0.39 0.41 0.42
BBB 0.06 0.16 0.28 0.40 0.51 0.72 0.91 1.07 1.24 1.41
BB 0.34 1.16 1.93 2.66 3.49 4.22 4.88 5.34 5.72 6.08
B 1.96 5.21 8.24 10.70 12.69 14.17 15.23 15.95 16.67 17.36
CCC/C 25.96 35.99 39.97 43.59 45.64 46.47 46.95 47.52 47.52 48.30
Investment grade 0.03 0.08 0.14 0.21 0.29 0.39 0.48 0.55 0.61 0.66
Speculative grade 2.76 5.37 7.50 9.27 10.75 11.86 12.70 13.27 13.78 14.30
All rated 0.77 1.49 2.07 2.55 2.95 3.27 3.52 3.68 3.81 3.94
Global From/To Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
AAA 0.00 0.03 0.13 0.24 0.34 0.45 0.50 0.58 0.64 0.69
AA 0.02 0.06 0.11 0.20 0.30 0.40 0.48 0.55 0.62 0.68
A 0.05 0.13 0.21 0.32 0.44 0.57 0.73 0.87 1.01 1.15
BBB 0.15 0.41 0.72 1.09 1.48 1.85 2.18 2.50 2.80 3.10
BB 0.60 1.88 3.34 4.81 6.19 7.46 8.57 9.55 10.44 11.23
B 3.18 7.46 11.26 14.29 16.67 18.58 20.10 21.33 22.45 23.49
CCC/C 26.55 36.75 41.80 44.74 46.91 47.95 49.08 49.83 50.48 51.06
Investment grade 0.08 0.23 0.40 0.61 0.83 1.05 1.26 1.45 1.63 1.81
Speculative grade 3.60 6.97 9.86 12.22 14.16 15.74 17.06 18.15 19.13 20.03
All rated 1.50 2.93 4.17 5.22 6.10 6.83 7.45 7.96 8.43 8.86
Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Table 8

Europe Corporate Cumulative Average Default Rates by Rating Modifier, 1981 to 2021 (%)
Time horizon
Rating Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.08 0.15 0.23 0.31 0.39 0.48 0.48
AA- 0.00 0.05 0.09 0.14 0.20 0.25 0.25 0.25 0.25 0.25
A+ 0.00 0.00 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04
A 0.06 0.12 0.15 0.18 0.21 0.32 0.43 0.47 0.47 0.47
A- 0.03 0.06 0.09 0.18 0.35 0.42 0.53 0.57 0.61 0.66
BBB+ 0.03 0.14 0.30 0.42 0.46 0.61 0.86 1.12 1.41 1.65
BBB 0.04 0.08 0.16 0.21 0.31 0.58 0.69 0.76 0.83 0.99
BBB- 0.12 0.31 0.44 0.66 0.90 1.15 1.34 1.45 1.56 1.56
BB+ 0.00 0.10 0.21 0.33 0.73 1.47 1.80 1.98 1.98 1.98
BB 0.18 0.66 1.07 1.62 2.34 2.47 2.61 2.77 3.32 3.53
BB- 0.82 2.67 4.45 5.91 7.26 8.60 10.12 11.16 11.75 12.61
B+ 0.95 2.96 5.44 7.28 9.20 10.11 10.80 11.07 11.68 12.38
B 1.57 4.16 6.72 9.44 11.42 13.00 14.11 15.42 16.08 16.90
B- 4.42 11.57 16.88 20.02 22.21 24.73 26.59 27.23 28.40 28.86
CCC/C 25.96 35.99 39.97 43.59 45.64 46.47 46.95 47.52 47.52 48.30
Investment Grade 0.03 0.08 0.14 0.21 0.29 0.39 0.48 0.55 0.61 0.66
Speculative Grade 2.76 5.37 7.50 9.27 10.75 11.86 12.70 13.27 13.78 14.30
All Rated 0.77 1.49 2.07 2.55 2.95 3.27 3.52 3.68 3.81 3.94
Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Rating Actions And Transitions Were Consistent With Global Trends

In 2021, downgrades were outnumbered by upgrades, lowering the downgrade-to-upgrade ratio below 1 (0.73) after reaching its 5th-highest reading in 2020 (7.3) (see table 9). This is a notable increase in aggregate credit quality relative to 2020, however, this was not enough to net out the severity of downgrades from 2020. The flow of rating actions was consistently positive in 2021, but the effects of 2020 linger. At the end of 2021, the ratio of speculative-grade ratings at 'B-' and lower was 28%, down only slightly from 2020's high point of 33%. By comparison, 22% of speculative-grade issuers fell into this lowest category of ratings at the end of 2019.

Table 9

Summary Of European Corporate Rating Activity (%)*
Year Issuers Upgrades (%) Downgrades (%)§ Defaults (%) Withdrawn ratings (%) Changed ratings (%) Unchanged ratings (%) Downgrade/upgrade ratio†
1981 11 0.0 9.1 0.0 0.0 9.1 90.9
1982 13 0.0 0.0 0.0 7.7 7.7 92.3
1983 18 0.0 11.1 0.0 0.0 11.1 88.9
1984 28 3.6 17.9 0.0 0.0 21.4 78.6 5.0
1985 35 2.9 2.9 0.0 0.0 5.7 94.3 1.0
1986 40 10.0 5.0 0.0 0.0 15.0 85.0 0.5
1987 50 2.0 2.0 0.0 4.0 8.0 92.0 1.0
1988 61 9.8 3.3 0.0 3.3 16.4 83.6 0.3
1989 73 8.2 1.4 0.0 1.4 11.0 89.0 0.2
1990 95 1.1 10.5 0.0 1.1 12.6 87.4 10.0
1991 131 2.3 18.3 0.8 0.0 21.4 78.6 8.0
1992 161 1.9 18.6 0.0 1.9 22.4 77.6 10.0
1993 198 1.5 12.6 0.5 2.5 17.2 82.8 8.3
1994 248 4.0 14.1 0.0 3.2 21.4 78.6 3.5
1995 319 6.3 15.0 0.3 0.3 21.9 78.1 2.4
1996 367 7.4 11.7 0.0 3.8 22.9 77.1 1.6
1997 455 6.8 8.8 0.0 5.5 21.1 78.9 1.3
1998 545 6.6 10.3 0.0 8.4 25.3 74.7 1.6
1999 659 6.2 13.2 0.9 11.2 31.6 68.4 2.1
2000 740 7.3 13.8 0.5 8.0 29.6 70.4 1.9
2001 825 6.1 16.2 1.5 7.3 31.0 69.0 2.7
2002 919 5.1 20.1 2.1 6.1 33.4 66.6 3.9
2003 957 5.1 16.8 0.8 6.3 29.0 71.0 3.3
2004 995 6.9 6.3 0.3 7.5 21.1 78.9 0.9
2005 1065 11.1 10.3 0.2 10.5 32.1 67.9 0.9
2006 1077 12.5 9.7 0.4 7.3 30.0 70.0 0.8
2007 1094 14.1 8.0 0.2 8.9 31.1 68.9 0.6
2008 1116 6.8 19.0 0.5 6.8 33.2 66.8 2.8
2009 1129 3.6 23.9 1.5 8.8 37.8 62.2 6.6
2010 1099 6.8 12.7 0.2 5.6 25.4 74.6 1.9
2011 1147 10.2 18.5 0.3 7.1 36.2 63.8 1.8
2012 1185 7.0 23.0 0.6 7.6 38.2 61.8 3.3
2013 1223 8.8 13.3 0.9 5.7 28.8 71.2 1.5
2014 1369 10.2 9.0 0.4 6.9 26.4 73.6 0.9
2015 1491 9.3 11.1 0.9 8.3 29.5 70.5 1.2
2016 1506 8.8 10.0 0.8 9.0 28.6 71.4 1.1
2017 1504 11.7 6.3 1.1 11.0 30.0 70.0 0.5
2018 1510 10.2 7.8 0.8 9.1 27.9 72.1 0.8
2019 1589 7.9 7.9 0.9 7.0 23.7 76.3 1.0
2020 1642 2.4 17.8 2.3 6.7 29.3 70.7 7.3
2021 1631 9.7 7.1 0.8 6.9 24.4 75.6 0.7
Weighted Average 8.0 12.6 0.8 7.4 28.8 71.2 1.6
Average 6.4 11.6 0.5 5.4 23.9 76.1 1.8
Median 6.8 11.1 0.3 6.7 25.3 74.7 1.6
Std. Dev. 3.7 5.9 0.6 3.4 8.6 8.6 1.6
Min 0.0 0.0 0.0 0.0 5.7 61.8 0.2
Max 14.1 23.9 2.3 11.2 38.2 94.3 10.0
*This table compares the net change in ratings from the first to the last day of each year. All intermediate ratings are disregarded. §Excludes downgrades to 'D', shown separately in the default column. †Downgrades to 'D' excluded in this metric. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Typically, nonfinancial companies have higher credit deterioration than financial services companies in a given year, and this remained true in 2021 (see chart 5). It is largely because nonfinancial companies typically have more ratings at the lowest end of speculative grade, which are both more volatile by definition and in practice.

Chart 5

image

Generally, European investment-grade companies tend to exhibit greater credit stability (as measured by the frequency of rating transitions) than their speculative-grade counterparts. About 87.5% of European corporate entities rated in 'AA' at the beginning of 2021 were still rated in that category at the end of the year, whereas the comparable measure for companies rated in the 'B' category was 80.1% (see table 10).

Table 10

2021 Corporate Transition Rates: Europe Versus Global
Europe From/To AAA AA A BBB BB B CCC/C D NR
AAA 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 87.50 11.36 0.00 0.00 0.00 0.00 0.00 1.14
A 0.00 0.51 92.80 3.60 0.00 0.00 0.00 0.00 3.08
BBB 0.00 0.00 3.50 90.89 1.40 0.00 0.00 0.00 4.21
BB 0.00 0.00 0.00 3.94 82.76 6.40 0.00 0.00 6.90
B 0.00 0.00 0.00 0.00 3.70 80.09 2.55 0.23 13.43
CCC/C 0.00 0.00 0.00 0.00 0.00 13.48 62.92 13.48 10.11
Global From/To AAA AA A BBB BB B CCC/C D NR
AAA 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 91.72 5.17 0.00 0.00 0.00 0.00 0.00 3.10
A 0.00 0.50 92.74 3.99 0.00 0.00 0.00 0.00 2.78
BBB 0.00 0.00 2.02 91.77 1.74 0.05 0.00 0.00 4.41
BB 0.00 0.00 0.00 3.88 85.33 3.20 0.17 0.00 7.42
B 0.00 0.00 0.00 0.10 4.59 77.04 2.01 0.52 15.74
CCC/C 0.00 0.00 0.00 0.00 0.00 21.81 50.88 11.01 16.30
Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

The 2021 pattern correlates with the long-term ratings behavior trend among all global rated issuers. This study--in line with our previous default studies--confirms that higher ratings are generally more stable than lower ratings. On average, of all of the European corporate issuers that we rated in the 'A' category, 88% retained ratings in the same category after one year, whereas only 73.6% of those rated in the 'B' category remained in the same rating category a year later (see table 11). Lower ratings also tend to exhibit less stability than higher ratings over multiyear time horizons (see table 12).

Table 11

Average One-Year Transition Rates, 1981 to 2021 (%)
Europe From/To AAA AA A BBB BB B CCC/C D NR
AAA 87.13 9.11 0.46 0.11 0.00 0.00 0.11 0.00 3.08
(8.71) (7.72) (1.36) (0.91) (0.00) (0.00) (0.76) (0.00) (4.45)
AA 0.26 86.27 9.49 0.52 0.00 0.00 0.00 0.00 3.46
(0.65) (6.92) (6.24) (1.14) (0.00) (0.00) (0.00) (0.00) (2.37)
A 0.01 1.75 88.02 5.24 0.14 0.03 0.00 0.03 4.78
(0.05) (1.76) (4.80) (3.35) (0.33) (0.40) (0.00) (0.09) (1.93)
BBB 0.00 0.08 3.91 85.70 3.34 0.26 0.08 0.06 6.56
(0.00) (1.20) (1.93) (4.63) (2.58) (0.49) (0.26) (0.19) (2.92)
BB 0.00 0.00 0.09 5.05 74.89 6.86 0.37 0.34 12.40
(0.00) (0.00) (0.58) (2.54) (6.56) (3.32) (0.94) (0.80) (4.35)
B 0.00 0.00 0.02 0.20 4.78 73.55 5.05 1.96 14.44
(0.00) (0.00) (0.19) (0.48) (3.30) (6.44) (3.26) (3.07) (5.05)
CCC/C 0.00 0.00 0.00 0.20 0.00 12.58 44.22 25.96 17.04
(0.00) (0.00) (0.00) (0.62) (0.00) (9.44) (16.69) (15.81) (8.94)
Global From/To AAA AA A BBB BB B CCC/C D NR
AAA 87.09 9.05 0.53 0.05 0.11 0.03 0.05 0.00 3.10
(7.20) (7.22) (0.82) (0.24) (0.27) (0.17) (0.34) (0.00) (2.43)
AA 0.48 87.32 7.72 0.46 0.05 0.06 0.02 0.02 3.88
(0.53) (5.16) (4.11) (0.67) (0.19) (0.20) (0.06) (0.07) (1.79)
A 0.02 1.56 88.73 4.97 0.25 0.11 0.01 0.05 4.29
(0.09) (1.06) (3.76) (2.12) (0.38) (0.24) (0.06) (0.10) (1.67)
BBB 0.00 0.08 3.19 86.72 3.48 0.42 0.09 0.15 5.86
(0.03) (0.15) (1.61) (3.96) (1.58) (0.64) (0.20) (0.24) (1.53)
BB 0.01 0.02 0.10 4.52 78.12 6.66 0.53 0.60 9.42
(0.05) (0.08) (0.23) (1.97) (4.53) (3.10) (0.69) (0.80) (2.16)
B 0.00 0.02 0.06 0.15 4.54 74.73 4.81 3.18 12.51
(0.00) (0.08) (0.19) (0.20) (2.15) (3.90) (2.75) (3.01) (2.25)
CCC/C 0.00 0.00 0.09 0.16 0.49 13.42 43.89 26.55 15.39
(0.00) (0.00) (0.38) (0.59) (0.85) (7.62) (8.39) (11.94) (4.70)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Table 12

Average Three-Year Transition Rates, 1981-2021 (%)
Europe From/To AAA AA A BBB BB B CCC/C D NR
AAA 64.99 23.34 2.40 0.11 0.23 0.00 0.11 0.00 8.81
(15.27) (12.81) (3.39) (0.76) (1.21) (0.00) (0.82) (0.00) (8.93)
AA 0.70 64.65 21.73 2.32 0.32 0.00 0.02 0.05 10.20
(1.40) (11.81) (9.72) (2.40) (0.54) (0.00) (0.12) (0.16) (4.30)
A 0.02 4.02 68.97 11.90 0.85 0.17 0.09 0.10 13.88
(0.10) (3.14) (8.25) (4.29) (1.43) (0.56) (0.32) (0.20) (3.81)
BBB 0.00 0.23 9.52 64.30 6.32 1.01 0.25 0.30 18.06
(0.00) (2.21) (2.64) (7.98) (3.17) (1.00) (0.53) (0.73) (5.54)
BB 0.00 0.00 0.46 11.62 43.71 10.74 0.74 1.87 30.86
(0.00) (0.00) (0.87) (3.57) (8.53) (3.70) (1.08) (2.54) (7.15)
B 0.00 0.00 0.00 0.67 8.40 38.20 5.82 8.51 38.40
(0.00) (0.00) (0.00) (1.13) (4.69) (7.92) (2.76) (6.22) (9.11)
CCC/C 0.00 0.00 0.00 0.28 0.84 14.61 8.43 40.73 35.11
(0.00) (0.00) (0.00) (0.95) (2.23) (11.14) (8.71) (16.33) (14.32)
Global From/To AAA AA A BBB BB B CCC/C D NR
AAA 65.54 22.15 2.32 0.32 0.26 0.08 0.11 0.13 9.08
(11.62) (12.29) (1.74) (0.76) (0.53) (0.29) (0.41) (0.37) (5.26)
AA 1.11 67.26 18.04 1.92 0.32 0.20 0.03 0.11 11.01
(0.86) (9.57) (6.13) (1.42) (0.50) (0.44) (0.07) (0.18) (3.98)
A 0.05 3.67 70.68 11.14 1.10 0.38 0.08 0.22 12.67
(0.09) (2.18) (7.18) (2.92) (1.01) (0.57) (0.13) (0.27) (3.42)
BBB 0.02 0.24 7.90 66.78 6.71 1.42 0.25 0.74 15.93
(0.06) (0.37) (2.90) (7.56) (1.99) (1.26) (0.35) (0.90) (3.29)
BB 0.01 0.05 0.43 10.32 49.14 11.30 1.15 3.39 24.22
(0.05) (0.12) (0.65) (3.48) (7.59) (2.57) (0.85) (3.34) (3.57)
B 0.00 0.02 0.16 0.63 9.09 42.39 5.26 11.56 30.89
(0.05) (0.10) (0.39) (0.74) (3.56) (5.13) (2.05) (6.76) (4.54)
CCC/C 0.00 0.00 0.11 0.50 1.51 16.52 9.73 42.29 29.35
(0.00) (0.00) (0.46) (1.11) (1.52) (6.72) (5.59) (11.54) (7.86)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

The transitions at the rating modifier level (that is, including the "plus" or "minus" identifiers) also generally exhibit the same relationship, although differences in sample sizes occasionally create slight variations between adjacent rating levels (see table 13).

Table 13

One-Year Weighted-Average Transition Rates For European Corporates By Rating Modifier, 1981-2021, (%)
Rating
From/To AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- BB+ BB BB- B+ B B- CCC D NR
AAA 87.13 6.83 1.59 0.68 0.11 0.34 0.00 0.00 0.11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.11 0.00 3.08
(8.71) (6.74) (2.56) (1.60) (0.53) (1.03) (0.00) (0.00) (0.91) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.76) (0.00) (4.45)
AA+ 1.16 77.65 14.07 2.98 0.50 0.50 0.33 0.17 0.00 0.17 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.48
(3.14) (13.41) (11.34) (4.62) (1.34) (1.45) (1.12) (0.78) (0.00) (0.76) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (3.28)
AA 0.14 1.35 79.70 9.83 3.56 1.14 0.43 0.28 0.07 0.07 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.42
(0.68) (2.41) (13.59) (9.34) (5.53) (1.82) (0.79) (0.83) (0.50) (0.29) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (3.70)
AA- 0.09 0.05 3.52 77.41 11.34 2.33 0.87 0.23 0.32 0.09 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.75
(0.38) (0.24) (3.79) (8.58) (6.92) (3.20) (1.52) (0.52) (1.18) (0.44) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (3.22)
A+ 0.00 0.00 0.26 5.06 75.91 10.45 1.95 0.45 0.26 0.11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.55
(0.00) (0.00) (0.70) (5.39) (9.30) (6.31) (1.75) (0.82) (0.82) (0.32) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (2.93)
A 0.00 0.11 0.09 0.40 5.94 76.63 8.85 2.05 0.66 0.20 0.03 0.03 0.00 0.06 0.00 0.00 0.00 0.06 4.91
(0.00) (0.49) (0.29) (1.23) (4.59) (8.32) (6.02) (2.20) (1.11) (0.49) (0.16) (0.16) (0.00) (0.87) (0.00) (0.00) (0.00) (0.20) (3.03)
A- 0.03 0.00 0.08 0.11 0.53 6.78 77.15 8.27 1.85 0.70 0.20 0.08 0.06 0.03 0.00 0.00 0.00 0.03 4.09
(0.12) (0.00) (0.24) (0.32) (2.34) (4.54) (7.51) (3.84) (3.38) (0.91) (0.53) (0.28) (0.22) (0.76) (0.00) (0.00) (0.00) (0.13) (2.42)
BBB+ 0.00 0.00 0.03 0.07 0.21 0.58 7.59 74.99 8.55 1.37 0.48 0.45 0.14 0.10 0.03 0.00 0.07 0.03 5.29
(0.00) (0.00) (0.16) (0.33) (0.46) (1.53) (4.05) (7.59) (4.94) (1.67) (0.73) (0.82) (0.31) (0.39) (0.18) (0.00) (0.24) (0.18) (2.83)
BBB 0.00 0.04 0.04 0.00 0.07 0.26 0.86 7.87 74.06 7.27 1.54 0.67 0.15 0.07 0.19 0.07 0.04 0.04 6.75
(0.00) (1.96) (0.27) (0.00) (0.30) (0.65) (1.06) (5.10) (7.71) (4.07) (2.21) (1.05) (0.34) (0.28) (0.50) (0.30) (0.27) (0.20) (4.46)
BBB- 0.00 0.00 0.06 0.00 0.12 0.18 0.18 0.95 11.55 69.03 6.39 1.84 0.59 0.12 0.24 0.00 0.18 0.12 8.47
(0.00) (0.00) (0.31) (0.00) (0.56) (0.57) (0.69) (1.00) (6.30) (8.08) (4.91) (2.93) (1.14) (0.44) (0.78) (0.00) (0.73) (0.56) (4.33)
BB+ 0.00 0.00 0.00 0.00 0.10 0.00 0.10 0.38 0.67 12.12 62.12 9.62 2.60 1.06 0.48 0.10 0.19 0.00 10.48
(0.00) (0.00) (0.00) (0.00) (0.35) (0.00) (1.57) (1.16) (1.44) (5.92) (11.44) (5.88) (4.13) (1.58) (1.09) (0.39) (0.89) (0.00) (6.00)
BB 0.00 0.00 0.00 0.00 0.00 0.00 0.09 0.27 0.09 1.35 11.60 60.97 7.64 2.43 0.63 0.09 0.63 0.18 14.03
(0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.52) (0.96) (1.76) (2.43) (5.78) (9.57) (4.65) (2.69) (1.25) (0.51) (1.71) (0.82) (7.71)
BB- 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.36 0.36 1.18 10.66 58.20 11.84 3.19 0.55 0.27 0.82 12.57
(0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (1.02) (0.92) (3.36) (5.40) (10.31) (5.27) (2.50) (1.16) (0.82) (1.80) (5.62)
B+ 0.00 0.00 0.00 0.00 0.00 0.07 0.00 0.14 0.07 0.14 0.61 2.18 9.61 56.71 12.41 2.39 1.57 0.95 13.16
(0.00) (0.00) (0.00) (0.00) (0.00) (0.50) (0.00) (0.56) (0.23) (0.48) (0.82) (4.94) (5.05) (8.73) (5.98) (2.94) (3.09) (2.09) (6.47)
B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.05 0.10 0.10 0.14 1.14 6.23 61.80 10.37 3.33 1.57 15.18
(0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.28) (0.44) (0.46) (0.97) (1.55) (4.36) (9.68) (6.21) (3.04) (3.27) (5.77)
B- 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.11 0.00 0.00 0.00 0.43 1.19 10.03 54.58 14.46 4.42 14.78
(0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.96) (0.00) (0.00) (0.00) (0.99) (1.48) (4.83) (9.89) (8.11) (6.58) (7.23)
CCC/C 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.20 0.00 0.00 0.00 0.00 0.20 1.42 10.95 44.22 25.96 17.04
(0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.62) (0.00) (0.00) (0.00) (0.00) (1.03) (2.36) (8.07) (16.69) (15.81) (8.94)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Time To Default Shows Strong, Positive Relationship With Rating Quality

Higher-rated corporate entities generally have a longer time to default than their lower-rated counterparts when using the original ratings as the reference points (see table 14). European corporate entities that we initially rated in the 'B' category, but that later defaulted, took an average of 3.9 years to default--less than the average of 7.5 years for defaulting entities we originally rated in the 'A' category. For the corporate entities that defaulted in 2021, an average of four years elapsed between the initial rating date and the default date, slightly less than the long-term average of 4.3 years.

Table 14

Time To Default From Original Rating For European Corporate Defaulters
Original rating Defaults Average years from original rating* Median years from original rating St. dev. of years from original rating
AAA 0 N/A N/A N/A
AA 1 8.42 8.42 N/A
A 11 7.54 6.25 4.28
BBB 18 8.45 7.33 5.42
BB 50 5.65 4.55 4.22
B 146 3.93 3.39 2.49
CCC/C 45 1.49 1.07 1.88
Total 271 4.30 3.23 3.61
*Or Dec. 31, 1980, whichever is greater. N/A—Not available. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

For the entire long-term history of European corporate defaults (271 for 1981-2021), the average time to default across all rating categories was 4.3 years, compared with 5.9 years globally (see chart 6). The relationship between the initial rating and the time to default is less clear in Europe, partly because of smaller sample sizes. In the 41 years ended in 2021, 1,767 companies with initial ratings in the 'B' category defaulted globally, and only 146 were from Europe.

In 2021, about half of the defaulters in Europe were initially rated in the 'B' category. Among the 2021 defaults, only one was initially rated investment-grade (Vallourec).

As expected, the average time to default for post-original ratings (in other words, excluding initial ratings) also shows that higher-rated corporate issuers generally take longer to default. However, the time to default is somewhat shorter than from initial ratings (see chart 7).

Chart 6

image

Chart 7

image

Gini Coefficients And Lorenz Curves

A quantitative analysis of ratings performance shows that our European corporate ratings continue to correlate with the level of default risk across different time horizons.

To measure ratings performance, we plot the cumulative share of defaulters against the cumulative share of issuers by rating in a Lorenz curve, which visually represents the ratings' rank-ordering power and is summarized quantitatively by the Gini coefficient (see definitions and methodology in Appendix II).

Over the long term, the European corporate weighted average one-year Gini coefficient was 90.1%, the three-year average was 85.2%, and the five-year average was 82.3% (see table 15 and charts 8-10).

Table 15

Corporate Gini Coefficients By Region (%)
Time horizon
Region One-year Three-year Five-year Seven-year
Global Weighted Ave. 82.58 75.35 71.59 69.07
Average 85.47 78.63 74.42 71.25
StDev (5.43) (5.14) (5.34) (5.20)
U.S. Weighted Ave. 80.58 72.86 69.03 66.48
Average 84.36 76.51 72.06 68.79
StDev (6.81) (6.57) (6.58) (6.13)
Europe Weighted Ave. 90.06 85.20 82.34 79.58
Average 91.61 87.39 82.51 76.98
StDev (4.77) (5.35) (6.24) (10.67)
Note: Numbers in parentheses are standard deviations. Average and standard deviations for Europe are from 1996-2021. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

The Gini coefficients decline as the time horizon lengthens because longer times allow for more opportunities for credit degradation among higher-rated entities. In the one-year Lorenz curve for European corporate issuers, for example, 97% of defaults were in speculative-grade rating categories, while the speculative-grade segment accounted for only 27.2% of all European corporate issuers (see chart 8).

The five-year Lorenz curve shows speculative-grade issuers accounted for 91.2% of defaulters and only 23% of the entire sample (see chart 10). If the rank ordering of ratings had little predictive value, the cumulative share of defaulting entities and the cumulative share of all entities would be nearly the same, producing a Gini coefficient close to zero.

Chart 8

image

Chart 9

image

Chart 10

image

Appendix I: Calculation Approach And Definitions

This long-term corporate default and rating transition study uses S&P Global Market Intelligence's 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. We do not require all issuers with debt that we rate 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 used for the proxy because this rating 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 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. 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, each annual default and transition study reports statistics back to Dec. 31, 1980, and is therefore self-contained and effectively supersedes all previous editions.

Issuers included in this study

This study analyzes the rating histories of 4,171 European companies that we rated as of Dec. 31, 1980, or that we first rated between that date and Dec. 31, 2021. These include industrials, utilities, financial institutions, and insurance companies in the region 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.

For the purposes of this study, Europe consists of Austria, Belgium, the British Virgin Islands, Bulgaria, the Channel Islands, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, Ireland, the Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Monaco, Montenegro, the Netherlands, Norway, Poland, Portugal, Republic of Moldova, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the U.K.

To avoid overcounting, we exclude subsidiaries with debt that is fully guaranteed by a parent or with default risk that we consider identical to that of a parent. The latter case arises for companies with obligations that are not legally guaranteed by a parent but that have operating or financing activities that are so entwined with those of the parent that a default of one and not the other would be highly unlikely, in our view. At times, however, a parent's guarantee might not have yet covered some of these subsidiaries, or the relationship that combines the default risk of parent and subsidiary might have come to an end or might not have begun. We include such subsidiaries in the dataset for the period during which they had distinct and separate risk of default.

Issuers with withdrawn ratings

We withdraw ratings when an entity's entire debt is paid off or when the program or programs that we rate are terminated and the relevant debt extinguished. We may also withdraw ratings at the issuer's request, as a result of a merger or acquisition, or when a company no longer provides all of the information we require to continue surveillance on the ratings.

Definition of default

For the purposes of this study, we deem 'D' (default), 'SD' (selective default), and 'R' (regulatory intervention) issuer credit ratings to be defaults. We assume the default takes place on the earliest of the date we revised the rating(s) to 'D', 'SD', or 'R'; the date the issuer missed a debt payment; the date a distressed exchange offer was announced; or the date the debtor filed for bankruptcy.

An obligor rated 'SD' or 'D' 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. We consider an obligor to be in default unless we believe 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.

We assign a 'D' rating when we believe that the default will be a general default and that the obligor will fail to pay all or almost all of its obligations as they come due. We assign an 'SD' rating when we believe 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. We also lower our rating on an obligor to 'D' or 'SD' if it is conducting a distressed exchange offer, whereby one or more financial obligations are either repurchased for an amount of cash or replaced by other instruments with a total value that is less than par.

An obligor rated 'R' is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others.

When an issuer defaults, we commonly subsequently withdraw the 'D' or 'SD' 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 on 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 rating history prior to the earlier default.

Many practitioners use statistics from this default study to estimate "probability of default" and "probability of rating transition," based on observed historical default and transition frequencies. It is important to note that we do not ascribe a specific default probability to each rating category.

Calculations

Static pool methodology.   S&P Global Ratings Research conducts its default studies on the basis of groups of ratings called static pools. For the purposes of this study, we form static pools by grouping issuers 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. We assign all companies included in the study 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.

We use the static pool methodology to avoid certain pitfalls in estimating default rates, like by ensuring that default rates account for rating migration and can 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 viewed as a buy-and-hold portfolio. Because errors, if any, are corrected in each update and because the criteria for inclusion or exclusion of companies 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 with ratings we have withdrawn or discontinued--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 companies 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 entity 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 2001 static pool consists of all companies rated as of 12:01 a.m. on Jan. 1, 2001. Adding those companies first rated in 2001 to the surviving members of the 2001 static pool forms the 2002 static pool. All rating changes that took place are reflected in the newly formed 2002 static pool through the ratings on these entities as of 12:01 a.m. on Jan. 1, 2002.

Consider the following example: An issuer is originally rated 'BB' in mid-2000, and we downgrade the company to 'B' in 2002. This is followed by a rating withdrawal in 2003 and a default in 2004. We would include this hypothetical company in the 2001 and 2002 static pools with the 'BB' rating, which it held at the beginning of those years. Likewise, we would include it in the 2003 static pool with the 'B' rating. It would not be part of the 2004 static pool because it was not rated as of the first day of that year, and we would not include it in any pool after the last day of 2004 because we had withdrawn our rating on the company by then. Yet each of the three static pools in which we include this company (2001-2003) would record its 2004 default at the appropriate time horizon.

Default rate calculation.   We calculate annual default rates for each static pool, first in units and later as percentages of the 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.   We base all default rates that appear in this study on the number of issuers rather than the currency amounts affected by defaults or rating changes. Although currency 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.   In this study, we also calculate and present average cumulative default rates for different time horizons. For example, table 7 shows that the one-year average cumulative default rate for 'A' rated European corporate issuers is 0.03% and the three-year average is 0.10%.

We first consider the static pool of ratings at the beginning of each calendar year. For each static pool, we calculate the marginal default rates for each calendar year after the static pool's formation. These one-year marginal default rates are "conditional on survival." For example, the marginal default rate for the third year is equal to the number of defaults during the third year divided by the number of ratings from the static pool that had "survived" (in other words, not moved to 'D') by the beginning of the third year.

We then average the marginal default rates for each time horizon across static pools, weighting by the number of surviving ratings at the beginning of each time horizon, to give an average marginal default rate per time horizon, as well as average marginal survival rates (equal to one minus the average marginal default rate). Finally, the average cumulative default rate for each time horizon is calculated as one minus the product of marginal survival rates up to that time horizon.

Transition analysis

Transition rates compare the 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 compare 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 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 companies first rated on Jan. 1, 2021, had only one. Each one-year transition matrix displays all rating movements between rating 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 rating categories from 'AAA' to 'D', plus NR.

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, 2014, 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 approach 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 either rated 'D' or not rated as of Dec. 31 of that particular year.

Multiyear transitions

We also calculate multiyear transitions for periods of two to 10 years. In this case, we compare the rating at the beginning of the multiyear period with the rating at the end. For example, three-year transition matrices are 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 is identical to the one we use for single-year transitions.

We calculate 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. 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 rates, as well as the magnitude of rating changes, throughout this study. However, some transition tables may show only 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 rating transitions because the rating remained within the rating category.

Standard deviations

Many of the tables and charts in this study display averages of default rates, transition rates, and Gini coefficients. Often these are issuer-weighted averages. Default and transition rates can fluctuate depending on many circumstances specific to particular time frames, industries, and geographic regions. As a supplement to many of the averages and time series we present in this study, we also show standard deviations to provide a gauge of the dispersion of data behind the averages.

For the transition matrices, the standard deviation for each cell in a given matrix is a weighted standard deviation, calculated using the data from each of the underlying static pool years that contribute to the averages, weighted by that static pool year's issuer base for each rating level. For example, in the average one-year transition matrix, each cell's weighted standard deviation is calculated from the series of that particular cell in each of the 41 static pools beginning with the 1981 static pool and ending with the 2021 static pool. The squared difference between each static pool's transition rate and the weighted average--which is the data point in each cell--is multiplied by each static pool's weight. These weights are based on each static pool 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.

We derive Gini coefficients' standard deviations from the time series for all of their constituent annual static pools. As an example, we calculate the standard deviation for the seven-year weighted average global Gini coefficient from the time series of all available seven-year Gini coefficients by static pool. In this case, these are the seven-year Gini coefficients beginning with the 1981 static pool through the 2015 static pool. We calculated standard deviations for Gini coefficients in this study as the standard deviations of a sample, rather than as the standard deviations of a population.

Appendix II: Gini Coefficient Methodology

We calculate Gini coefficients as one way to quantify our ratings' rank-ordering power of creditworthiness, based on observed default rates.

To measure relative ratings performance, we use 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 level, while the y-axis represents the cumulative share of defaulters, also arranged by rating level. For 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.

We illustrate the procedure for calculating the Gini coefficient in chart 11. 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 sum of area A and area B. The Gini coefficient can therefore range from 0% (if the Lorenz curve follows the random curve) to 100% (if the Lorenz curve follows the ideal curve). In general, therefore, the higher the Gini coefficient, the greater the link between our ratings and observed default propensity.

If our ratings only randomly approximated default propensity, the Lorenz curve would fall along the diagonal shown as the random curve in chart 11, and the Gini coefficient would be 0%. On the other hand, if all defaults occurred only among the lowest-rated issuers, with no defaults among the higher-rated issuers, the Lorenz curve would lie along the line shown as the ideal curve in chart 11, and the Gini coefficient would be 100%. Typically, the observed Lorenz curve falls between the ideal and random curves, and we use the Gini coefficient as a summary statistic to quantify its proximity to the ideal curve.

Chart 11

image

Appendix III: Detailed Cumulative Default And Transition Data

Table 16

Static Pool Cumulative Corporate Default Rates Among All European Ratings, 1981 To 2021 (%)
Rating: All rated
Time horizon
Year Issuers Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15
1981 11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1982 13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1983 18 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1984 28 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1985 35 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1986 40 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1987 50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1988 61 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1989 73 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1990 95 0.00 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05
1991 131 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76
1992 161 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1993 198 0.51 0.51 0.51 0.51 0.51 0.51 0.51 0.51 0.51 0.51 0.51 0.51 0.51 0.51 0.51
1994 248 0.00 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.81 0.81 0.81 0.81 0.81 0.81 0.81
1995 319 0.31 0.31 0.31 0.31 0.31 0.31 0.31 0.94 0.94 0.94 0.94 0.94 0.94 0.94 0.94
1996 367 0.00 0.00 0.00 0.00 0.00 0.00 0.82 0.82 1.09 1.09 1.09 1.09 1.09 1.09 1.09
1997 455 0.00 0.00 0.00 0.00 0.00 0.88 1.76 1.98 1.98 1.98 1.98 1.98 1.98 1.98 1.98
1998 545 0.00 0.73 0.73 1.28 2.20 2.94 3.30 3.30 3.30 3.30 3.30 3.30 3.30 3.30 3.30
1999 659 0.91 1.37 2.43 3.34 4.10 4.40 4.40 4.55 4.55 4.55 4.55 4.55 4.55 4.55 4.55
2000 740 0.54 1.76 3.65 4.32 4.59 4.59 4.73 4.86 4.86 5.00 5.00 5.00 5.00 5.00 5.14
2001 825 1.45 3.88 4.97 5.21 5.33 5.45 5.58 5.58 5.70 5.70 5.70 5.70 5.70 5.82 6.30
2002 919 2.07 2.94 3.16 3.26 3.48 3.59 3.70 3.81 3.81 3.81 3.92 4.03 4.13 4.57 4.68
2003 957 0.84 1.04 1.25 1.46 1.57 1.67 1.99 1.99 1.99 2.19 2.30 2.40 2.82 2.93 3.24
2004 995 0.30 0.50 0.70 0.80 1.11 1.51 1.51 1.51 1.71 1.81 1.81 2.21 2.31 2.61 2.61
2005 1,065 0.19 0.47 0.56 0.85 1.31 1.50 1.69 1.88 2.07 2.07 2.54 2.63 2.82 2.82 2.91
2006 1,077 0.37 0.56 0.84 1.58 1.76 2.04 2.32 2.60 2.60 3.06 3.25 3.44 3.44 3.44 3.44
2007 1,094 0.18 0.82 2.01 2.10 2.38 2.74 3.02 3.02 3.47 3.66 3.84 3.84 3.84 3.93 3.93
2008 1,116 0.54 1.97 2.06 2.33 2.78 3.14 3.23 3.67 3.85 4.03 4.03 4.03 4.30 4.30
2009 1,129 1.51 1.59 1.86 2.30 2.66 2.75 3.19 3.45 3.63 3.63 3.63 3.90 3.90
2010 1,099 0.18 0.55 1.00 1.46 1.55 2.09 2.46 2.64 2.64 2.64 2.91 2.91
2011 1,147 0.35 0.78 1.39 1.66 2.53 2.88 3.05 3.05 3.05 3.66 3.66
2012 1,185 0.59 1.35 1.69 2.62 3.04 3.29 3.38 3.46 4.05 4.14
2013 1,223 0.90 1.31 2.21 2.62 3.11 3.27 3.43 4.01 4.17
2014 1,369 0.37 1.24 1.61 2.26 2.56 2.92 3.80 3.94
2015 1,491 0.87 1.61 2.41 2.88 3.55 4.69 4.83
2016 1,506 0.80 1.73 2.19 3.05 4.25 4.52
2017 1,504 1.06 1.66 2.53 4.06 4.32
2018 1,510 0.79 1.79 3.44 3.84
2019 1,589 0.94 2.96 3.65
2020 1,642 2.31 3.05
2021 1,631 0.80
Summary Statistics Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15
Marginal average 0.77 0.73 0.59 0.49 0.41 0.33 0.26 0.16 0.14 0.13 0.09 0.09 0.08 0.08 0.09
Cumulative average 0.77 1.49 2.07 2.55 2.95 3.27 3.52 3.68 3.81 3.94 4.03 4.11 4.19 4.27 4.36
Standard deviation 0.58 0.99 1.30 1.49 1.64 1.71 1.73 1.74 1.77 1.80 1.80 1.83 1.88 1.91 1.95
Median 0.35 0.75 0.84 1.17 1.31 1.50 1.69 1.69 1.71 1.45 1.09 1.07 1.05 1.00 0.94
Min 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Max 2.31 3.88 4.97 5.21 5.33 5.45 5.58 5.58 5.70 5.70 5.70 5.70 5.70 5.82 6.30
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Table 17

Static Pool Cumulative Corporate Default Rates Among Investment-Grade European Ratings, 1981 To 2021 (%)
Rating: Investment-Grade
Time horizon
Year Issuers Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15
1981 10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1982 12 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1983 17 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1984 26 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1985 33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1986 38 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1987 47 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1988 58 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1989 71 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1990 92 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1991 129 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1992 159 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1993 193 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1994 244 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.41 0.41 0.41 0.41 0.41 0.41 0.41
1995 308 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.32 0.32 0.32 0.32 0.32 0.32 0.32 0.32
1996 350 0.00 0.00 0.00 0.00 0.00 0.00 0.29 0.29 0.57 0.57 0.57 0.57 0.57 0.57 0.57
1997 432 0.00 0.00 0.00 0.00 0.00 0.23 0.93 1.16 1.16 1.16 1.16 1.16 1.16 1.16 1.16
1998 502 0.00 0.00 0.00 0.20 0.60 1.20 1.59 1.59 1.59 1.59 1.59 1.59 1.59 1.59 1.59
1999 564 0.00 0.00 0.18 0.53 1.06 1.42 1.42 1.60 1.60 1.60 1.60 1.60 1.60 1.60 1.60
2000 623 0.16 0.32 0.64 1.12 1.44 1.44 1.61 1.61 1.61 1.61 1.61 1.61 1.61 1.61 1.77
2001 695 0.14 0.43 1.15 1.44 1.44 1.58 1.58 1.58 1.58 1.58 1.58 1.58 1.58 1.73 2.30
2002 776 0.13 0.64 0.77 0.77 0.90 0.90 1.03 1.03 1.03 1.03 1.03 1.16 1.29 1.80 1.93
2003 796 0.25 0.25 0.25 0.25 0.25 0.38 0.63 0.63 0.63 0.63 0.75 0.88 1.38 1.51 1.51
2004 809 0.00 0.00 0.00 0.00 0.12 0.37 0.37 0.37 0.37 0.49 0.49 0.99 1.11 1.11 1.11
2005 854 0.00 0.00 0.00 0.12 0.35 0.35 0.35 0.35 0.47 0.47 0.94 1.05 1.05 1.05 1.05
2006 855 0.00 0.00 0.00 0.23 0.23 0.23 0.23 0.35 0.35 0.82 0.82 0.82 0.82 0.82 0.82
2007 885 0.00 0.23 0.45 0.45 0.45 0.45 0.45 0.45 0.90 0.90 0.90 0.90 0.90 0.90 0.90
2008 916 0.11 0.33 0.33 0.33 0.33 0.44 0.44 0.87 0.87 0.87 0.87 0.87 0.87 0.87
2009 931 0.11 0.11 0.11 0.11 0.21 0.21 0.64 0.64 0.64 0.64 0.64 0.64 0.64
2010 902 0.00 0.00 0.00 0.11 0.11 0.55 0.55 0.55 0.55 0.55 0.55 0.55
2011 894 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.11 0.11
2012 871 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.11 0.23
2013 840 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.12 0.24
2014 853 0.00 0.00 0.00 0.00 0.00 0.12 0.23 0.35
2015 874 0.00 0.00 0.00 0.00 0.00 0.23 0.34
2016 890 0.00 0.00 0.00 0.00 0.22 0.22
2017 886 0.00 0.00 0.00 0.11 0.11
2018 895 0.00 0.00 0.11 0.11
2019 915 0.00 0.00 0.00
2020 929 0.00 0.00
2021 907 0.00
Summary Statistics Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15
Marginal average 0.03 0.05 0.06 0.07 0.08 0.10 0.10 0.06 0.06 0.05 0.04 0.06 0.05 0.06 0.06
Cumulative average 0.03 0.08 0.14 0.21 0.29 0.39 0.48 0.55 0.61 0.66 0.70 0.75 0.81 0.86 0.93
Standard deviation 0.06 0.14 0.25 0.32 0.39 0.46 0.52 0.54 0.55 0.55 0.57 0.59 0.62 0.68 0.75
Median 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.20 0.32 0.37 0.41 0.48 0.41 0.37 0.32
Min 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Max 0.25 0.64 1.15 1.44 1.44 1.58 1.61 1.61 1.61 1.61 1.61 1.61 1.61 1.80 2.30
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Table 18

Static Pool Cumulative Corporate Default Rates Among Speculative-Grade European Ratings, 1981 To 2021 (%)
Rating: Speculative-Grade
Time horizon
Year Issuers Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15
1981 1 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1982 1 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1983 1 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1984 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1985 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1986 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1987 3 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1988 3 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1989 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1990 3 0.00 33.33 33.33 33.33 33.33 33.33 33.33 33.33 33.33 33.33 33.33 33.33 33.33 33.33 33.33
1991 2 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00
1992 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1993 5 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00
1994 4 0.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00
1995 11 9.09 9.09 9.09 9.09 9.09 9.09 9.09 18.18 18.18 18.18 18.18 18.18 18.18 18.18 18.18
1996 17 0.00 0.00 0.00 0.00 0.00 0.00 11.76 11.76 11.76 11.76 11.76 11.76 11.76 11.76 11.76
1997 23 0.00 0.00 0.00 0.00 0.00 13.04 17.39 17.39 17.39 17.39 17.39 17.39 17.39 17.39 17.39
1998 43 0.00 9.30 9.30 13.95 20.93 23.26 23.26 23.26 23.26 23.26 23.26 23.26 23.26 23.26 23.26
1999 95 6.32 9.47 15.79 20.00 22.11 22.11 22.11 22.11 22.11 22.11 22.11 22.11 22.11 22.11 22.11
2000 117 2.56 9.40 19.66 21.37 21.37 21.37 21.37 22.22 22.22 23.08 23.08 23.08 23.08 23.08 23.08
2001 130 8.46 22.31 25.38 25.38 26.15 26.15 26.92 26.92 27.69 27.69 27.69 27.69 27.69 27.69 27.69
2002 143 12.59 15.38 16.08 16.78 17.48 18.18 18.18 18.88 18.88 18.88 19.58 19.58 19.58 19.58 19.58
2003 161 3.73 4.97 6.21 7.45 8.07 8.07 8.70 8.70 8.70 9.94 9.94 9.94 9.94 9.94 11.80
2004 186 1.61 2.69 3.76 4.30 5.38 6.45 6.45 6.45 7.53 7.53 7.53 7.53 7.53 9.14 9.14
2005 211 0.95 2.37 2.84 3.79 5.21 6.16 7.11 8.06 8.53 8.53 9.00 9.00 9.95 9.95 10.43
2006 222 1.80 2.70 4.05 6.76 7.66 9.01 10.36 11.26 11.26 11.71 12.61 13.51 13.51 13.51 13.51
2007 209 0.96 3.35 8.61 9.09 10.53 12.44 13.88 13.88 14.35 15.31 16.27 16.27 16.27 16.75 16.75
2008 200 2.50 9.50 10.00 11.50 14.00 15.50 16.00 16.50 17.50 18.50 18.50 18.50 20.00 20.00
2009 198 8.08 8.59 10.10 12.63 14.14 14.65 15.15 16.67 17.68 17.68 17.68 19.19 19.19
2010 197 1.02 3.05 5.58 7.61 8.12 9.14 11.17 12.18 12.18 12.18 13.71 13.71
2011 253 1.58 3.56 6.32 7.51 11.46 13.04 13.83 13.83 13.83 16.21 16.21
2012 314 2.23 5.10 6.37 9.87 11.46 12.42 12.74 13.06 14.97 14.97
2013 383 2.87 4.18 7.05 8.36 9.92 10.44 10.97 12.53 12.79
2014 516 0.97 3.29 4.26 6.01 6.78 7.56 9.69 9.88
2015 617 2.11 3.89 5.83 6.97 8.59 11.02 11.18
2016 616 1.95 4.22 5.36 7.47 10.06 10.71
2017 618 2.59 4.05 6.15 9.71 10.36
2018 615 1.95 4.39 8.29 9.27
2019 674 2.23 6.97 8.61
2020 713 5.33 7.01
2021 724 1.80
Summary Statistics Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15
Marginal average 2.76 2.68 2.25 1.92 1.64 1.23 0.95 0.66 0.59 0.59 0.43 0.27 0.30 0.26 0.30
Cumulative average 2.76 5.37 7.50 9.27 10.75 11.86 12.70 13.27 13.78 14.30 14.67 14.90 15.15 15.38 15.63
Standard deviation 8.42 10.28 10.61 10.82 11.16 11.22 11.24 11.47 11.67 11.89 12.09 12.31 12.54 12.70 12.86
Median 1.61 3.97 6.15 7.49 8.59 9.79 11.17 12.36 12.79 13.58 13.71 13.61 13.51 12.64 11.80
Min 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Max 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Table 19

One-Year Weighted Average European Corporate Transition Matrix, 1981 To 2021 (%)
From/To AAA AA A BBB BB B CCC/C D NR
AAA 87.13 9.11 0.46 0.11 0.00 0.00 0.11 0.00 3.08
(8.71) (7.72) (1.36) (0.91) (0.00) (0.00) (0.76) (0.00) (4.45)
AA 0.26 86.27 9.49 0.52 0.00 0.00 0.00 0.00 3.46
(0.65) (6.92) (6.24) (1.14) (0.00) (0.00) (0.00) (0.00) (2.37)
A 0.01 1.75 88.02 5.24 0.14 0.03 0.00 0.03 4.78
(0.05) (1.76) (4.80) (3.35) (0.33) (0.40) (0.00) (0.09) (1.93)
BBB 0.00 0.08 3.91 85.70 3.34 0.26 0.08 0.06 6.56
(0.00) (1.20) (1.93) (4.63) (2.58) (0.49) (0.26) (0.19) (2.92)
BB 0.00 0.00 0.09 5.05 74.89 6.86 0.37 0.34 12.40
(0.00) (0.00) (0.58) (2.54) (6.56) (3.32) (0.94) (0.80) (4.35)
B 0.00 0.00 0.02 0.20 4.78 73.55 5.05 1.96 14.44
(0.00) (0.00) (0.19) (0.48) (3.30) (6.44) (3.26) (3.07) (5.05)
CCC/C 0.00 0.00 0.00 0.20 0.00 12.58 44.22 25.96 17.04
(0.00) (0.00) (0.00) (0.62) (0.00) (9.44) (16.69) (15.81) (8.94)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Table 20

Two-Year Weighted Average European Corporate Transition Matrix, 1981-2021, (%)
From/To AAA AA A BBB BB B CCC/C D NR
AAA 75.57 16.78 1.26 0.11 0.11 0.00 0.11 0.00 6.05
(12.83) (11.10) (2.44) (0.82) (0.91) (0.00) (0.80) (0.00) (7.53)
AA 0.51 74.39 16.68 1.39 0.15 0.00 0.00 0.02 6.87
(1.09) (10.26) (8.82) (1.85) (0.36) (0.00) (0.00) (0.11) (3.30)
A 0.01 3.09 77.65 9.12 0.45 0.10 0.03 0.06 9.49
(0.05) (2.54) (7.35) (4.28) (0.92) (0.45) (0.19) (0.14) (2.99)
BBB 0.00 0.16 7.06 73.87 5.37 0.63 0.20 0.16 12.54
(0.00) (1.75) (2.84) (6.64) (3.22) (0.91) (0.58) (0.40) (4.31)
BB 0.00 0.00 0.30 8.76 56.65 9.98 0.56 1.18 22.58
(0.00) (0.00) (0.76) (3.00) (7.82) (3.98) (1.10) (1.89) (5.45)
B 0.00 0.00 0.02 0.44 7.31 53.27 6.55 5.39 27.02
(0.00) (0.00) (0.20) (0.82) (4.58) (8.29) (3.24) (5.18) (7.74)
CCC/C 0.00 0.00 0.00 0.25 0.74 14.85 17.82 38.37 27.97
(0.00) (0.00) (0.00) (0.91) (2.11) (12.52) (11.27) (14.93) (12.24)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Table 21

Three-Year Weighted Average European Corporate Transition Matrix, 1981-2021, (%)
From/To AAA AA A BBB BB B CCC/C D NR
AAA 64.99 23.34 2.40 0.11 0.23 0.00 0.11 0.00 8.81
(15.27) (12.81) (3.39) (0.76) (1.21) (0.00) (0.82) (0.00) (8.93)
AA 0.70 64.65 21.73 2.32 0.32 0.00 0.02 0.05 10.20
(1.40) (11.81) (9.72) (2.40) (0.54) (0.00) (0.12) (0.16) (4.30)
A 0.02 4.02 68.97 11.90 0.85 0.17 0.09 0.10 13.88
(0.10) (3.14) (8.25) (4.29) (1.43) (0.56) (0.32) (0.20) (3.81)
BBB 0.00 0.23 9.52 64.30 6.32 1.01 0.25 0.30 18.06
(0.00) (2.21) (2.64) (7.98) (3.17) (1.00) (0.53) (0.73) (5.54)
BB 0.00 0.00 0.46 11.62 43.71 10.74 0.74 1.87 30.86
(0.00) (0.00) (0.87) (3.57) (8.53) (3.70) (1.08) (2.54) (7.15)
B 0.00 0.00 0.00 0.67 8.40 38.20 5.82 8.51 38.40
(0.00) (0.00) (0.00) (1.13) (4.69) (7.92) (2.76) (6.22) (9.11)
CCC/C 0.00 0.00 0.00 0.28 0.84 14.61 8.43 40.73 35.11
(0.00) (0.00) (0.00) (0.95) (2.23) (11.14) (8.71) (16.33) (14.32)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Table 22

Five-Year Weighted Average European Corporate Transition Matrix, 1981-2021, (%)
From/To AAA AA A BBB BB B CCC/C D NR
AAA 48.39 30.92 4.71 0.57 0.46 0.00 0.00 0.00 14.94
(16.71) (11.79) (4.73) (1.17) (1.60) (0.00) (0.00) (0.00) (10.95)
AA 0.65 49.31 29.01 3.67 0.58 0.08 0.03 0.16 16.52
(1.12) (13.05) (9.94) (2.52) (0.85) (0.20) (0.15) (0.32) (5.21)
A 0.04 5.04 55.42 15.27 1.66 0.27 0.12 0.23 21.95
(0.14) (3.57) (8.87) (4.57) (1.65) (0.38) (0.45) (0.35) (4.84)
BBB 0.00 0.43 11.54 49.93 6.77 1.51 0.43 0.56 28.83
(0.00) (2.77) (2.27) (8.77) (3.20) (1.08) (0.70) (0.92) (7.30)
BB 0.00 0.04 0.83 14.27 28.45 9.15 0.87 3.58 42.80
(0.00) (0.62) (1.26) (4.32) (7.67) (2.62) (0.98) (3.44) (8.04)
B 0.00 0.00 0.00 1.70 7.93 20.72 2.59 13.04 54.02
(0.00) (0.00) (0.00) (1.50) (4.09) (4.21) (1.49) (6.59) (7.56)
CCC/C 0.00 0.00 0.00 0.70 1.75 9.44 2.10 44.41 41.61
(0.00) (0.00) (0.00) (1.80) (4.04) (6.77) (2.75) (16.67) (14.26)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Table 23

Seven-Year Weighted Average European Corporate Transition Matrix, 1981-2021, (%)
From/To AAA AA A BBB BB B CCC/C D NR
AAA 36.65 34.57 6.94 1.50 0.46 0.00 0.00 0.00 19.88
(16.93) (11.77) (4.29) (2.11) (1.61) (0.00) (0.00) (0.00) (11.31)
AA 0.55 38.52 32.82 4.57 0.69 0.17 0.03 0.25 22.40
(0.63) (11.14) (8.90) (2.35) (0.80) (0.37) (0.16) (0.42) (5.98)
A 0.03 5.53 45.02 17.57 2.21 0.28 0.05 0.40 28.90
(0.12) (3.36) (8.58) (4.25) (1.69) (0.37) (0.11) (0.52) (5.50)
BBB 0.00 0.63 12.21 40.65 6.04 1.57 0.55 1.01 37.34
(0.00) (3.07) (2.11) (8.13) (2.40) (0.86) (0.75) (1.05) (7.69)
BB 0.00 0.05 1.56 13.42 20.13 7.92 0.76 5.35 50.81
(0.00) (0.69) (3.16) (5.70) (6.69) (2.14) (0.69) (3.83) (8.57)
B 0.00 0.00 0.00 2.63 6.94 13.21 1.20 16.13 59.89
(0.00) (0.00) (0.00) (1.92) (3.53) (3.32) (1.09) (6.87) (7.65)
CCC/C 0.00 0.00 0.00 0.48 2.40 5.29 0.96 47.12 43.75
(0.00) (0.00) (0.00) (1.56) (3.93) (5.19) (2.57) (19.15) (17.45)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Table 24

Ten-Year Weighted Average European Corporate Transition Matrix, 1981-2021, (%)
From/To AAA AA A BBB BB B CCC/C D NR
AAA 23.03 35.49 11.40 2.94 0.12 0.00 0.00 0.00 27.03
(13.53) (8.88) (4.85) (2.21) (0.81) (0.00) (0.00) (0.00) (11.02)
AA 0.30 27.10 34.37 6.91 0.75 0.18 0.00 0.33 30.05
(0.53) (7.32) (6.77) (2.97) (0.81) (0.33) (0.00) (0.46) (5.89)
A 0.00 5.50 32.82 19.57 2.74 0.43 0.00 0.54 38.40
(0.00) (3.20) (6.50) (4.27) (1.77) (0.55) (0.00) (0.57) (6.25)
BBB 0.00 0.79 12.04 31.08 5.67 1.36 0.71 1.63 46.73
(0.00) (3.60) (2.39) (7.20) (2.59) (0.85) (0.83) (0.94) (6.38)
BB 0.00 0.07 2.39 9.85 13.29 6.61 0.49 7.74 59.56
(0.00) (0.81) (5.54) (5.16) (5.63) (2.08) (0.69) (3.98) (8.21)
B 0.00 0.00 0.00 1.98 6.77 6.52 0.58 20.56 63.58
(0.00) (0.00) (0.00) (1.53) (3.30) (2.57) (0.65) (8.21) (7.86)
CCC/C 0.00 0.00 0.00 1.54 1.54 3.08 0.00 49.23 44.62
(0.00) (0.00) (0.00) (3.67) (3.83) (5.11) (0.00) (21.36) (20.08)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Research, S&P Global Market Intelligence's CreditPro®.

Related Research

The use of the term "methodology" in this article refers to data aggregation and calculation methods used in conducting the research. It does not relate to S&P Global Ratings' methodologies, which are publicly available criteria used to determine credit ratings.

This report does not constitute a rating action.

Ratings Performance Analytics:Nicholas W Kraemer, FRM, New York + 1 (212) 438 1698;
nick.kraemer@spglobal.com
Research Contributor:Nivritti Mishra Richhariya, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai

No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.


Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back