(Editor's Note: Our "Risky Credits" series covering risky-credit data is now published on a three-month trailing basis, effective January 2025. This edition includes data covering February-April 2025. The series focuses on corporate issuers rated 'CCC+' and lower in emerging markets. Because many defaults are of companies in these categories, ratings with negative outlooks or on CreditWatch negative are important to monitor.)
Key Takeaways
- The number of issuers rated 'CCC+' and lower fell to nine as of April 2025 (6.5% of speculative-grade issuers) from 15 in January following Argentina's upward transfer and convertibility (T&C) assessment revision. Three of the nine risky credits had a negative outlook.
- No 'CCC+' and lower rated issuance was recorded over the past three months as tariff-related market turmoil triggered a sharp rise in borrowing costs, particularly for speculative-grade rated companies.
- Rated 'B-' and lower maturity wall peaks in 2027 with $3.8 billion, mostly in Latin America. Telecom and transport displayed the highest concentration of upcoming debt.
The number of emerging-market issuers rated 'CCC+' and lower declined to nine as of end-April 2025, from 15 as of January (see chart 1). 'CCC+' and lower issuers accounted for 6.5% of speculative-grade entities as of April 2025, down from 10.8% in January, and to the lowest level since the pandemic.
The reduction in the number of risky credits was led by the upgrade of seven Argentinian issuers: Banco De Galicia Y Buenos Aires S.A.U., YPF S.A., Telecom Argentina S.A., Pampa Energia S.A., Aeropuertos Argentina 2000 S.A., CAPEX S.A., and Genneia S.A. We upgraded all the above entities to 'B-' from 'CCC' on Feb. 6 2025, following the upward revision of our transfer-and-convertibility assessment of Argentina.
We made the revision based on our perception of a modestly diminished risk that the sovereign would interfere with the ability of domestic entities to access, convert and transfer money abroad (see chart 2).
We upgraded the Brazilian chemicals firm Unigel Participacoes S.A. to 'CCC' from 'D' on conclusion of a extrajudicial reorganization, having exchanged Brazilian real 5.1 billion of debt (at prevailing foreign-exchange rates) for two new debt instruments: restructured notes and participating titles. The company faces challenges related to still weak industry conditions and the pace of the revamp of its operations in the next few quarters.
No defaults were recorded between February and April this year in emerging markets. However, the count accelerated in May with the Brazilian telecom firm Oi S.A. and the Hungarian chemicals entity Nitrogenmuvek Zrt. defaulting on missed interest payments, and the Brazilian transport company Investimentos e Participacoes em Infraestrutura S.A. - Invepar put on judicial protection approval.
The year-to-date default count reads four, as the Brazilian transport firm Azul S.A. defaulted with a distressed exchange in January. Compared with last year the count of defaults remains lower, with six defaults at end-May 2024. Emerging markets continue to display a lower default rate with respect to developed regions: as of March 2025, the 12-month trailing speculative-grade default rate was 0.9% for emerging markets against 4.3% in the U.S. and 3.8% in Europe.
Chart 1
Chart 2
Negative bias for 'CCC+' and lower rated issuers increased to 33% as of April 2025 from 20% as of January 2025 mostly due to the reduced pool of issuers. Two of the three negative outlooks were in Brazil: Oi S.A. and Invepar. Nitrogenmuvek Zrt. completed the count.
On the other hand, the negative bias of 'B-' rated companies returned to 0%, from 33% in January, as the Chinese property entity China Vanke Co. Ltd. was placed on CreditWatch developing from CreditWatch negative. In making the action we took into account secured shareholder loans provided to China Vanke, which we viewed as timely but insufficient to fully address the company's liquidity strains.
We expect to resolve the CreditWatch when we have more details about how China Vanke's new management will address the company's liquidity pressure in the face of its bond maturity wall in 2025.
Following the Argentinian positive rating actions, the aggregate debt represented by the issuers rated 'CCC+' and lower fell to $2.1 billion, from $9 billion as of January 2025. Brazil had the highest concentration of corporate debt on negative outlook, with $1.4 billion placed on negative outlook as of April 2025 (see chart 3). It was entirely concentrated in Oi S.A., as the telecom topped the list sector-wise (see chart 4).
Chart 3
Chart 4
Speculative-grade issuance has declined over the past three months (see chart 5) with only $1 billion of market activity, down from the $6 billion recorded in the month of January, and $7 billion over the fourth quarter of 2024.
The falloff in issuance coincided with a jump in corporate yields and spreads, following tariff-related announcements in early April this year. In one week, emerging-market speculative-grade yields climbed by 110 basis points (bps), with a concomitant spread widening of 107 bps.
While borrowing costs have since eased they remain about 20 bps higher than the level at end-January, and 272 bps higher for the 'CCC' rating category: the 'CCC' iBoxx annual yield time series hit 14.4% as of end-April, from 11.7% at end-January.
We saw no issuance rated 'CCC+' or lower over the past three months. The recent drought of market activity stresses the sensitivity of emerging-market issuers to market volatility. It is also reflects a manageable maturity wall among these entities.
Chart 5
The 'B-' and below rated debt maturity wall peaks in 2027, with $3.8 billion (see chart 6) as of April 2025. The amount due in 2025 has decreased by 72% compared with last year, while increasing in 2027 (+37%) and beyond (see chart 6).
Through 2030 upcoming debt to be refinanced was equally split between 'B-' and 'CCC+' and below, while 72% is located in Latin America. Sector-wise, the short-term refinancing risk was more pronounced for entities within telecoms and transport, including Oi S.A. and Azul S.A., which both fall in the risky-credits pool (see chart 7).
Chart 6
Chart 7
Finally, financials reveal our expected dynamics for the risky credits pool(see charts 8-10). Below are two case studies illustrating the most relevant changes:
- The average debt to EBITDA in the telecoms sector mirrors the financials of Oi S.A. The firm displayed negative EBITDA over 2022-2025, and very low EBITDA over 2026-2027, impairing its liquidity profile. We expect the company will require additional waivers for upcoming quarterly interest payments.
- Hungarian chemical company Nitrogenmuvek's operating conditions have recently improved. To date there is no meaningful development related to litigation on the application of a carbon-dioxide quota tax. The company believes a decision from the EU court is unlikely before year-end 2025. As of now, our projections portray very high leverage for 2025, low interest coverage and strained liquidity.
Chart 8
Chart 9
Chart 10
Table 1
| Emerging-market entities rated 'CCC+' or lower--the complete list | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Industry | Issuer | Rating | Outlook/CreditWatch | Outlook or CreditWatch | Country | Region | ||||||||
| Capital Goods |
CLISA-Compania Latinoamericana de Infraestructura & Servicios S.A. |
'CCC+' | Stable | OL | Argentina | Latin America | ||||||||
| Utility |
Empresa Distribuidora Y Comercializadora Norte S.A. |
'CCC+' | Stable | OL | Argentina | Latin America | ||||||||
| Oil & Gas exploration & production |
Compania General de Combustibles S.A. |
'CCC+' | Stable | OL | Argentina | Latin America | ||||||||
| Telecoms |
Oi S.A. |
'CCC' | Negative | OL | Brazil | Latin America | ||||||||
| Home/RE |
Kawasan Industri Jababeka Tbk. PT |
'CCC+' | Stable | OL | Indonesia | Asia/Pacific | ||||||||
| Chemicals, packaging & environmental services |
Nitrogenmuvek Zrt. |
'CCC-' | Negative | OL | Hungary | Europe | ||||||||
| Chemicals, packaging & environmental services |
Unigel Participacoes S.A. |
'CCC' | Positive | CW | Brazil | Latin America | ||||||||
| Transport |
Investimentos e Participacoes em Infraestrutura S.A. - Invepar |
'CCC' | Negative | CW | Brazil | Latin America | ||||||||
| Transport |
Azul S.A. |
'CCC+' | Positive | OL | Brazil | Latin America | ||||||||
| Data as of Apr. 30, 2025. Home/RE--Homebuilding and real estate. Source: S&P Global Ratings Credit Research & Insights. | ||||||||||||||
Glossary and Abbreviations
Emerging markets consist of Latin America: Argentina, Brazil, Chile, Colombia, Peru, Mexico; Emerging Asia: India, Indonesia, Malaysia, Thailand, Philippines, Vietnam; EMEA: Hungary, Poland, Saudi Arabia, South Africa, Turkey; Greater China: China, Hong Kong, Macau, Taiwan, and red-chip companies (issuers headquartered in Greater China but incorporated elsewhere).
Negative bias--Percentage of issuers with a negative outlook or on CreditWatch.
Related Research
- Emerging Markets Monthly Highlights: Shifting Trade Winds Provide A Breather, May 15, 2025
- Corporate Defaults Fall Below Long-Term Average, May 14, 2025
- Credit Conditions Emerging Markets Q2 2025: The Tariff Storm, March 26, 2025
- Risky Credits: Refinancing Ahead Of Further Market Volatility, Feb. 28, 2025
Related Rating Actions
- Oi S.A. Downgraded To 'SD' Following Deferred Interest Payments, May 20, 2025
- Nitrogenmuvek Rating Lowered To 'D' On Missed Principal Payment, May 20, 2025
- Brazilian Infrastructure Group Invepar Downgraded To 'D' From 'CC' On Judicial Protection Approval, May 19, 2025
- China Vanke 'B-' Ratings Placed On CreditWatch Developing On Management Changes And Evolving Liquidity Situation, March 5, 2025
- Several Argentine Corporate, Infrastructure Entities Upgraded On Improved Transfer And Convertibility Risk Assessment, Feb. 6, 2025
- Unigel Participacoes Rating Raised To 'CCC' From 'D' On Completed Debt Restructuring And Placed On CreditWatch Positive, Feb. 3, 2025
- Brazilian Airline Azul S.A. Downgraded To 'SD' Following Distressed Debt Exchange, Jan. 29, 2025
This report does not constitute a rating action.
| Primary Credit Analysts: | Luca Rossi, Paris +33 6 2518 9258; luca.rossi@spglobal.com |
| Jose M Perez-Gorozpe, Madrid +34 914233212; jose.perez-gorozpe@spglobal.com | |
| Research Contributor: | Nivedita Daiya, Mumbai; nivedita.daiya@spglobal.com |
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