Despite greater market volatility and political uncertainty in 2018, funding conditions for companies remained accommodative for much of the year, and the global corporate default rate declined. By many measures, 2018 showed improved performance for S&P Global Ratings' corporate credit globally. Even amid rising trade tensions, populism's growing political influence, and Brexit, companies were largely able to brush aside the noise and benefit from the continued growth of the global economy. Against this backdrop, many of S&P Global Ratings' measures for rating performance and rating stability, as well as the proportion of upgrades, rose to their highest levels since 2014. Meanwhile, the number of defaults fell to 82, its lowest level since that year (see chart 1 and table 1).

Over half of all defaults in 2018 came from two sectors: the consumer services sector and energy and natural resources (with 22 defaults each). These were the only two sectors with default rates in 2018 that exceeded their long-term weighted averages (see chart 2). Residual stress has continued to weigh on energy and natural resources, and brick-and-mortar retailers in consumer services are facing structural changes. Even though both sectors exhibited above-average default rates in 2018, these default rates (and the number of defaults for each sector) modestly declined from 2017.

This study includes industrials, utilities, financial institutions (banks, brokerages, asset managers, and other financial entities), and insurance companies globally with long-term local currency ratings from S&P Global Ratings. We calculated all default rates on an issuer-weighted basis. The default rates that we refer to as weighted averages in this study use the number of issuers at the beginning of each year as the basis for each year's weight. (For a detailed explanation of our data sources and methodology, see Appendix I.)

Table 1

Of the 82 defaults in 2018, 72 were from companies rated as of the beginning of the year. The 10 defaults from companies that were not rated at the beginning of 2018 included five for which the ratings were withdrawn before the beginning of 2018 and five that were first rated by S&P Global Ratings after Jan. 1, 2018. We consider companies reemerging from a prior default to be separate entities, with their rating histories beginning with the postdefault rating. As in 2017, there were no defaults by companies that were rated investment grade ('BBB-' or higher). Each of the rated defaulters was rated speculative grade ('BB+' or lower) at the beginning of 2018, and 74% of these were rated in the lowest rating category of 'CCC'/'C'.

With such a large share of defaults coming from companies at the lowest rating levels in 2018, the one-year Gini ratio rose to its highest since 2014, to 93% from 2017's 92.7% (see chart 3). The Gini ratio is a measure of the rank-ordering power of ratings over a given time horizon, from one through seven years. It shows the ratio of actual rank-ordering performance to theoretically perfect rank ordering. The one-year Gini in 2018 was well above the one-year weighted-average (since 1981) Gini ratio of 82.5% (see table 2 and chart 30). (For details on the Gini methodology, refer to Appendix II.)

All of S&P Global Fixed Income Research's default studies have found a clear correlation between ratings and defaults: The higher the rating, the lower the observed frequency of default, and vice versa. Over each time span, lower ratings correspond to higher default rates (see chart 4 and chart 25), and this relationship holds true when broken out by rating category and by rating modifier (see tables 24 and 26), as well as by region (see table 25).

As the Gini ratios show, the ability of corporate ratings to serve as effective measures of relative risk remains intact over time, particularly in low-default years. Many default studies, including this one, also look at transition rates, which gauge the degree to which ratings change--either up or down--over a particular period. Transition studies have repeatedly confirmed that higher ratings tend to be more stable and that speculative-grade ratings generally experience more volatility.

However, since the financial downturn of 2008, many highly rated companies have been downgraded, leaving, for example, exceedingly few 'AAA' rated issuers at the start of 2018 and fewer still by year-end. As such, rating categories with smaller populations will experience high rating transition rates when even a small number of issuers are upgraded or downgraded.

Table 2

For the ninth consecutive year, there were no defaults by companies from the 'A' category or higher. Last year was also the second year in a row with no defaults from the 'BBB' category. Even among speculative-grade ratings, defaults were generally lower, with no defaults in the 'BB' category (down from 0.08% in 2017) and a slight decline in the 'B' category (to 0.98% from 0.99%). Only the 'CCC'/'C' category showed a rising default rate, up to 27.18% from 26.45%, reaching its highest level since 2016 (see table 3).

Outside of the 'CCC'/'C' category, default rates across all other rating categories were either at or below their long-term weighted averages. Most notably, the default rate for the 'B' category was nearly 2.5 percentage points below its long-term weighted average (see table 4). Once again, the default rate in the 'AAA' rating category was zero, continuing the unblemished default record for corporate ratings in this category and consistent with historical trends.

Table 3

Table 4

2018 Summary Findings

• Of the 82 corporate defaults in 2018, the majority (47) were from companies in the U.S. and associated tax havens (Bermuda and the Cayman Islands). The emerging markets region followed with 17 defaults, Europe with 13, and the other developed region (Australia, Canada, Japan, and New Zealand) with five.
• Distressed exchanges accounted for the largest share of defaults (among publicly rated companies) in 2018, with 38%, followed by missed interest or principal payments (32%) and Chapter 11 filings (23%). Two defaults resulted from payment suspension and two from foreign bankruptcy, while another resulted from the issuer being placed under regulatory directive.
• The global trailing-12-month speculative-grade default rate fell to 2.1% at the end of 2018 from 2.5% in 2017, remaining below its annual average rate (since 1981) of 3.99%. The speculative-grade default rate fell in the U.S. (to 2.4%) and Europe (1.9%) but rose modestly in the emerging markets (1.3%) and other developed (3.3%) regions.
• All of the 72 defaulters that were rated by S&P Global Ratings at the beginning of the year had speculative-grade ratings at that time. The remainder of the 2018 defaulters began the year without ratings or were first assigned ratings later in the year. None began the year rated investment grade. Of the companies that defaulted in 2018 (and that had ratings as of Jan. 1, 2018), 87.5% were rated 'B-' or lower at the start of the year.
• The volume of debt affected by default rose by 26% to $131.65 billion in 2018, even as the number of defaults fell from 2017. The average amount of debt per defaulter rose to $1.6 billion in 2018 from $1.1 billion in 2017, modestly higher than the post-Lehman Bros. (2009 onward) annual average of $1.4 billion.
• The largest default of the year was from Texas-based media and entertainment company iHeartCommunications Inc., with $20.2 billion (15.3%) of the outstanding debt.
• Global new corporate bond issuance in 2018 totaled $3.9 trillion, down 10.3% from 2017. Nearly all of the drop-off came from the developed markets.
• Bond spreads in the U.S. widened through most of 2018. Investment-grade spreads moved 57 basis points (bps) wider over the course of the year, while speculative-grade spreads widened by 154 bps. Most of this movement took place in the fourth quarter.
• Ratings showed increasing stability in 2018. About 73.2% of global corporate ratings were unchanged during the year, up from 72.07% in 2017 and above the annual average of 71.31% since 1981.
• The percentage of defaulters with confidential ratings fell in 2018 (to 11%) as compared with 2017. However, the count of confidentially rated issuers that defaulted remained at nine.
• Two of the defaulters in 2018 were initially rated investment grade, and the other 80 (98% of the total) were initially rated speculative grade.
• Of these two that were initially investment grade, the average time to default--the time between first rating and date of default--was 24.1 years, with an associated standard deviation of 18.5 years. In contrast, the average time to default among entities initially rated speculative grade was 5.4 years, with an associated standard deviation of five years. For all of the issuers that defaulted in 2018, the average time to default from the first rating was 5.8 years, with a median of 4.2 years and a standard deviation of six years.
• The issuer with the longest time to default in 2018 was U.S.-based retailer Sears, Roebuck and Co., with an initial rating of 'AA' as of Dec. 31, 1980, 37.2 years before the issuer credit rating was lowered to 'SD' (selective default) in March 2018.
• The issuer with the shortest time to default (13 days) was House of Fraser (UK & Ireland) Ltd. The company defaulted twice in 2018.
• The consumer services sector and energy and natural resources sector had the largest number of defaulters last year, with 22 each. All other sectors had fewer than 10 defaults, and only the insurance sector had zero defaults.
• Credit quality displayed modest net improvement in 2018. A slightly higher share of companies were upgraded in 2018 than in 2017, bringing upgrades to their highest level (9.02%) since 2014.
• The number of 'AAA' rated companies declined by one during the year, after Singapore-based SMRT Corp. Ltd. was downgraded to 'AA+' from 'AAA' on March 13, 2018. As of the end of 2018, there were just eight companies still rated 'AAA' globally.
• By the end of 2018, speculative-grade issuers represented the majority of rated companies globally, accounting for 50.3% of rated issuers, up from 49.4% at the beginning of the year. In large part, this expansion represents the growing number of newly rated issuers that are speculative grade. S&P Global Ratings assigned initial ratings to 905 issuers in 2018, up from 775 issuers in 2017. Of these new issuers, 79.1% had speculative-grade ratings--the highest share since 2010 and one of the highest proportions annually.

Annual Global Trends: A Year Of Credit Stability

The number of defaulters that began the year with active ratings fell to 72 in 2018 from 83 in 2017. This marks the lowest count since 2014 (see chart 5). Nonetheless, the default total in 2018 was substantially higher than in 2014 (when there were 45 rated at the beginning of the year and 60 in total). Although the number of defaulters fell during the year, the amount of debt affected by default rose by 26% to $131.7 billion (see chart 6).

As in most years, the U.S. accounted for the majority of defaults in 2018, by both count and the amount of affected debt. The U.S. has the largest population of rated corporate issuers, accounting for roughly 46% of the global total at the start of 2018. With its highly developed financing markets, the U.S. also has a considerably higher share of speculative-grade companies than other regions, and U.S. issuers accounted for 51% of total speculative-grade companies globally as of the beginning of 2018.

Meanwhile, the emerging markets region was the only region that experienced an increase in the number of defaults, to 12 from eight. By sector, financial institutions led defaults in the emerging markets region (with five), followed by the aerospace/automotive/capital goods/metals sector (with four).

While the default rate fell globally, credit quality also showed a modest net improvement in 2018, with more companies upgraded than downgraded. The share of companies upgraded rose to 9.02% in 2018, and the share of ratings that were unchanged during the year rose to 73.21%. Both these rates reached their highest levels since 2014. Meanwhile, the ratio of downgrades to upgrades remained unchanged at 0.97 (see table 6). A ratio of 1 would indicate that the percentages of upgrades and downgrades were equal. The share of companies with ratings withdrawn during the year declined by about one percentage point to 8.02% in 2018.

By region, the largest share of downgrades were in the U.S., with 47%, followed by the emerging markets with 31%, Europe with 18%, and the other developed region with 5%. In the U.S., most of the downgrades were concentrated among issuers in the speculative-grade category, which tends to be less stable. Consumer services and the leisure/media sector experienced the highest share of downgrades: Together, these two sectors accounted for nearly a third of U.S. corporate downgrades during the year.

Within the emerging markets, corporate issuers from Brazil, China, Argentina, and Turkey had the highest numbers of downgrades, and the sovereign downgrades of Brazil, Argentina, and Turkey contributed to the corporate downgrades within this region. European downgrades were led by companies from the U.K., where uncertainty regarding Brexit continued to be a key risk.

Table 5

Table 6

Even though ratings stability increased during the year, the number of large rating changes (which we define as those of more than six notches) also increased. In 2018, there were four large downgrades and no large upgrades, compared with one each in 2017 (see chart 7). For these counts of large downgrades, we include movements to 'D' (default) along with what we normally report as downgrades (i.e., downward movements between active ratings). All of the four large downgrades in 2018 were from companies that defaulted during the year: Turkey-based Fleetcorp Operasyonel Tasit Kiralama ve Turizm A.S., Luxembourg-based QGOG Constellation S.A., the China Huayang Economic and Trade Group Co., and one issuer that was confidentially rated.

These four companies with large downgrades in 2018 were outliers during a year of increased credit stability, as the average number of notches for a rating change was little changed during the year. The average number of notches from an upgrade declined slightly, to 1.10 in 2018 from 1.14 in 2017, while downgrades moved by an average of 1.37 notches in 2018, nearly unchanged from 1.36 notches in 2017 (see chart 8).

The speculative-grade default rate declined in the two largest regions, the U.S. and Europe, in 2018, and this decline more than offset a slight increase in the default rates in the emerging markets and other developed regions. The annual speculative-grade default rate decreased in the U.S. to 2.42% (from 3.14% in 2017) and in Europe to 1.9% (from 2.38%). Meanwhile, the speculative-grade default rate rose in the emerging markets to 1.35% (from 0.96%) and in the other developed region to 3.29% (from 3.03%) (see table 7 and chart 21).

Table 7

Data on defaulted corporate issuers globally show that defaults among speculative-grade entities tend to be clustered in the third year after the initial rating, particularly in the 'B' rating category (see chart 9). For example, among defaulters that were rated 'B' at origination, the default rate climbs to a high of 18.7% in the third year and decelerates thereafter.

Defaulted issuers initially rated 'BB' show a similar pattern but peak a little later, in the fourth year. Defaulters initially rated 'CCC' show the reverse pattern, with the highest default rate observed in the first year, which is not surprising given the low rating and S&P Global Ratings' associated criteria (see "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012).

In 2018, 80 of the 82 defaults, or 97.6%, were from companies originally rated speculative grade, which is 10 percentage points higher than the long-term average of 87.5%. In years with lower-than-average default rates, we often see that more than 90% of defaulters were initially rated speculative grade, as reflected in the rating path observed for defaulters in the trailing 12 quarters (see chart 10). The median rating for all recently defaulted entities was solidly in the speculative-grade category in the seven years preceding default, and for most of that period, it was at least one notch below that of the long-term equivalent.

Financial services companies are typically more sensitive to sudden declines in investor and stakeholder confidence than nonfinancial companies, which can contribute to a rapid decline in funding liquidity and credit quality. In turn, this can result in a relatively fast descent into default (see chart 11). This was especially evident during the global financial crisis, when many highly rated banks defaulted within a short amount of time from their initial downgrades. Since 1981, financial services defaulters show a median rating in the 'BBB' category five years prior to default. But now that a decade has passed since the crisis, financial services defaulters from the past three years show a median rating in the 'B' category five years prior to default.

Historically, nonfinancial defaulters tend to have a much smoother and shorter path to default (see chart 12). One key reason is that financial services companies typically start with investment-grade ratings, while most nonfinancial issuers have speculative-grade initial ratings, particularly over the past 10 years.

Another major difference between financial and nonfinancial companies is the incidence of default. Defaults are much less frequent for financial services companies than for nonfinancials, which can allow outliers to bias the averages. For instance, in the three years ended Dec. 31, 2018, 308 nonfinancial companies defaulted, while only 32 financials did. Despite the much smaller sample of financial services defaults over the past three years, most of these defaulters were rated in the lowest rating categories several years ahead of their eventual default.

Some issuers default after S&P Global Ratings no longer rates them. We make our best effort to capture such defaults in the database, and we include an entity in the annual default rate calculations if it was rated as of Jan. 1 in the year of default. If, however, S&P Global Ratings withdrew the rating prior to Jan. 1 of the year of default, we do not include the issuer in the default rate calculation in that year. Although defaulters that are not rated ("NR") are not always captured in the default rate calculations for the year of default, we do capture them in the longer-term cumulative default rate statistics, which are tied back to the year in which defaulters were last rated.

Of the defaulted companies in 2018, 7.3% were not rated just prior to default, which is slightly lower than the long-term percentage of 16.9% (see chart 13). All of the defaulters in 2018 that had active ratings immediately prior to default were rated in the lowest rating categories. Specifically, 83% were rated 'CCC+' or lower just prior to default, which is much higher than the 67.5% long-term average.

Table 8 provides a list of all the publicly rated companies that defaulted in 2018. For additional details on the 2018 defaulters, see Appendix III.

Table 8

Table 9

2018 Timeline: Credit Holds Through The Tempest

After 2017 proved to be a banner year, 2018 brought headwinds for financial markets across the globe, with multiple bouts of heightened volatility, often provoked by geopolitical events. Troubles began in February, sending the VIX to a high of 37 on Feb. 5. While S&P Global Ratings has viewed geopolitical risk as elevated in recent years, markets have either been more sanguine or had little idea on how to accurately price it. That changed in 2018 as the Fed continued its pursuit of higher interest rates, U.S.-China trade talks failed to reach an amicable conclusion, and Europe presented multiple pain points for the year--notably, the slowly collapsing Brexit negotiations and Italy's high indebtedness amid fiscally chaotic leadership.

Through it all, credit risk remained relatively stable, with spates of downgrades limited to country-specific events that had been developing for some time in certain emerging economies. Defaults were also concentrated in the energy and consumer services sectors, which are now in somewhat specific multiyear periods of stress.

Political risk was not limited to the U.S., China, or Europe. Early in the year, Brazil became the first sovereign of the year to be downgraded, on Jan. 11. The sovereign long-term foreign currency rating was lowered to 'BB-' from 'BB', reflecting the country's slower-than-expected progress and lower support by the country's political class to put in place meaningful legislation to correct structural fiscal slippage on a timely basis. This was the single largest impetus behind subsequent corporate downgrades in 2018. The next day, 51 downgrades within Brazil occurred, and ultimately the resultant downgrade total in January reached 61, out of the monthly total of 83 globally.

Feb. 5 brought the first noticeable bout of market volatility for the year, likely in reaction to growing evidence that wage growth had finally established itself, raising investor worries that interest rates would rise more quickly than expected. The VIX closed at 37.3 and reached an intraday high of 50 the next day. The S&P 500 went on to lose 8.5% between the end of January and Feb. 8 and 3.8% between the end of January and the end of February. It would take roughly six months for the S&P 500 to return to its high from the end of January. China's Shenzhen Index lost ground at a similar pace at this point in the year but never rebounded in 2018, losing 33%.

Initial fears over an increasing pace of rate hikes were compounded by mounting concern over rising U.S.-China trade tensions in March. Early in the month, the Trump Administration announced that the U.S. would implement tariffs on aluminum and steel imports, as well as impose restrictions on technology transfers and acquisitions by China. China followed suit with higher tariffs on an initial $3 billion of U.S. imports. These measures rattled other U.S. trade partners, such as Japan and the EU, which sought to be exempt from the U.S. measures. In North America, Canada and Mexico were initially spared, largely due to the ongoing revisions to the North American Free Trade Agreement (NAFTA). In nearly all cases, talk of tariffs by the U.S. led to threats of retaliation by major trading partners. Many of the tariffs were aimed at sectors reliant on global growth, which, after solid performance in 2017, was now feared to be in danger of slowing.

Over the course of the month, the tone of the trade situation improved and declined, leading to more market volatility. This erratic timeline of events and subsequent market reactions became commonplace throughout the year, and amid the trade conflict, the National People's Congress reached a near-unanimous vote to remove term limits on Chinese President Xi Jinping in March. But despite whipsawed markets, economic growth remained robust, leading the Fed to unanimously vote to raise interest rates by a quarter of a point at its March meeting and to signal the potential for a faster pace of interest rate hikes ahead.

For Europe, trade talks in March weren't limited to dealings with the U.S. The thorny issue of post-Brexit trade between the EU and the U.K. resulted in an agreement of terms to a 21-month transition period after the U.K.'s March 2019 departure deadline. During that time, the U.K. would follow EU rules and trade freely in the common market. After that point, the U.K. would be able to negotiate bilateral deals. However, unresolved at the time--and still unresolved through the first three months of 2019--was the issue of the Irish border.

Finally, March also ushered in a sea change in Italian politics as the two anti-establishment parties, the League and Five-Star Movement, both ousted the more traditional parties previously in power. The two parties represent different factions and different regions within Italy, but both share a rejection of established politics and a strong skepticism of the EU. The rise of euroskeptic parties in Italy (and earlier in Germany) caused much angst in the investment community, particularly given the criticism of European budgetary austerity and the timing of the victories during the fraught Brexit negotiations. The election resulted in a hung parliament, with high potential for a second general election.

April started with China hitting back on the trade front, imposing a 15% tax on about 120 U.S. products and another 25% tax on eight U.S. products, including aluminum and pork. Almost immediately, the U.S. retaliated with a 25% tax on nearly 1,300 Chinese products worth about $50 billion in imports. China quickly followed up with tariffs on $50 billion of U.S. imports across 106 products. U.S. President Donald Trump shortly after announced another $100 billion in potential tariffs in the quickly escalating process. These developments prompted President Trump to send a delegation to Beijing in the first week of May, acknowledging many obstacles remained.

Despite the escalating tension between the two countries, markets seemed to take it in stride during April as the VIX fell to 15.9 on April 30 from a high of 23.6 on April 2. Some of the enthusiasm might have been a result of increased opportunities for speculative-grade companies to take out loans. Since 2016, rising interest rates had already been making leveraged loans a preferred investment relative to bonds. But April saw an additional increase in collateralized loan obligation (CLO) deals after the U.S. Court of Appeals in Washington D.C. ruled that CLO managers were not subject to the risk retention rule introduced as part of the Dodd-Frank Act. Previously, CLO managers were required to hold a 5% stake in any deals they sold.

Coinciding with the U.S. trade envoy's timed meeting in Beijing, the European Central Bank issued a warning in early May that the rise in trade protectionism could hurt the global economy. The World Trade Organization echoed this sentiment in a joint statement. This came at a time when investor confidence in Europe had been declining since the start of the year, alongside data showing declining German factory orders. That said, the month ended with the U.S. ending a two-month exemption by forging ahead with tariffs on aluminum (of 10%) and steel (25%) imports from Canada, Mexico, and the EU.

By the end of May, Italy had set a new record for going without a functional government (88 days). The League and the Five-Star Movement were failing to form a coalition, and markets responded with Italian 10-year government bond yields rising to 3% at the end of May from 1.8% at the end of April. A final coalition was formed on the last day of the month, resulting in the election of Giuseppe Conte as prime minister, whose "Conte Cabinet" would be largely made up of Five-Star and League members.

With one of the year's hot-button issues finally at rest, markets could regain some footing toward the second half of the year. A strong jobs report out of the U.S. in June showed that the unemployment rate had hit its lowest level since April 2000, at 3.8%, supporting a round of equity market gains in the first half of June. Given the performance of U.S. labor markets, the Fed raised rates for a second time in 2018 at its June meeting, with another 25 bps increase taking the federal funds rate up to a range of 1.75%-2%.

The second half of the year began with the Mexican general election, resulting in a victory for Andres Manuel Lopez Obrador. This was the first outright majority win by a presidential candidate in Mexico since 1988, and in a new global trend, a victory by another economic nationalist. This result added another layer to the ongoing renegotiation of NAFTA, a process already long plagued by missed deadlines.

Economic growth in the U.S. had surged in the second quarter, nearly reaching 4% in seasonally adjusted annual terms. Spending by multiple sectors (consumers, business, and government) grew, and initial data in July suggested exports increased as well. In one of the most impactful events of the U.S.-China trade standoff, the Trump Administration announced a list of tariffs on $200 billion of Chinese goods on July 10. These tariffs underwent a two-month review process and targeted many products from sectors in China's "Made in China 2025" strategic economic plan. Central to the dispute were U.S. claims of unfair trading practices by China, particularly in key areas of intellectual property protections for U.S. goods, as well as technological and trade secrets.

At this dollar level of goods, China would not be able to respond in kind to the U.S., so instead filed a complaint against the latest round of tariffs with the World Trade Organization on July 16, with the formal complaint process to begin in August. This was met with President Trump announcing the potential for more tariffs, targeting roughly $500 billion in Chinese imports.

Meanwhile, in Europe, U.K. Foreign Secretary Boris Johnson and David Davis, the minister in charge of Britain's negotiations with the EU, resigned within a 24-hour time span between July 8 and July 9. Mr. Davis' resignation came after he decided he couldn't support the Brexit plan agreed upon by the cabinet, which he believed gave too much ground to the EU. Only days later, another nine members of Parliament resigned in reaction to Prime Minister Theresa May's plan for a "common rulebook" with the EU. Many, if not all, of the resignations were by Conservatives who favored a full break with Europe, opening the possibility of challenges to May's leadership.

July ended on a positive note for global trade relations as the U.S. and EU negotiations resulted in no new tariffs by the U.S.--a particularly sensitive issue for European automakers--in exchange for increased EU purchases of U.S. soybeans and the building of more terminals to import U.S. liquefied natural gas. Before long, however, investor concerns over trade tensions returned, in August, but those were overshadowed somewhat by the currency crisis facing Turkey.

U.S. tariffs had hit countries beyond China, the EU, and NAFTA partners, and Turkey was among them. In retaliation for a doubling of U.S. tariffs, Turkey doubled its own tariffs on certain U.S. imports. Previously, Turkey had been facing sanctions by the U.S., largely in response to the detention of an evangelical pastor accused of being involved in the failed 2016 coup. Turkey had also been dealing with a large current account deficit and high inflation. As a result, S&P Global Ratings lowered the sovereign long-term foreign currency rating to 'B+' from 'BB-', largely on the expectation that this level of volatility would continue.

On the trade front, the U.S. adopted a carrot-and-stick approach to dealing with China in August, both relaunching negotiations with midlevel representatives and pursuing either 10% or 25% tariffs on $200 billion of Chinese imports. At this point, the U.S. had implemented only 25% tariffs on $34 billion of Chinese imports--which had been matched equally by China. Another $16 billion of Chinese imports would soon be subject to the 25% tariffs, which China threatened to reciprocate.

Closer to home, the U.S. reached a deal with Mexico on the future of NAFTA at the end of the month, after extended bilateral talks between the two countries managed to resolve issues (largely concerning automobiles and energy), allowing Canada to return to trilateral negotiations. Yet as NAFTA negotiations moved closer to an amicable conclusion, worries among investors and other observers mounted that the agreement would cause the U.S.-China conflict to escalate. Some of this worry stemmed from a belief that in forging ahead with its main trading partners, the U.S. would build a united multinational front against Chinese trade practices.

As the NAFTA process reached the finish line in September, President Trump announced the possibility of a third round of tariffs aimed at an additional $267 billion of Chinese goods. As of September, officials from both sides were slated to meet in November--after crucial midterm elections in the U.S. Later in the month, after the initial review period, the second round of tariffs took effect. With $200 billion of Chinese goods now subject to 10% tariffs, this brought the total to $250 billion of Chinese imports subject to the new 10% tariffs, with the rate set to increase to 25% at the start of 2019.

At the end of the month--and right before the proposed deadline--the U.S., Canada, and Mexico finalized the new trade deal, dubbed the United States-Mexico-Canada Agreement (USMCA). Coinciding with this high note in global trade developments, which had hounded markets in the year, the S&P 500 hit its peak daily close on Sept. 20, at 2,931. Few would have guessed how far it would subsequently fall in the course of one month and how much further it would fall by year-end.

While the U.S. was experiencing some of the strongest economic growth in recent years and equity market resilience in the face of the chaotic trade dispute, Europe was not as fortunate. The region was dogged by the unraveling Brexit process throughout the year, as well as several major countries' governments taking a populist shift, particularly heavily indebted Italy. But in addition to those headwinds, Europe's GDP suffered due to the global scope of U.S. trade policies. The impact was direct (in the form of increased tariffs, even if only until an agreement was reached) but also indirect (via the effect of the U.S.-China conflict on global trade).

German, British, and other European equity markets suffered declines in the fourth quarter alongside the U.S., but through September, the S&P 500 had reached a high point for the year, while European peers had experienced theirs much earlier in the year. Emerging markets were also hard hit by the slowdown in the global economy--resulting from trade conflicts--by the time the fall arrived.

As October unfolded, talk on both sides of the Brexit process increasingly mentioned the possibility of a "no deal" outcome. A summit was scheduled for Oct. 17, the outcome of which could be chaotic if a deal wasn't attainable in the lead-up. A point of growing concern, particularly in the U.K., was the Irish border. Offering some relief to financial markets and businesses, EU financial regulators joined their U.K. counterparts in warning of the risks of a no-deal outcome and offered to do what they could to ensure a smooth transition, regardless of the political outcome.

Not long after a third interest rate increase by the Fed in September and a strong jobs report in early October, equity markets the world over suffered sharp losses on or after Oct. 8. At this point, U.S.-China trade negotiations were nonexistent after the last round of tariffs, the U.S. unemployment rate had hit a low not seen in roughly 50 years (alongside increased consumer confidence and wage increases), a "hard" Brexit outcome was becoming much more likely, and the new Italian government had dug in its heels on its new budget, which was rejected by the EU. This confluence of events, along with recent data hinting at more rate hikes in 2019 by the Fed, perhaps proved too much for previously resilient financial markets.

Nonetheless, late in October, Brazil elected right-wing Jair Bolsonaro as president, who markets welcomed given his intent to cut spending, pursue tax reform, reduce bureaucracy, and privatize state-run firms. The Bovespa Index started increasing in mid-September and would finish the year up almost 18% from Sept. 11 (up 15% from January).

Despite the unexpected outcome of the 2016 U.S. presidential election, which caught pollsters and pundits by surprise, most polls were right in their expectations for the results of the 2018 U.S. midterm congressional elections. The Democrats won the House of Representatives, while the Republicans expanded their majority in the Senate. Faced with a split legislature and investigations into the president's dealings, U.S. leverage in the trade talks with China became viewed as weakened. At the end of the month, President Trump and Chinese President Xi Jinping met at the G-20 summit in Argentina.

The main outcome of the meeting was a "truce" between the two nations, in which the U.S. would postpone increasing tariffs to 25% on $200 billion of Chinese goods from the current 10%. China, in turn, would reduce its 40% tariffs on American cars. Nonetheless, the main issues of forced technology transfers by U.S. companies doing business in China, intellectual property protections, and impediments to U.S. access to Chinese markets remained unresolved. The truce was to extend for about three months, while negotiations would continue yet again.

Late November also brought progress in negotiations on the Brexit front, with the EU agreeing to a draft withdrawal treaty penned by Prime Minister May and her cabinet. The EU warned that this would be its final offer, and now the draft bill would have to go to Parliament for a vote. This was the same draft that caused the second Brexit secretary in 2018, Dominic Raab, to quit in protest, with others in the cabinet following.

The fourth-quarter rout in global equity markets coincided with even greater declines in the price of oil. On Oct. 3, the price of a barrel of West Texas Intermediate was $76.4. It fell to a low of $44.5 by Dec. 27, prompting OPEC and Russia to cut production by a combined 1.2 million barrels to help stabilize the market. During December, credit markets in the U.S. and Europe froze up, with no speculative-grade bonds issued in either region, alongside a dramatic drop in leveraged loan issuance. Nonetheless, economic data remained strong, and the Fed raised interest rates for a fourth time in 2018.

The year in full was characterized by a slew of geopolitical events that moved many markets into fits and bouts of increased volatility, ultimately leading to losses across most major equity indices. Both the U.S. and China lost ground by this measure, with the S&P 500 shedding over 6% and the Shenzhen Index contracting over 33%. The FTSE 100 in Britain was ultimately down over 12% as the deteriorating Brexit process took its toll, but Germany's DAX 30 lost an even greater share, down 18%. Within U.S. corporate bond markets, investment-grade bonds were in the red all year, finishing down 1.8%. Meanwhile, the speculative-grade segment saw gains through the third quarter only to lose it all by year-end, finishing down 2.1%.

Ultimately, economic fundamentals were positive, and in some cases strong, despite the effect of trade tensions on slowing growth over the course of the year. This helped corporate credit remain fairly solid, and ratings displayed stability through the noise.

Quarterly Trends

On a year-over-year basis, the number of rated defaults globally was lower in each quarter of 2018 except the first quarter (see chart 14). The U.S. led with the most corporate defaults in each quarter except for the third.

In contrast, the amount of debt affected by default globally fell year over year in the first quarter and then rose in the subsequent quarters (see chart 15). Much of the increase came from companies in the U.S., while both the emerging market and other developed regions experienced declines in the amount of debt affected by default in 2018. The largest defaulter in 2018 was the U.S. media company iHeartCommunications Inc., which had $20.2 billion in associated debt at the time of default. This marked the largest default since 2014, when Texas Competitive Electric Holdings Co. LLC defaulted with $28.7 billion in associated debt (see table 5).

The trailing-12-month and annual default rates have become standard measures, but default rates measured over shorter time frames give a more immediate picture of credit market conditions. Based on quarterly intervals of measurement (nonannualized), default rates contracted across most major regions throughout 2018 (see chart 16). From the first quarter through the fourth, the default rate fell globally, as well as in the U.S. and emerging markets, while the quarterly speculative-grade default rate in Europe rose to 0.59% in the fourth quarter, up by 27 bps from the first quarter. Despite that modest increase, quarterly default rates globally and in these major regions remained below the long-term average quarterly default rates for each region.

Lower Ratings Are More Vulnerable To Default

On average, there is a negative correlation between the initial rating on a firm and its time to default, if a default occurs. For example, for the entire pool of defaulters in this study (1981-2018), the average times to default for issuers originally rated in the 'A' and 'B' categories were 13.5 years and 4.9 years, respectively, from the initial rating (or from Dec. 31, 1980, the start date of the study), whereas issuers in the 'CCC' rating category or lower had an average time to default of only 2.3 years.

In cases where an issuer emerges from a prior default (including distressed exchanges), we consider it a separate entity, and the original rating is the first after the default event. Table 10 displays the median, average, and standard deviations for the time to default from the original rating. The differences between each rating category's minimum and maximum times to default are in the last column, under "range." Table 11 presents the average and median times to default from each rating category for all subsequent ratings.

In both cases, the standard deviation of the times to default generally shrinks progressively as the rating gets lower. Broadly speaking, the average and median times to default for each rating category are longer when based on the initial rating than when based on subsequent ratings, particularly for speculative-grade ratings.

Table 10

Table 11

Table 12 shows the cumulative distribution of defaulters by timeline, based on the original rating. The first row shows the ratings distribution of defaults occurring within 12 months of the original rating. The second row shows the distribution of the cumulative count of defaults occurring within three years of the original rating. In line with expectations, the majority of companies that defaulted within one year of the original rating are from the lowest speculative-grade rating categories of 'B' and lower. For example, of the 207 companies that defaulted within 12 months of having been rated, 191 (or 92.3%) were originally in the 'B' or 'CCC'/'C' categories.

Only in longer time frames do companies with higher original ratings surface among the defaulters. For example, of all the companies that defaulted during 1981-2018, only two entities rated 'AAA' at inception defaulted within seven years. Throughout the 38-year span, only eight companies initially rated 'AAA' have ever defaulted. These were Macy's Inc., Ally Financial Inc., Ambac Assurance Corp., Mutual Benefit Life Insurance Co., Executive Life Insurance Co. CA, Confederation Life Insurance Co., Motors Liquidation Co. (formerly known as General Motors Corp.), and Eastman Kodak Co.

Table 12

Table 13 shows the cumulative defaults over various time horizons from all ratings received subsequent to initial ratings. Each issuer is likely to be captured multiple times, in line with its migration from one rating to another, so the total count in table 13 is different from that in table 12. For example, 10 companies rated 'A' at any point in their lifetimes (excluding initial ratings) defaulted within one year of receiving this rating.

In table 13, the times to default are from the date that each entity received each unique rating in its path to default. In contrast, table 21 reports transition-to-default rates using the static pool methodology, which calculates movements to default from the beginning of each static pool year. This usually leads to shorter time frames from which to calculate default statistics. Data provided in table 13 also differ from default rates in table 24, owing to the use of the static pool methodology. (For more information on methodologies and definitions, see Appendix I.)

Table 13

Defaults arise disproportionately from low rating categories, and this is also true over longer time horizons (see table 14). For example, 324 defaults were recorded in the five-year pool that began in January 2014, of which 316 were rated speculative grade on Jan. 1, 2014. (See table 15 for the eight publicly rated investment-grade defaults during this period.) With higher rates of default, we also observe lower survival rates over time for lower-rated issuers.

The nonfinancial sectors tend to have a much higher share of companies rated speculative grade, with 59.8% globally as of the beginning of 2018, compared with just 25.6% of financial services companies. However, the speculative-grade share of both the financial and nonfinancial sectors has been growing in recent years.

Thus far, 72 defaults have come from the 2018 pool of financial and nonfinancial companies, and all of these were from the lowest rating categories of 'B' and lower. Most were nonfinancial companies, and six were financial services issuers.

Table 14

Table 15

Since 1981, the 'B' rating category has accounted for 1,523 defaults (55.3% of the total from initial rating), well more than double the number of defaulters from the 'BB' category (see tables 10 and 12). Given this track record, monitoring the trends of newly assigned ratings could prove useful in anticipating future default activity, based on the notion that years characterized by high numbers of new ratings of 'B-' or lower will likely be followed by increased default risk.

Chart 17 plots the proportion of all new speculative-grade ratings of 'B-' or lower in the U.S. against the year-end U.S. speculative-grade default rate. As coincident indicators, the two series generally mirror each other in broad movements throughout most of their shared history. However, in most of the relatively benign period since the financial crisis, the two series have diverged somewhat, as they did in 2004-2007. The two series diverged again in 2018, when the speculative-grade default rate fell even as a growing share of newly rated speculative-grade issuers were assigned ratings of 'B-' or lower amid generally accommodative credit markets.

Industry Variations: Energy And Consumer Services Lead Defaults

While default rates modestly declined for the broad nonfinancial sector and rose slightly for the financial services sector in 2018 relative to 2017, the one-year default rate for each of these categories remained below the long-term average over the one-year horizon (see table 16). Meanwhile, the trailing three- and 10-year default rates for financial services in 2018 were also below their long-term averages, even as nonfinancials had a three-year trailing default rate of 5.15%, slightly above its long-term average rate of 5.11%, and a 10-year trailing default rate of 12.05%, above its long-term average rate of 11.45%.

Nonfinancial companies show a higher average default rate than financial services companies over the one-, three-, and 10-year horizons. This trend continued in 2018, with the default rates for nonfinancials exceeding those of financials. Financial services companies accounted for about 11% of total defaults globally in 2018, and the default rate for financial services was just 0.33%. Financial services sectors tend to have a higher share of companies rated investment grade, and at the beginning of 2018, just 16% of speculative-grade companies globally were from financial services.

Table 16

Over the long term, nonfinancial sectors have tended to show a more pronounced cyclicality of defaults than the financial sectors. While the one-year default rate for nonfinancial companies has climbed above 3.5% in three previous cyclical peaks (1991, 2001-2002, and 2009), the annual default rate for financial services has remained below 2% since 1990 (see chart 18). The higher default rates for nonfinancials is not surprising, given this sector's higher concentration of speculative-grade issuers. Financial services companies are more likely to be initially rated in the investment-grade category, while nonfinancial companies are more likely to initially be rated speculative grade.

Over the 38 years this study covers, 71.2% of financial entities were initially rated investment grade, compared with only 30.5% of nonfinancial companies. This helps to explain the resemblance between the annual default rates of nonfinancial entities and those of the speculative-grade universe as a whole, which certainly contributes to the vast differences between cumulative default rates across financial and nonfinancial sectors (see table 16). For example, at the end of 2018, the one-year default rate among all financial entities was 0.33%, compared with 1.34% for all nonfinancials. The gap becomes even wider over longer time horizons, such as three years and 10 years (see chart 19).

Among the 2,754 defaults recorded globally over the long term, six sectors displayed average times to default that are lower than the overall average of 5.8 years. These sectors are energy and natural resources; financial institutions; high technology, computers, and office equipment; leisure time and media; real estate; and telecommunications (see table 17). Using the median rather than the mean adds the transportation and utility sectors to the list. Across sectors, the average difference between an industry's median initial rating and the median initial rating of its defaulters was about 1.3 notches. The largest gap between the two was in financial institutions, which had a four-notch difference: The 221 financial institutions that defaulted had a median original rating of 'BB-', compared with a sector median of 'BBB'.

Table 17

Table 18

Defaults in 2018 were concentrated within the consumer services sector (with 22 defaults) and the energy and natural resources sector (with 22 defaults). Together, these two sectors accounted for more than half of global defaults. Despite the concentration of defaults in these two sectors, the default rate in each fell from 2017. These two sectors displayed the highest default rates in 2018, and these were also the only two sectors with default rates above their long-term averages (see table 19).

The number of defaults in the consumer services sector fell by two in 2018, and the default rate fell by 24 bps from 2017. This sector continues to experience elevated credit stress as many global retailers and consumer products companies face shifts in their business models, confronted by competition from online retailers and large discount chains and increased price transparency for consumers.

In the energy and natural resources sector, elevated defaults continue to reflect credit weakness in the sector as companies recover from the plunge in oil prices from late 2014. Last year's defaulters were largely concentrated in the U.S. and Canada. While Brent crude oil prices returned to over $85 per barrel in mid-2018, prices fell to near $50 per barrel by year-end.

Table 19

When comparing default rates across sectors, we note some key differences between the various industries. Several sectors have had distinct default cycles, such as the high technology, computers, and office equipment sector and the telecommunications sector, which both fueled the prolonged and pronounced spike in the default rate during the tech bubble, when the global speculative-grade default rate reached 12.1% in June 2002. Other sectors, such as the consumer services sector, have had more frequent default cycles, both during and between economic cycles.

However, some of the variation in default rates between sectors stems from overall sample size differences, as well as differentiation in the ratings distribution across industries. For example, the leisure and media sector has a much higher proportion of speculative-grade ratings than the financial institutions or insurance sectors (see chart 20).

Furthermore, the speculative-grade share of every sector has grown over the past decade. Speculative-grade-rated issuers account for more than 60% of total issuers in eight of the 13 industries. As has been the case for an extended period, the leisure time and media sector has far and away the highest proportion of speculative-grade ratings, with nearly 84% of its issuers in this rating category in 2018.

Speculative-Grade Ratings Are Now A Global Majority

On a trailing-12-month basis, the global speculative-grade default rate fell to 2.1% in December 2018 from 2.5% one year earlier (see chart 21). With the default rate falling, risk tolerance among lenders has generally increased, and the share of newly assigned issuer credit ratings that are speculative grade has been rising. In 2018, 79.1% of newly assigned issuer credit ratings globally were speculative grade--the highest share since 2010.

This growing number of newly rated speculative-grade issuers has helped tip the balance of ratings out of investment grade. Globally, speculative-grade issuers now constitute the majority of rated corporate issuers: By the end of 2018, speculative-grade issuers accounted for 50.3% of global issuers. This is the first time in the 38-year history of the ratings covered in our study that speculative-grade ratings represent the majority of global ratings (see chart 22). However, the majority of U.S. corporate ratings have been speculative grade for much of the past decade.

Over the past four years, more than 75% of the initial ratings that S&P Global Ratings has assigned to new issuers have been speculative grade. This influx of new speculative-grade issuers has contributed to the growing share of speculative-grade ratings globally.

Historically, a growing concentration of speculative-grade ratings often precedes a period of increased defaults. For example, the share of speculative-grade ratings surged in the U.S. beginning in 2002. After speculative-grade ratings reached a peak of 51% of U.S. corporate ratings in 2007, the default rate reached its cyclical peak of 12% in 2009, following the Great Recession (see chart 23).

In Europe, by contrast, the share of speculative-grade ratings remains in the minority. In large part, this reflects the private nature of the leveraged finance market before the financial crisis in 2008. In 2006, the speculative-grade share of European corporate ratings peaked near 21%, and once the cycle turned, the European speculative-grade default rate peaked at 9.9% in November 2009.

However, since 2008, the number of speculative-grade ratings in Europe has surged, and the share of speculative-grade ratings has more than doubled to 43% at the end of 2018. This blossoming of the publicly rated speculative-grade market in Europe has resulted from a combination of downgrades and newly assigned ratings. Before 2010, the majority of newly assigned European issuer credit ratings were investment grade, but since then, nearly 73% of newly assigned ratings have been speculative grade. With the region moving to promote disintermediation, we expect this share of speculative-grade issuers to continue to grow.

Transition Tables And Cumulative Default Rates Demonstrate Ratings Performance

An analysis of transition rates over the four quarters ended December 2018 suggests that ratings behavior continues to exhibit consistency with long-term trends. Higher ratings show a negative correspondence with the observed frequency of default. Investment-grade-rated issuers globally tend to exhibit greater ratings stability (as measured by the frequency of rating transitions) than those rated speculative grade (see table 20).

For instance, 92% of issuers rated 'A' at the beginning of 2018 were still rated 'A' by Dec. 31, 2018, whereas the comparable share for issuers rated 'B' was only 78.1%. One exception is the 'AAA' category, which had a stability rate of 89% in 2018. This was the lowest stability rate among the investment-grade rating categories, due to the small sample size of 'AAA' rated issuers.

At the beginning of 2018, just nine issuers globally were rated 'AAA'. Because of the extremely small size of the 'AAA' rating category, the downgrade of even one issuer will have a large effect on this segment's stability rate. In 2018, S&P Global Ratings lowered the issuer credit rating on just one 'AAA' issuer, Singapore-based SMRT Corp. Ltd., which was downgraded to 'AA+' from 'AAA' on March 13, 2018.

This downgrade is yet another from recent years that has contributed to the dwindling population of 'AAA' corporates. The sovereign downgrades of China in 2017, the U.K. in 2016, France in 2012, and the U.S. in 2011 have factored in the downgrades of many higher-rated financial services companies. Conversely, among nonfinancial entities, there has been a more gradual trend of increased willingness to operate with higher leverage to fund share buybacks, expand businesses, or finance acquisitions. These factors have combined with a growing tolerance by asset managers to invest in lower-rated companies, leaving just a handful of the highest-rated firms.

The number of 'AAA' rated issuers has declined from 89 globally at the beginning of 2008 to just eight by the end of 2018. Over this same period, as the number of the highest-rated investment-grade companies has dwindled, the number of the lowest-rated investment-grade companies has surged. The number of companies rated in the 'BBB' category has grown by 30% since the beginning of 2008, to 1,882 at the end of 2018.

Table 20

This study--in line with previous default studies--confirms that over the long term (1981-2018), higher ratings are more stable than lower ratings. Issuers rated 'AAA' were still rated 'AAA' one year later 87% of the time, while issuers rated in the 'CCC'/'C' category retained those ratings just 43.5% of the time. Ratings continue to exhibit this long-term relationship between higher ratings and higher ratings stability even over longer time horizons (see table 21) or when broken out by region (see table 22). A key consideration when analyzing transition matrices that present averages computed over multiple static pools is that the standard deviations associated with each transition point in the matrix are large relative to the averages (outside of stability rates).

In contrast, the relationship is slightly more discontinuous when we examine rating transitions across modifiers (the plus or minus after a rating), but these variations are likely a result of sample size considerations, and we do not consider them significant (see table 23). For example, 'AA+' rated issuers were still rated 'AA+' one year later 78.4% of the time, and 'AA' rated issuers were still rated 'AA' one year later 80.6% of the time. In this particular case, however, the 'AA+' figure was derived from a much smaller sample than that for the 'AA' rating. And as a general rule, the highest proportions of rating changes for any given rating or rating modifier occur at adjacent ratings and rating modifiers.

Table 21

Table 22

Table 23

Over each time span, lower ratings correspond to higher default rates (see table 24 and chart 25). This holds true in every region worldwide (see table 25). The only exceptions occur when the number of defaults is low or when the underlying population of issuers is very small--such as at the rating modifier level among the higher rating categories (see table 26). Investment-grade-rated issuers seldom default, so the number of defaults among these rating categories is particularly low. This small sample size can at times result in historical default rates that seem counterintuitive. These default rates do not imply, however, that 'AAA' rated companies are riskier than 'AA+' rated companies, for example, but rather that both are highly unlikely to default.

Table 24

Table 25

Table 26

Gini Ratios And Lorenz Curves

A quantitative analysis of the performance of S&P Global Ratings' corporate credit ratings shows that they continue to correlate with default risk across several time horizons. As one measure of ratings performance, the cumulative share of defaulters was plotted against the cumulative share of issuers by rating in a Lorenz curve to visually render the accuracy of its rank ordering (for definitions and methodology, refer to Appendix II). Over the long term, the global weighted-average Gini coefficient was 82.5% over the one-year horizon, 75.2% over three years, 71.5% over five years, and 69.4% over seven years (see table 27).

Table 27

In line with expectations, the Gini coefficients decline over time because longer time horizons allow for greater credit degradation among higher-rated entities. In the one-year global Lorenz curve, for example, 96.2% of defaults occurred in the speculative-grade category, while these ratings constituted only 39% of all corporate ratings (see chart 26). In the seven-year Lorenz curve, speculative-grade issuers constituted 87.6% of defaulters and only 35.6% of the entire sample (see chart 29). If the rank ordering of ratings had little predictive value, the cumulative share of defaulting corporate entities and the cumulative share of all entities at each rating would be nearly the same, producing a Gini ratio of zero.

Table 28

One-year Gini coefficients appear to be broadly cyclical and negatively correlated with default rates (see chart 30). Trends in the one-year Gini ratio emerge during periods of both high and low default rates, which reflects the natural relationship between the two extremes. In periods of high defaults, there tends to be greater variation in the distribution of defaults with regard to prior ratings, which reduces the Gini. That is, when default pressure is high, economic conditions are such that the likelihood of companies from across the rating spectrum suffering a more rapid deterioration of credit quality is higher.

The experience of 2018 generally coincides with this observation. The one-year Gini ratio in 2018 was 93%, alongside a relatively low default rate of 2.1%. This compares with a Gini of 92.7% and a default rate of 2.5% in 2017.

Appendix I: Methodology And Definitions

This long-term corporate default and rating transition study uses the 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 ratings. S&P Global Ratings does not require all issuers with debt rated 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 that the CreditPro corporate dataset accurately represents the complete universe of ratings. The local currency senior unsecured rating is the preferred debt-level rating used for the proxy because this rating is usually consistent with the issuer credit rating. In a small number of cases, we used the subordinated debt rating or the senior secured rating as the proxy.

An S&P Global Ratings 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. Counterparty credit ratings, corporate credit ratings, and sovereign credit ratings are all forms of issuer credit ratings. 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, this poses no continuity problem because each study reports statistics back to Dec. 31, 1980. Therefore, each annual default study is self-contained and effectively supersedes all previous versions.

Issuers included in this study

This study analyzes the rating histories of 20,581 companies that S&P Global Ratings rated as of Dec. 31, 1980, or that were first rated between that date and Dec. 31, 2018. These include industrials, utilities, financial institutions, and insurance companies around the world 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.

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

Issuers with withdrawn ratings

S&P Global Ratings withdraws ratings when an entity's entire debt is paid off or when the program or programs rated are terminated and the relevant debt extinguished. Others are withdrawn because of a lack of cooperation, particularly when a company is experiencing financial difficulties and refuses to provide all the information needed to continue surveillance on the ratings, or at the entity's request. For the purposes of this study, a corporate rating may also be withdrawn as a result of mergers and acquisitions.

Definition of default

An obligor rated 'SD' (selective default) or 'D' (default) 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. An obligor is considered in default unless S&P Global Ratings believes 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.

A 'D' rating is assigned when S&P Global Ratings believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. An 'SD' rating is assigned when S&P Global Ratings believes that 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.

S&P Global Ratings lowers its rating on an obligor to 'D' or 'SD' if the obligor is conducting a distressed exchange offer. 'R' (regulatory intervention) indicates that an obligor is under regulatory supervision owing to its financial condition. This does not necessarily indicate a default event, but during the period of regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. Preferred stock is not considered a financial obligation; thus, a missed preferred stock dividend is not normally equated with default.

We deem 'D', 'SD', and 'R' issuer ratings to be defaults for the purposes of this study. A default is assumed to take place on the earliest of:

• The date S&P Global Ratings revised the rating(s) to 'D', 'SD', or 'R';
• The date a debt payment was missed;
• The date a distressed exchange offer was announced; or
• The date the debtor filed for, or was forced into, bankruptcy.

When an issuer defaults, it is not uncommon for S&P Global Ratings to subsequently withdraw the 'D' 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 of 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 experience leading up to its earlier default.

Many practitioners use statistics from this default study to estimate the "probability of default" and "probability of rating transition." It is important to note that S&P Global Ratings' credit ratings do not imply a specific probability of default.

Regional definitions

Within this study, tables and charts are often presented using specific geographic regions. Some countries can be included in multiple regions, and S&P Global Ratings does not have corporate ratings within every country. The regions covered in this study are:

U.S. and tax havens: U.S., Bermuda, and the Cayman Islands

Other developed: Australia, Canada, Japan, and New Zealand

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

Emerging markets: Angola, Argentina, Armenia, Aruba, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belize, Bhutan, Bolivia, Bosnia-Herzegovina, Brazil, Brunei Darussalam, Cambodia, Chile, China, Colombia, Costa Rica, Curacao, Dominican Republic, Egypt, El Salvador, Fiji, Gabon, Georgia, Ghana, Grenada, Guatemala, Honduras, Hong Kong, India, Indonesia, Israel, Jamaica, Jordan, Kazakhstan, Kenya, Korea (Republic of), Kuwait, Lebanon, Liberia, Macao, Malaysia, Marshall Islands, Mauritius, Mexico, Mongolia, Morocco, Namibia, Netherlands Antilles, Nigeria, Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Sri Lanka, Syrian Arab Republic, Taiwan, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Turks and Caicos Islands, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, and Vietnam.

Calculations

Static pool methodology.  S&P Global Fixed Income Research conducts its default studies on the basis of groupings called static pools. For the purposes of this study, we form static pools by grouping issuers (for example, 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. All companies included in the study are assigned to one or more static pools. When an issuer defaults, we assign that default back 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, ensuring that default rates account for rating migration and allowing for default rates to 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 interpreted as a buy-and-hold portfolio. Because errors, if any, are corrected by every new 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 new update revises results back to the same starting date of Dec. 31, 1980, so as to avoid continuity problems.

Entities that have had ratings withdrawn--that is, revised to not rated ("NR")--are surveilled with the aim of capturing a potential default. Because static pools include only 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 the entity in that static pool as a defaulter and categorize it in the rating category of which it was a member at that time.

For instance, the 1981 static pool consists of all companies rated as of 12:00:01 a.m. on Jan. 1, 1981. Adding those companies first rated in 1981 to the surviving members of the 1981 static pool forms the 1982 static pool. All rating changes that took place are reflected in the newly formed 1982 static pool through the ratings on these entities as of 12:00:01 a.m. on Jan. 1, 1982. We used the same method to form static pools for 1983-2018. From Jan. 1, 1981-Dec. 31, 2018, a total of 20,581 first-time-rated organizations were added to form new static pools, while we excluded 2,754 defaulting companies and 10,548 companies that are no longer assigned ratings ("NR").

Consider the following example: An issuer is originally rated 'BB' in mid-1986 and is downgraded to 'B' in 1988. This is followed by a rating withdrawal in 1990 and a default in 1993. We would include this hypothetical company in the 1987 and 1988 pools with the 'BB' rating, which was the rating on the issuer at the beginning of those years. Likewise, it would be included in the 1989 and 1990 pools with the 'B' rating. It would not be part of the 1986 pool because it was not rated as of the first day of that year, and it would not be included in any pool after the last day of 1990 because the rating had been withdrawn by then. Yet each of the four pools in which this company was included (1987-1990) would record its 1993 default at the appropriate time horizon.

Default rate calculation.  We calculated annual default rates for each static pool, first in units and later as percentages with respect to the number of issuers in each rating category. We combined these percentages to obtain cumulative default rates for the 38 years the study covers (see tables 24-26 and 30-32).

Issuer-weighted default rates.  All default rates that appear in this study are based on the number of issuers rather than the dollar amounts affected by defaults or rating changes. Although dollar 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.  The cumulative default rates in this study average the experience of all static pools by first calculating marginal default rates for each possible time horizon and for each static pool, weight-averaging the marginal default rates conditional on survival (survivors being nondefaulters), and accumulating the average conditional marginal default rates (see tables 24-26 and 30-32). We calculated conditional default rates by dividing the number of issuers in a static pool that default at a specific time horizon by the number of issuers that survived (did not default) to that point in time. Weights are based on the number of issuers in each static pool. Cumulative default rates are one minus the product of the proportion of survivors (nondefaulters).

For instance, in table 32, the weighted-average first-year default rate for all speculative-grade-rated companies for all 38 pools was 3.66%, meaning that an average of 96.34% survived one year. Similarly, the second- and third-year conditional marginal averages--shown in the "Summary statistics" section at the bottom portion of the table--were 3.59% for the first 37 pools (96.41% of those companies that did not default in the first year survived the second year) and 3.22% for the first 36 pools (96.78% of those companies that did not default by the second year survived the third year), respectively. Multiplying 96.34% by 96.41% results in a 92.87% survival rate to the end of the second year, which is a two-year average cumulative default rate of 7.13%. Multiplying 92.87% by 96.78% results in an 89.88% survival rate to the end of the third year, which results in a three-year average cumulative default rate of 10.12%.

Transition analysis.  Transition rates compare issuer ratings at the beginning of a period with ratings at the end of the period. To compute one-year rating transition rates by rating category, we compared 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 continually rated from the middle of 1984 to the middle of 1991 would appear in the seven consecutive one-year transition matrices from 1985-1991. 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, 2018, had 38 one-year transitions, while companies first rated on Jan. 1, 2018, had only one. Table 29 displays the summary of one-year transitions in the investment-grade and speculative-grade rating categories. Each one-year transition matrix displays all rating movements between letter 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 ratings from 'AAA' to 'D', plus an entry for "NR" (see table 22).

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, 2018, and was 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' that ended the year as 'A'. This also applies to transition matrices that span longer time horizons. If an issuer defaults or if the rating on the issuer is withdrawn in the middle of the year, then it would be considered rated 'D' or not rated as of Dec. 31 of that particular year.

Table 29

Multiyear transitions.  Multiyear transitions were also calculated for periods of two up to 20 years. In this case, we compared the rating at the beginning of the multiyear period with the rating at the end. For example, three-year transition matrices were the result of comparing ratings at the beginning of the years 1981-2016 with the ratings at the end of the years 1983-2018. Otherwise, the methodology was identical to that used for single-year transitions.

We calculated 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 (see tables 33-40). 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 upgrade and downgrade percentages, as well as the magnitude of rating changes, throughout this study. However, some transition tables may use 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 to be rating transitions because the rating remained within the rating category.

Comparing transition rates with default rates.  Rating transition rates may be compared with the marginal and cumulative default rates described in the previous sections. For example, the one-year default rate column of table 24 is equivalent to column 'D' of the average one-year transition matrix in table 21, as well as the cumulative average in the "Summary statistics" of the one-year column in table 32.

However, the two-year default rate column in table 24 is not the same as column 'D' of the average two-year transition matrix in table 34. This difference results from the different methods of calculating default rates. The default rates in table 34 are calculated as not conditional on survival, while those in table 24 are average default rates conditional on survival. The two-year default rates in table 24 are calculated in the same way as those in the cumulative average section for the two-year column in table 32, while those in the 'D' column of table 34 are equivalent to adding up all the defaults behind the two-year column's annual default rates in table 32, divided by the sum of all the issuers in table 32 for the years 1981-2017.

The links between transition matrices and average cumulative default rates can be best illustrated through tables 30-32. The default rates in the columns of these tables, associated with each static pool year, are calculated in the same way as they would be for individual years' one-year transition matrices. Tables 30, 31, and 32 are broken out by the broadest rating classifications (all rated, investment grade, and speculative grade). These tables can also be constructed for each rating category.

As an example, the two-year column of table 32 shows the two-year default rates (not conditional on survival) for each static pool. These are calculated in the same way as the default column in table 20, though table 20 shows the one-year default rates for each rating category for 2018 exclusively. In the summary section at the bottom of tables 30-32, the first row shows the issuer-weighted averages of the marginal default rates. These marginal averages are then used to calculate the cumulative average default rates in the row directly beneath them, as explained in the "Average cumulative default rate" section above. These default rates are the same that appear in table 24 and are average cumulative default rates conditional on survival.

Standard deviations.  Many of the tables and charts in this study display averages of default rates, transition rates, and Gini ratios. Often these are issuer-weighted averages. Prior studies have shown that fluctuations within default rates and transitions can vary greatly depending on many circumstances specific to particular time frames, industries, and geographic regions. As a supplement to many of the averages and time series presented in this study, standard deviations are also shown to provide a gauge of the dispersion of data behind these averages.

For the transition matrices in tables 21-23 and 33-44, the standard deviation for each cell in a given matrix is a weighted standard deviation, calculated using the data from each of the underlying cohort years that contribute to the averages, weighted by that cohort year's issuer base for each rating level. For example, in the average one-year global transition matrix in table 33, each cell's weighted standard deviation is calculated from the series of that particular cell in each of the 38 cohorts beginning with the 1981 cohort and ending with the 2018 cohort. The squared difference between each cohort's transition rate and the weighted average--which is the data point in each cell--is multiplied by each cohort's weight. These weights are based on each cohort's rating level's contribution to the 38-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.

For the Gini ratios in tables 2, 27, and 28, the standard deviations are derived from the time series of Gini ratios for all of their constituent annual cohorts. As an example, the standard deviation applied to the seven-year weighted-average global Gini ratio in table 2 (5.36) was calculated from the time series of all available seven-year Gini ratios by cohort. In this case, these are the seven-year Gini ratios beginning with the 1981 cohort through the 2011 seven-year cohort. We calculated standard deviations for Gini ratios in this study as the standard deviations of a sample, and not those of a population.

Time sample.  This study limits the reporting of default rates to the 15-year time horizon. However, the data were gathered for 38 years, and all calculations are based on the rating experience of that period. In addition, average default statistics become less reliable at longer time horizons as the sample size becomes smaller and the cyclical nature of default rates has a bigger effect on averages.

Table 30

Table 31

Table 32

Table 33

Table 34

Table 35

Table 36

Table 37

Table 38

Table 39

Table 40

Table 41

Table 42

Table 43

Table 44

Appendix II: Gini Methodology

We utilize the Lorenz curve, a graphical representation of the proportionality of a distribution, as one measure of ratings performance, 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, while the y-axis represents the cumulative share of defaulters, also arranged by rating. 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. If S&P Global Ratings' corporate ratings only randomly approximated default risk, the Lorenz curve would fall along the diagonal. Its Gini coefficient--which is a summary statistic of the Lorenz curve--would thus be zero. If corporate ratings were perfectly rank ordered so that all defaults occurred only among the lowest-rated entities, the curve would capture all of the area above the diagonal on the graph (the ideal curve), and its Gini coefficient would be 1 (see chart 31).

The procedure for calculating the Gini coefficients is illustrated in chart 31: 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 total of area A plus area B. In other words, the Gini coefficient captures the extent to which actual ratings accuracy diverges from the random scenario and aspires to the ideal scenario.

Appendix III: Defaults In Profile

In 2018, there were 82 corporate defaults, including nine from confidential issuers, affecting US$131.7 billion of debt. This appendix provides summaries of the events leading up to each default and, in some cases, events following the default. We also list each company's defaulting instruments that S&P Global Ratings rates.

Expro Holdings U.K. 3 Ltd.

• US$1.3 billion term B bank loan due Sept. 2, 2021
• US$175 million revolving credit facility bank loan due Sept. 2, 2019

On Jan. 2, 2018, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based oilfield services company Expro Holdings U.K. 3 Ltd. to 'D' from 'CCC+'. The downgrade followed Expro's announcement of submitting a plan to reorganize its debt under Chapter 11 of the U.S. Bankruptcy Code, after reaching an agreement with debtholders and shareholders to convert its debt into equity (about $1.4 billion).

On March 13, 2018, the ratings on the issuer were withdrawn.

Table 45

Fieldwood Energy LLC

• US$1.375 billion revolver bank loan due Sept. 30, 2018
• US$2.143 billion second-lien term bank loan due Sept. 30, 2020
• US$387.6 million first-lien term bank loan due Aug. 31, 2020
• US$517.5 million first-lien last-out term bank loan due Sept. 30, 2020
• US$900 million first-lien term bank loan due Sept. 30, 2018
• US$200 million first-lien guaranteed senior secured due Sept. 28, 2018

On Jan. 3, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based oil and gas exploration and production company Fieldwood Energy LLC to 'D' from 'CCC'. The downgrade reflected Fieldwood Energy's decision to skip the interest payments on its first-lien last-out term loan and second-lien term loan and enter into forbearance agreements with certain lenders of its term loans.

On Feb. 15, 2018, Fieldwood filed for Chapter 11 with a prepackaged plan to reduce balance sheet debt by $1.6 billion and transfer ownership of the reorganized company to the junior debtholders. Additionally, as part of the reorganization, the new equity owners arranged for Fieldwood to acquire drilling fields from Noble Group Inc.

On April 23, 2018, S&P Global Ratings raised its issuer credit rating on Fieldwood Energy LLC to 'B-' from 'D'. The rating action followed Fieldwood's emergence from bankruptcy and reflected the new capital structure, the acquisition of Noble Energy Inc.'s Gulf of Mexico assets, and revised estimates of the company's operating performance.

Table 46

Liberty Tire Recycling Holdco LLC

• US$170 million term B bank loan due July 7, 2020

On Jan. 4, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based tire collection and recycling services provider Liberty Tire Recycling Holdco LLC to 'SD' (selective default) from 'CC'. The downgrade followed the close of Liberty's exchange offer wherein it exchanged $175 million of its outstanding payment-in-kind (PIK) notes due in 2021 for $60 million of new PIK notes due in 2023 and equity.

On Jan. 8, 2018, S&P Global Ratings raised its issuer credit rating on the company to 'B-' from 'SD', and the ratings on the issuer were subsequently withdrawn.

Table 47

BIS Industries Ltd.

• US$250 million 11.50% notes due April 1, 2019

On Jan. 16, 2018, S&P Global Ratings lowered its long-term issuer credit rating on Australia-based mining-logistics issuer BIS Industries Ltd. to 'D' from 'CC'. The rating action followed the completion of BIS' scheme of arrangement to recapitalize the company, which we consider to be a distressed exchange. The issuer credit rating was subsequently withdrawn.

Table 48

RGL Reservoir Management Inc.

• US$301 million first-lien term bank due Aug. 16, 2021
• US$45 million revolving bank loan due Aug. 14, 2019
• US$75 million first-lien guaranteed senior secured due Dec. 21, 2024

On Jan. 18, 2018, S&P Global Ratings lowered its long-term issuer credit rating on Canada-based RGL Reservoir Management Inc. to 'SD' from 'CCC-'. The downgrade followed RGL's recapitalization of its balance sheet, which reduced long-term debt by more than 80%. We viewed the transaction as a distressed exchange.

This debt recapitalization transaction effectively extinguished all of the company's previously rated first-lien secured debt. On Jan. 23, 2018, S&P Global Ratings raised its long-term issuer credit rating on the company to 'CCC+' from 'SD' and withdrew the 'CCC+' rating on RGL at the company's request.

Table 49

Philadelphia Energy Solutions Refining and Marketing LLC

• US$550 million term B bank loan due April 4, 2018
• US$100 million first-lien guaranteed senior secured due Oct. 7, 2019
• US$120 million first-lien superpriority senior secured due Dec. 31, 2022

On Jan. 24, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based oil and gas refining issuer Philadelphia Energy Solutions Refining and Marketing LLC (PES) to 'D' from 'CCC-'. The rating reflected the Chapter 11 bankruptcy filing by the company and its affiliates on Jan. 21, 2018. PES announced that it entered into a restructuring support agreement with the holders of more than 90% of its term loan B as well as 100% of the holders of its term loan A (not rated by S&P Global Ratings). The ratings on the issuer were withdrawn on March 12, 2018.

Table 50

Hovnanian Enterprises Inc.

• US$141.8 million 5.00% notes due Nov. 1, 2021
• US$150 million 7.00% senior unsecured notes due Jan. 15, 2019
• US$220 million 9.125% second-lien notes due Nov. 15, 2020
• US$250 million 8.00% notes due Nov. 1, 2019
• US$400 million 10.50% senior secured noted due July 15, 2024
• US$440 million 10.00% senior secured notes due July 15, 2022
• US$53.2 million 2.00% notes due Nov. 1, 2021
• US$75 million 10.00% second-lien notes due Oct. 15, 2018
• US$75 million 9.50% first-lien notes due Nov. 15, 2020
• US$75 million superpriority term bank loan due Aug. 8, 2019
• US$140 million 7.625% series A

On Jan. 30, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based residential homebuilder Hovnanian Enterprises Inc. to 'SD' from 'CC'. The downgrade followed the disclosure that Hovnanian completed a debt exchange whereby holders of up to $185 million of the 8% senior notes received newly issued 3.5% unsecured notes due 2026, 5% unsecured notes due 2040, and $26.5 million in cash. We viewed the exchange as distressed because the new securities' maturities extend beyond the original securities' and because we believed there was a realistic possibility of a conventional default before the exchange.

Following the transaction, S&P Global Ratings raised its issuer credit rating on the company to 'CCC+' from 'SD' on Feb. 6, 2018.

Later, on April 6, 2018, S&P Global Ratings lowered the issuer credit rating on Hovnanian Enterprises Inc. to 'CC' from 'CCC+'. The downgrade followed Hovnanian's announcement of a proposed exchange offering that would be outstanding until May 3, 2018, which we would view as a distressed exchange, if completed. The issuer credit rating was subsequently raised to 'CCC+' from 'CC', as the minimum exchange condition to its exchange offer was not satisfied and no existing notes were accepted in the exchange offer.

Table 51

iHeartCommunications Inc.

• US$1 billion 9.00% priority guarantee notes due Sept. 15, 2022
• US$1.2 billion 12.00% senior notes due Feb. 1, 2021
• US$1.3 billion term E bank loan due 2019
• US$1.75 billion 9.00% priority guarantee notes due March 1, 2021
• US$175 million 6.875% senior debentures due June 15, 2018
• US$2 billion 9.00% senior secured notes due Dec. 15, 2019
• US$250 million 5.50% notes due Dec. 15, 2016
• US$300 million 7.25% senior debentures due Oct. 15, 2027
• US$5 billion term D bank loan due Jan. 30, 2019
• US$950 million 10.625% priority guarantee notes due 2023
• US$976.373 million 11.25% priority guarantee senior secured notes due March 1, 2021
• US$1.925 billion 7.625% notes series B due March 15, 2020
• US$1.989 billion 6.5% callable bonds due Nov. 15, 2022
• US$275 million 7.625% notes series A due March 15, 2020
• US$735.75 million 6.50% callable bonds due Nov. 15, 2022
• US$350 million 8.75% senior notes due Dec. 15, 2020

On Feb. 1, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based media company iHeartCommunications Inc. to 'SD' from 'CC' after the company missed a $106 million net cash interest payment on its 12%/14% senior notes due 2021. On March 14, 2018, iHeart announced that it had filed for Chapter 11 bankruptcy protection in the Southern District of Texas, Houston Division.

On March 15, 2018, S&P Global Ratings lowered the issuer credit rating on the company to 'D' from 'SD'. The ratings on the issuer were subsequently withdrawn on April 18, 2018.

Table 52

Cenveo Inc.

• US$105 million 6.00% senior notes due May 15, 2024
• US$250 million 8.50% second-lien notes due Sept. 15, 2022
• US$540 million 6.00% first-lien notes due Aug. 1, 2019

On Feb. 2, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based printing company and envelope manufacturer Cenveo Inc. to 'D' from 'CCC+'. The downgrade followed the company's announcement that it had filed for Chapter 11 bankruptcy protection in the Southern District of New York, White Plains. At the time of the filing, Cenveo's adjusted leverage was above 10x, which we viewed as unsustainable, despite the company's leading market position in envelope and label printing.

The ratings on the issuer were withdrawn on March 26, 2018.

Table 53

BrightHouse Group PLC

• EUR220 million 7.875% notes due May 15, 2018

On Feb. 5, 2018, S&P Global Ratings lowered its long-term issuer credit rating on U.K.-based rent-to-own provider BrightHouse Group PLC to 'D' from 'CC'. The downgrade followed BrightHouse's announcement on Feb. 2, 2018, that it had completed its debt exchange offer. We viewed the transaction as a distressed exchange because investors would receive less than what was promised on the original securities. We therefore considered the exchange as tantamount to a default on the company's obligations.

The ratings on the issuer were withdrawn on May 10, 2018.

Table 54

Charlotte Russe Inc.

• US$150 million term B bank loan due May 22, 2019
• US$80 million incremental term bank loan due May 22, 2019

On Feb. 5, 2018, S&P Global Ratings lowered the rating on U.S.-based apparel retailer Charlotte Russe Inc. to 'SD' from 'CC'. The downgrade followed the company's completed restructuring transaction of its first-lien term loan. Pursuant to the agreement, the outstanding $214 million term loan was exchanged for a new $90 million term loan, and the maturity date was extended to February 2023. In exchange, the term loan lenders received 100% of the equity of Charlotte Russe, subject to some dilution from the newly formed management equity incentive plan. We have determined that this transaction is a distressed exchange.

Later, on Feb. 23, 2018, we raised the issuer credit rating on the company to 'CCC' from 'SD' following the completed debt restructuring.

Table 55

Remington Outdoor Co. Inc.

• US$250 million 7.875% third-lien notes due May 1, 2020
• US$575 million term loan bank loan due April 19, 2019

On Feb. 13, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based gun and ammunitions manufacturer Remington Outdoor Co. Inc. to 'D' from 'CCC-'. We lowered the issuer credit rating to 'D' because the interest payment on the company's term loan B was not made within the stated five-day grace period, and we view this as a default.

Table 56

Transworld Systems Inc.

• US$440 million 9.50% second-lien notes due Aug. 8, 2021

On Feb. 16, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based accounts receivable management and business process outsourcing provider Transworld Systems Inc. to 'D' from 'CCC-'. The downgrade followed Transworld's announcement that it did not make its interest payment due on Feb. 15, 2018, on its 9.5% secured notes due 2021. We did not expect the company to make the payment within the grace period, given the company's heavy debt burden.

The ratings on the issuer were withdrawn on May 29, 2018.

Table 57

Tops Holding II Corp.

• US$560 million 8.00% senior notes due Dec. 31, 2022
• US$67.511 million 9.00% senior notes due March 3, 2021
• US$150 million 8.75% senior notes due June 15, 2018

On Feb. 21, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based retailer Tops Holding II Corp. and subsidiaries Tops Holding LLC and Tops Markets LLC to 'D' from 'CCC' following the company's Chapter 11 bankruptcy filing. The ratings were subsequently withdrawn on March 27, 2018.

Table 58

Eletson Holdings Inc.

• US$300 million 9.625% first preferred ship mortgage notes due Jan. 15, 2022

On Feb. 22, 2018, S&P Global Ratings lowered its long-term issuer credit rating on Liberia-registered product tanker and liquefied petroleum gas carrier owner and operator Eletson Holdings Inc. to 'SD' from 'CCC+'. The downgrade followed Eletson's announcement that it entered into a forbearance agreement with the holders of its ship mortgage notes. This was to suspend coupon payments beyond the 30-day contractual grace period under the existing notes' indenture, which expired on Feb. 15.

On Aug. 14, 2018, S&P Global Ratings raised the rating to 'CCC' from 'SD'. The rating action followed the company's completed exchange offer and its agreement with bank lenders to defer principal payments and waive the loan-to-value covenants.

Table 59

Iconix Brand Group Inc.

• US$300 million term bank loan due Aug. 2, 2022
• US$125 million 5.75% second-lien due May 15, 2023
• US$400 million 1.50% senior subordinated notes due March 15, 2018

On Feb. 23, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based brand management company Iconix Brand Group Inc. to 'SD' from 'CC'. The rating action followed the completion of the exchange offer for a $125 million principal amount of convertible notes due in March 2018 for an equal amount of new convertible notes due in August 2023 and cash payments representing accrued but unpaid interest. We viewed the transaction as a distressed exchange, tantamount to a default, because we believed the noteholders would receive less value than originally promised, given the five-year maturity extension, the ability of Iconix to force conversion of the new convertible notes, and the substantial decline in potential equity conversion value.

On March 16, 2018, S&P Global Ratings raised the rating to 'CCC' from 'SD'. While the company's capital structure improved after repaying the 2018 convertibles notes, its operations remained vulnerable. The retail environment remains challenging, and the company continues to have weak liquidity, including a tight covenant cushion over the next two years.

Table 60

PaperWorks Industries Holding Corp.

• US$365 million 9.50% senior notes due Aug. 15, 2019

On March 6, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based coated recycled paperboard manufacturer PaperWorks Industries Holding Corp. to 'SD' from 'CC' following the close of PaperWorks' restructuring transaction. The company exchanged its $360 million secured notes outstanding for a new $45 million term loan (unrated) and majority ownership of the company. We view this as a distressed exchange because the existing noteholders received significantly less than par value. Later, on March 21, 2018, the rating was withdrawn.

Table 61

HGIM Corp.

• US$300 million revolver bank loan due June 18, 2018
• US$875 million term B bank loan due 2020
• US$150 million first-lien guaranteed senior secured due June 18, 2018
• US$100 million first-lien guaranteed senior secured due June 18, 2019
• US$600 million first-lien guaranteed senior secured due June 18, 2020
• US$250 million first-lien guaranteed senior secured due June 18, 2020

On March 8, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based offshore service provider HGIM Corp. to 'D' from 'CCC-'. The rating was lowered after the company's announcement that it voluntarily filed a prepackaged Chapter 11 bankruptcy. According to the filings, the debtors secured support for a prepackaged Chapter 11 plan of reorganization from holders of senior lenders' claims representing over 94% of holdings. Later, on May 14, 2018, the rating was withdrawn.

On July 31, 2018, S&P Global Ratings assigned an issuer credit rating of 'B-' to HGIM Corp. The rating reflected the company's still-elevated debt leverage following its debt restructuring and emergence from Chapter 11.

Table 62

EV Energy Partners L.P.

• US$500 million 8.00% senior notes due April 15, 2019

On March 16, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based oil and gas exploration and production company EV Energy Partners L.P. to 'D' from 'CCC+'. The downgrade reflected the company's announcement that it entered into a restructuring support agreement with holders of its senior unsecured notes due 2019 and lenders of its reserve-based lending facility. This agreement contemplated a comprehensive restructuring of the company's capital structure through a proposed prepackaged reorganization plan. We viewed the proposed prepackaged plan of reorganization as a precursor to bankruptcy and tantamount to default.

On July 19, 2018, the ratings on the issuer were withdrawn.

Table 63

Claire's Stores Inc.

• US$1.125 billion 9.00% first-lien notes due March 15, 2019
• US$210 million 6.125% first-lien notes due March 15, 2020
• US$320 million 7.75% senior notes due June 1, 2020
• US$450 million 8.875% senior secured second-lien notes due March 15, 2019
• US$75 million first-lien guaranteed senior secured due Feb. 4, 2019
• US$40 million first-lien guaranteed senior secured due Sept. 20, 2021

On March 19, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based specialty retailer Claire's Stores Inc. to 'D' from 'CC'. The downgrade followed the company's filing of a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. The company entered into bankruptcy with a restructuring support agreement with its first-lien creditors, representing about 72% of Claire's first-lien debt, 8% of its second-lien notes, and 83% of its unsecured notes. Claire's expected to eliminate about $1.9 billion in debt and emerge from Chapter 11 in September 2018.

On April 19, 2018, the ratings on the issuer were withdrawn.

Table 64

Noble Group Ltd.

• US$250 million 6.625% notes due Aug 5, 2020
• US$400 million 3.625% medium-term notes series 2 due March 20, 2018
• US$500 million revolving bank loan
• US$750 million 8.75% notes due March 9, 2022
• US$850 million 6.75% notes due Jan. 29, 2020
• US$400 million 6.00% junior subordinated perpetual notes
• US$1.143 billion unsecured revolver due May 18, 2018

On March 20, 2018, S&P Global Ratings lowered its long-term issuer credit rating on Hong Kong-based commodity trader Noble Group Ltd. to 'D' from 'CC'. We lowered the ratings because Noble missed the principal and coupon payment for its 2018 notes due March 20, 2018. Noble also missed the coupon payment on its 2022 notes due March 9, 2018. In addition, the company said it would not make the payments despite being given 30-day grace periods to meet both obligations. The failure to make these payments would trigger cross-defaults on the company's other obligations. We did not expect Noble to meet any outstanding obligations as the company preserved its assets during the restructuring process.

On Dec. 23, 2018, the ratings on the issuer were withdrawn.

Table 65

Sears, Roebuck and Co.

• US$1.25 billion 6.625% senior secured second-lien notes due Oct. 15, 2018
• US$625 million 8.00% notes due Dec. 15, 2019
• US$1 billion 7.00% notes due June 1, 2032
• US$1 billion term bank loan due Jan. 29, 2019
• US$1.5 billion revolver bank loan due July 20, 2020
• US$200 million 6.75% senior notes due Jan. 15, 2028
• US$250 million 7.00% notes due July 15, 2042
• US$250 million 7.40% senior unsecured notes due Feb. 1, 2043
• US$250 million 7.50% notes due Oct. 5, 2027
• US$300 million 6.50% notes due Dec. 1, 2028
• US$750 million term bank loan due July 20, 2020
• US$169.824 million 6.625% PIK toggle notes convertible due Oct. 15, 2019
• US$214.018 million 8.00% convertible senior unsecured notes due Dec. 15, 2019
• US$169.824 million 6.625% second-lien convertible notes due Oct. 15, 2019
• US$214.018 million 8.00% senior unsecured notes due Dec. 15, 2019

On March 22, 2018, S&P Global Ratings lowered its issuer credit rating on U.S. retailer Sears Holdings Corp. (SHLD) to 'SD' from 'CC'. The ratings were lowered after the close of SHLD's previously announced debt exchange transactions. We believed the transaction constituted a distressed exchange. We based this on our view that the PIK option for all exchanged debt and the maturity extension (in certain cases) differed from the original promise on the debt issues and represented a distressed exchange under our criteria.

After the completion of the exchange offer, S&P Global Ratings raised the rating to 'CCC-' from 'SD' on April 9, 2018. The rating reflected our view that Sears had addressed most but not all of the 2018 maturities and would need to continue to raise capital.

On Oct. 15, 2018, S&P Global Ratings lowered its issuer credit rating to 'D' from 'CCC-' following Sears' Chapter 11 bankruptcy filing in the U.S. Bankruptcy Court for the Southern District of New York to address its debt-heavy capital structure and money-losing retail operations.

On Nov. 27, 2018, the ratings on the issuer were withdrawn.

Table 66

BI-LO Holding Finance LLC

• US$475 million 8.625% unsecured PIK toggle notes due Sept. 15, 2018
• US$425 million 9.25% senior secured notes due Feb. 15, 2019
• US$900 million asset-based lending revolver bank loan due May 21, 2019

On March 28, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based supermarket chain BI-LO Holding Finance LLC to 'D' from 'CC' after the company's Chapter 11 bankruptcy filing. The company entered into bankruptcy with a restructuring support agreement in place with a group of creditors holding 80% of the PIK toggle notes issued by BI-LO Holding Finance LLC. The company planned to continue to operate more than 580 stores, after closing 85 underperforming locations and selling more than 30 stores. Under the terms of the agreement, the company would eliminate more than $500 million of debt, with the unsecured noteholders receiving 100% of equity in the reorganized company.

On May 31, 2018, the ratings on BI-LO Holding Finance LLC were withdrawn.

Table 67

NCSG Crane & Heavy Haul Corp.

• US$305 million 9.50% second-lien notes due Aug. 15, 2019

On March 29, 2018, S&P Global Ratings lowered its long-term issuer credit rating on Canada-based NCSG Crane & Heavy Haul Corp. to 'SD' from 'CCC+'. The downgrade reflected the fact that the company missed the interest payment due Feb. 15, 2018, on its second-lien secured notes due August 2019. The missed payment constituted a default under our criteria. The rating reflected NCSG continuing to pay the interest expenses on its other existing debt securities.

On July 4, 2018, the ratings on the issuer were withdrawn.

Table 68

FirstEnergy Solutions Corp.

• US$43 million exempt facilities revolving bonds (shipping project) non-AMT series 2005A due Dec. 1, 2040
• US$82.8 million pollution control credit tenant lease revolving refunding bonds (FirstEnergy Nuclear Gen Corp. project) series 2005B due Jan. 1, 2034
• US$72.65 million pollution control credit tenant lease revolving refunding bonds (FirstEnergy Nuclear Gen Corp. project) series 2005A due Jan. 1, 2035
• US$7.2 million poll credit tenant lease revolving refunding bonds (First Energy Nuclear Gen Corp. project) series 2005B due Jan. 1, 2034
• US$90.14 million pollution control revolving refunding bonds (FirstEnergy Generation project) series 2006A due May 15, 2019
• US$60 million pollution control revolving refunding bonds (FirstEnergy Nuclear Generation project) series 2006A due Jan. 1, 2035
• US$15.5 million pollution control revolving refunding bonds (FirstEnergy Nuclear Generation project) series 2006B due Dec. 1, 2033
• US$135.55 million pollution control revolving refunding bonds (FirstEnergy Nuclear Generation Corp.) series 2006B due Dec. 1, 2033
• US$234.52 million poll credit tenant lease revolving refunding bonds (FirstEnergy Generation project) series 2006A due Dec. 1, 2023
• US$129.61 million poll credit tenant lease revolving refunding bonds (FirstEnergy Generation project) series 2006B due Dec. 1, 2041
• US$6.45 million pollution control revolving refunding bonds (FirstEnergy Generation Corp. project) non-AMT series 2007A due Aug. 1, 2029
• US$26 million poll control revolving refunding bonds (FirstEnergy Nuclear Generations Corp. project) (non-AMT) series 2010-B due June. 1, 2033
• US$54.6 million poll control revolving refunding bonds (FirstEnergy Nuclear Generations Corp. project) (non-AMT) series 2010-B due June 1, 2033
• US$98.9 million pollution control revolving refunding (First Energy Generation Corp. project) series 2008A due April 1, 2035
• US$23 million pollution control revolving refunding bonds (FirstEnergy Nuclear Generation Corp. project) series 2008C due Nov. 1, 2032
• US$33 million pollution control revolving refunding bonds (FirstEnergy Nuclear Generation project) series 2008C due Nov. 1, 2032
• US$50 million pollution control revolving refunding bonds (FirstEnergy Generation Corp.) series 2009-B due March 1, 2023
• US$62.5 million pollution control revolving refunding bonds (FirstEnergy Nuclear Gen Corp. project) series 2009-A (non-AMT) due June 1, 2033
• US$6.45 million poll control revolving refund bonds (FirstEnergy Generation Corp. project) (non-AMT) series 2009A due Aug. 1, 2029
• US$9.1 million pollution control revolving refunding bonds (FirstEnergy Nuclear Generation project) series 2008-B due Oct. 1, 2033
• US$20.45 million pollution control revolving refunding bonds (FirstEnergy Generation Corp. project) series 2008-B due Oct. 1, 2033
• US$46.3 million poll control revolving refunding bonds (FirstEnergy Generation Corp. project) (non-AMT) series 2008-B due Oct. 1, 2047
• US$8 million poll control revolving refunding bonds (FirstEnergy Nuclear Gen Corp. project) series 2010-A (non-AMT) due July 1, 2033
• US$99.1 million pollution control revolving refunding bonds (FirstEnergy Nuclear Gen Corp. project) series 2010-A (non-AMT) due July 1, 2033
• US$46.5 million pollution control revolving refunding bonds (FirstEnergy Nuclear Generation Corp.) series 2010-C due June 1, 2033
• US$600 million 6.05% exchange senior notes due Aug. 15, 2021
• US$500 million 6.80% exchange senior notes due Aug. 15, 2039
• US$177 million air quality developing revolving bonds (First Energy Generation Corp. project) (non-AMT) series 2009-A due Aug. 1, 2020

On April 2, 2018, S&P Global Ratings lowered its issuer credit rating on Ohio-based producer and distributor of electricity FirstEnergy Solutions Corp. (FES) to 'D' from 'CCC-'. Several key factors, including decreasing gas prices and weaker-than-expected demand growth, led to weakening cash flows. This weaker demand pattern also contributed to a number of unexpectedly weak outcomes in Pennsylvania-Jersey-Maryland capacity auctions, the most recent of which severely affect Regional Transmission Organization, where FES' assets are concentrated.

On May 31, 2018, the ratings on the issuer were withdrawn.

Table 69

Nine West Holdings Inc.

• US$250 million 6.125% senior unsecured notes due Nov. 15, 2034
• US$300 million term bank loan due Jan. 8, 2020
• US$424 million senior unsecured notes due March 15, 2019
• US$445 million term bank loan due Oct. 8, 2019

On April 6, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based Nine West Holdings Inc. to 'D' from 'CCC-'. The downgrade followed Nine West's announcement on April 6, 2018, that it had filed for Chapter 11 bankruptcy protection.

On April 23, 2018, S&P Global Ratings withdrew its 'D' ratings on Nine West Holdings Inc. at the request of the issuer.

Table 70

Bertucci's Corp.

On April 15, 2018, U.S.-based Italian restaurant chain Bertucci's Corp. defaulted due to a distressed exchange.

This company has not been rated since June 9, 2005, when S&P Global Ratings withdrew its 'CCC+' corporate credit and senior unsecured ratings on Bertucci's Corp. at the request of the company.

Table 71

Guitar Center Inc.

• US$7 million 9.625% senior unsecured notes due April 15, 2020

On April 16, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based operating subsidiary and borrower Guitar Center Inc. to 'SD' from 'CC'. The downgrade followed Guitar Center's announcement that it completed an exchange offer for $325 million 9.625% senior unsecured notes due April 2020. The company exchanged the tendered debt for new $318 million senior unsecured notes due 2022 and new warrants to purchase shares of Guitar Center Holdings' common stock at par value $0.01 per share. We viewed the exchange offer as distressed and tantamount to a selective default because the PIK feature and maturity extension constituted less than the original promise on the notes.

On April 16, 2018, S&P Global Ratings raised its issuer credit rating on the company to 'CCC+' from 'SD'. The rating action followed the completed refinancing of the senior secured notes and restructuring of the unsecured notes. Guitar Center was able to extend debt maturities by two years. The closest maturity is now 2021, when the secured notes come due.

Table 72

Corporacion Electrica Nacional S.A.

• US$650 million 8.50% notes due April 10, 2018

On April 24, 2018, S&P Global Ratings lowered its long-term issuer credit rating for Venezuela-based producer and distributor of electric power Corporacion Electrica Nacional S.A. (Corpoelec) to 'SD' from 'CC' and its senior unsecured debt rating to 'D' from 'CC'. The rating action reflected Corpoelec's failure to make an interest payment and $650 million coupon payment that were due on April 10, 2018.

Table 73

Gibson Brands Inc.

• US$375 million 8.875% senior secured notes due Aug. 1, 2018
• US$55 million first-lien guaranteed senior secured asset-based revolver loan due Feb. 15, 2022
• US$77.4 million first-lien guaranteed senior secured term A loan due Feb. 15, 2023

On May 1, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based manufacturer of musical instruments Gibson Brands Inc. to 'D' from 'CCC-'. The downgrade followed Gibson Brands' announcement on May 1, 2018, that it filed for Chapter 11 bankruptcy protection.

On May 31, 2018, the ratings on the issuer were withdrawn.

Table 74

PT MNC Investama Tbk.

• US$365 million 5.875% notes due May 16, 2018

On May 4, 2018, S&P Global Ratings lowered its long-term issuer credit rating on Indonesia-based media and entertainment company PT MNC Investama Tbk. to 'D' from 'CC'. The downgrade followed the company's announcement that it formalized an exchange offer for US$365 million 5.875% senior secured notes due May 16, 2018. The company exchanged approximately US$186 million of the debt for new senior unsecured notes and cash. Separately, US$115 million of the existing notes were converted into subordinated debt. We viewed the exchange as distressed, tantamount to a default, because the subordinated debt and maturity extension constituted less than the promise on the original notes.

On May 11, 2018, S&P Global Ratings raised its long-term issuer credit rating on the company to 'B-' from 'D'. The upgrade followed the company's completed exchange and successful placement of its US$231 million 9% senior secured notes.

Table 75

Bank of Astana JSC

• KZT20 billion 9.50% notes due Jan. 27, 2020
• KZT10 billion 12.00% secured notes due Dec. 21, 2025

On May 4, 2018, S&P Global Ratings lowered its long-term issuer credit rating on Kazakhstan-based Bank of Astana to 'D' from 'CCC'. The downgrade followed official announcements by the Bank of Astana on May 2 and April 28, 2018, that in our understanding imposed extensive temporary restrictions on cash operations and debit operations on due dates for both corporate and retail clients. We understood that, because of a low liquidity cushion, the bank was unable to process most of its payments in full and on time, or to pay back the majority of corporate clients who have requested payment.

On Nov. 27, 2018, S&P Global Ratings said that it has discontinued its 'D' issuer credit rating on Bank of Astana JSC following the National Bank of Kazakhstan's revocation of Bank of Astana's banking license on Sept. 19, 2018. We understood that the authorities had started the process of settling the bank's obligations to creditors in accordance with bankruptcy law.

Table 76

QGOG Constellation S.A.

• US$604.6 million 9.00% cash/0.500% PIK notes due Nov. 9, 2024
• US$700 million 6.25% senior unsecured notes due Nov. 9, 2019

On May 9, 2018, S&P Global Ratings lowered its issuer credit rating on QGOG Constellation S.A. to 'D' from 'B'. The downgrade followed the company's announcement that it would miss cash interest payments on 2019 and 2024 senior notes due on May 9, 2018. QGOG Constellation would use the 30-day grace period defined under the terms of the notes in order to advance ongoing negotiations with its key lenders to reprofile the group's debt.

Table 77

Northern Oil and Gas Inc.

• US$700 million 8.00% notes due June 1, 2020
• US$344 million 9.5% PIK second-lien notes due May 15, 2023
• US$400 million ICE LIBOR 7.75% first-lien senior secured bank loan due Nov. 1, 2022

On May 16, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based oil and gas exploration and production company Northern Oil and Gas Inc. to 'SD' from 'CC'. The downgrade followed the announcement by Northern Oil and Gas that it completed an exchange that included the exchange of about $500 million in unsecured debt for new second-lien secured notes and equity.

On May 29, 2018, S&P Global Ratings raised its issuer credit rating on the company to 'B-' from 'SD'. The upgrade followed the completion of the company's debt exchange, which included about $500 million in unsecured debt in exchange for about $344 million in second-lien secured notes and $155 million in equity. The reduction in debt, along with increases in commodity prices, has led to a significant improvement in the company's leverage positions.

Table 78

GetBack S.A.

• PLN30 million 6.00% unsecured notes due Sept. 16, 2018
• PLN20 million 5.55% unsecured notes due Sept. 21, 2018
• PLN20 million 5.73% unsecured notes due Sept. 22, 2018
• PLN1.52 million 6.00% unsecured notes due Oct. 2, 2018
• PLN10 million 6.00% unsecured notes due Dec. 14, 2018
• PLN9.423 million 5.98% unsecured notes due Dec. 19, 2018
• PLN9.82 million 5.98% unsecured notes due Dec. 29, 2018
• PLN20 million 5.9% unsecured notes due Jan. 29, 2019
• PLN13.503 million 5.72% unsecured notes due Feb. 28, 2019
• PLN20 million 5.84% unsecured notes due Feb. 28, 2019
• PLN6.497 million 5.71% unsecured notes due March 17, 2019
• PLN30 million unsecured notes due April 10, 2019
• PLN3.02 million 5.6% unsecured notes due June 24, 2019
• PLN18.5 million 6.2% secured notes due Aug. 8, 2019
• PLN6.605 million 6.22% secured notes due Sept. 16, 2019
• PLN6 million 5.76% unsecured notes due Sept. 18, 2019
• PLN6 million 5.8% unsecured notes due Oct. 1, 2019
• PLN7.564 million 5.72% unsecured notes due Oct. 5, 2019
• PLN16.317 million 5.71% unsecured notes due Oct. 22, 2019
• PLN5 million 5.68% unsecured notes due Oct. 30, 2019
• PLN11.299 million 5.79% unsecured notes due Nov. 27, 2019
• PLN20 million unsecured notes due Dec. 30, 2019
• PLN13.279 million unsecured notes due Jan. 30, 2020
• PLN139.3 million 6.1% senior unsecured notes due May 10, 2020
• PLN40 million 5.9% senior unsecured notes due Dec. 30, 2020
• PLN40 million senior unsecured notes due Feb. 16, 2021
• PLN25 million 5.7% senior unsecured notes due April 30, 2021
• PLN12.1479 million 6.11% senior secured notes due Sept. 14, 2021

On April 24, 2018, S&P Global Ratings suspended its 'B' issuer credit rating on Poland-based financial company GetBack S.A. after it was unable to secure sufficient information to accurately assess the ratings on GetBack.

On May 17, 2018, S&P Global Ratings reinstated its 'B' long-term issuer credit ratings on GetBack and lowered the rating to 'D'. The downgrade came after the company stopped servicing interest and principal on all of its financial obligations, beyond any possible grace period, and was pursuing an arrangement with its creditors.

On Aug. 6, 2018, we withdrew our ratings on GetBack S.A. at the issuer's request.

Table 79

Proserv Group Inc.

• US$115 million second-lien bank loan due Dec. 22, 2022
• US$135 million bank loan due Dec. 22, 2022
• US$230 million bank loan due Dec. 22, 2021
• US$60 million revolving credit facility bank loan due Dec. 22, 2019

On May 21, 2018, S&P Global Ratings lowered its issuer credit rating on U.K.-based oilfield services company Proserv Group Inc. to 'SD' from 'CCC-'. The downgrade followed the close of Proserv's restructuring transaction. The company had exchanged most of its debt for equity. We view this as a distressed exchange because the debtholders received less than the original promise.

On Aug. 1, 2018, S&P Global Ratings raised its issuer credit rating on Proserv Group Inc. to 'CCC+' from 'SD' following completion of the capital restructuring, resulting in a largely debt-free balance sheet.

Table 80

Triple Point Group Holdings Inc.

• US$125 million second term bank loan due July 10, 2021
• US$310 million first-lien term bank loan due July 10, 2021
• US$40 million revolving bank loan due July 10, 2018

On May 23, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based commodity management software provider Triple Point Group Holdings Inc. to 'SD' from 'CCC'. The downgrade followed Triple Point parent Helios Software Holdings Inc.'s purchase of $10 million of its second-lien term loan at a value below par. We treat the transaction as equivalent to a default, based on our criteria, because investors received less principal and interest than the securities promised.

On May 24, 2018, S&P Global Ratings raised its long-term issuer credit rating on Triple Point to 'CCC' from 'SD'. The outlook is negative. The rating action reflected Triple Point's weak liquidity, caused by declining revenue from customer attrition in its maintenance segment without enough subscription revenue growth to offset it.

Table 81

Grupo Senda Autotransporte S.A. de C.V.

• MXN1.725 billion guaranteed unsecured bank loan due Jan. 26, 2023
• MXN475 million guaranteed unsecured bank loan due Jan. 26, 2024

On May 25, 2018, S&P Global Ratings lowered its global issuer credit rating on Mexico-based transportation services provider Grupo Senda Autotransporte S.A. de C.V. (Senda) to 'SD' from 'B-'. The downgrade reflected the fact that Senda missed the principal payment related to its MXN70 million short-term unsecured notes due May 24, 2018. The missed payment constitutes a default under our criteria.

On July 30, 2018, S&P Global Ratings lowered its global and national scale issuer credit ratings on Senda to 'D' from 'SD' after the company announced that it would file for bankruptcy protection.

Table 82

Westmoreland Coal Co.

• US$350 million 8.75% notes due Jan. 1, 2022
• US$425 million term bank loan due 2020
• US$120 million delayed draw bank loan due Dec. 31, 2018
• US$175 million first-lien term bank loan due Dec. 31, 2018
• US$90 million first-lien senior secured bank loan due undisclosed

On May 29, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based coal producer Westmoreland Coal Co. (WCC) to 'SD' from 'CCC-'. The downgrade followed WCC's announcement that it entered into an agreement with its first-lien lenders and creditors to obtain a $110 million bridge term loan that subordinates the liens securing the rated debt (formerly first-lien) to the liens securing the bridge term loan financing. We consider this transaction distressed because it alters the ranking of the secured lenders to a junior position.

On June 19, 2018, we lowered our long-term issuer credit rating on WCC to 'D' from 'SD'. The downgrade considered WCC's forbearance agreement. Under our criteria, forbearance agreements related to missing payments without appropriate compensation constitute a default. The forbearance agreement, in effect through Sept. 30, 2018, deferred interest or principal payments on WCC's notes and term loan.

On Sept. 7, 2018, S&P Global Ratings withdrew all its ratings on WCC and its issuing subsidiary Oxford Mining Co. LLC at the issuer's request.

Table 83

Murray Energy Corp.

• US$1.3 billion 11.25% senior secured notes due April 15, 2021
• US$1.585 billion superpriority first-lien term B-2 bank loan due Oct. 17, 2022
• US$1.7 billion B-2 bank loan due 2020
• US$159 million superpriority first-lien term B-3 bank loan due Oct. 17, 2022
• US$175 million term B-3 bank loan due April 17, 2020
• US$498 million 12.00% 1.5-lien notes due April 30, 2024
• US$170 million revolver bank loan due March 26, 2021
• US$425 million 11.50% second-lien notes due April 1, 2023
• US$825 million first-lien term bank loan due March 28, 2022
• US$400 million 9.5% second-lien notes due Dec. 5, 2020

On June 15, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based coal producer Murray Energy Corp. to 'SD' from 'CC'. The downgrade followed Murray's exchange of approximately 71% of its $996 million 11.25% senior secured notes due 2021 for newly issued 12% (9% cash and 3% PIK) senior notes due 2024, and the exchange of more than 95% of its $1.8 billion outstanding term loans due 2020 for newly issued term loans due 2022. Under our criteria, we considered the exchange as tantamount to a default because investors received less value than the promise of the original securities, and the offer, in our view, was distressed, rather than purely opportunistic.

On June 18, 2018, S&P Global Ratings raised its long-term issuer credit rating on Murray Energy to 'CCC+' from 'SD' following the completion of the exchange.

On July 2, 2018, S&P Global Ratings raised its long-term issuer credit rating on Murray Energy to 'B-' from 'CCC+' following Murray's refinancing of its revolving credit facility.

Table 84

Trident Holding Co. LLC

• US$155 million second-lien term bank loan due July 31, 2020
• US$340 million first-lien term bank loan due July 31, 2019
• US$75 million revolver bank loan due July 31, 2018

On June 22, 2018, S&P Global Ratings lowered its issuer credit rating on Maryland-based provider of bedside diagnostic services Trident Holding Co. LLC to 'SD' from 'CCC-'. The rating action followed Trident's refinancing transaction that closed on April 30, 2018. The transaction included the amendment of credit agreements on first- and second-lien term loans. This amendment included the extension of maturities to 2022 from 2019 on the first-lien term loan, the introduction of a partial PIK interest payment feature, and the elimination of financial covenants in both the first- and second-lien term loans. Furthermore, the liens securing existing term loans would rank junior to liens securing the new $216 million term loan.

On June 28, 2018, S&P Global Ratings raised its long-term issuer credit rating on Trident to 'CCC+' from 'SD'. The rating reflected the company's new capital structure following Trident's refinancing transaction that closed on April 30, 2018. On the same day, we withdrew the ratings on the company.

Table 85

Community Health Systems Inc.

• US$1.7 billion bank loan due Dec. 31, 2018
• US$1 billion 5.125% senior secured notes due Aug. 1, 2021
• US$1 billion revolving bank loan due Jan. 25, 2019
• US$1 billion term A bank loan due Jan. 27, 2019
• US$1 billion term G bank loan due Dec. 31, 2019
• US$1.2 billion 7.125% senior secured notes due July 15, 2020
• US$2 billion 8.00% senior notes due Nov. 15, 2019
• US$3 billion 6.875% senior unsecured notes due Feb. 1, 2022
• US$3.1 billion 6.25% senior notes due March 31, 2023
• US$3.5 billion term H bank loan due Jan. 27, 2021

On June 26, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based hospital operator Community Health Systems Inc. to 'SD' from 'CC'. The downgrade followed the completion of the exchange of senior notes pursuant to Community's tender offer for senior notes due 2019, 2020, and 2022. We viewed the tender on the 6.875% notes due 2022 as distressed because investors received a material discount to par on these notes.

On June 28, 2018, we raised our long-term issuer credit rating on Community Health Systems to 'CCC+' from 'SD'. This rating action followed the completion of the exchange and the launch of a proposed refinancing. The new rating reflects Community's longer-dated debt maturity schedule and our view that its efforts to rationalize its hospital portfolio, as well as improve financial performance and cash flow, should strengthen credit measures over the next 12-18 months.

Table 86

Del Monte Foods Inc.

• US$260 million second-lien term bank loan due Aug. 18, 2021
• US$710 million first-lien term bank loan due Feb. 18, 2021
• US$442.55 million first-lien guaranteed senior secured bank loan due Nov. 20, 2020

On June 28, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based Del Monte Foods Inc. to 'SD' from 'CCC-'. The downgrade followed the completion of a tender offer whereby the parent, Del Monte Pacific Ltd., repurchased $129 million of Del Monte's $260 million second-lien term loan at a 30% discount.

On July 2, 2018, S&P Global Ratings raised its long-term issuer credit rating on Del Monte Foods to 'CCC+' from 'SD'. This rating action reflected our reassessment of Del Monte's liquidity position and capital structure after the completion of the debt buyback.

Table 87

Intelsat S.A.

• US$2 billion 5.50% senior guaranteed notes due Aug. 1, 2023
• US$1.25 billion senior notes due 2024
• US$490 million 9.50% senior notes due 2022
• US$1 billion 8.125% senior notes due June 1, 2023
• US$2 billion 7.75% senior unsecured notes due June 1, 2021
• US$2 billion term B-3 bank loan due Nov. 27, 2023
• US$395 million term B-4 bank loan due Jan. 2, 2024
• US$700 million term B-5 bank loan due Jan. 2, 2024
• US$750 million 12.50% senior notes due April 1, 2022
• US$1.15 billion 7.50% guaranteed senior notes due April 1, 2021
• US$1.5 billion 9.75% senior notes due July 15, 2025
• US$2.2 billion 7.25% guaranteed notes due Oct. 15, 2020
• US$402.5 million 4.5 senior unsecured due June 15, 2025

On July 13, 2018, S&P Global Ratings lowered its issuer credit rating on Luxembourg-based fixed satellite service provider Intelsat S.A. to 'SD' from 'CCC+'. The downgrade followed Intelsat's repurchase of senior notes of its subsidiary Intelsat (Luxembourg) S.A. due 2021 at a discount to par. The notes had a face value of about $600 million. We considered this transaction a default because the lenders received less value than what was originally promised on the notes.

On July 18, 2018, S&P Global Ratings raised its issuer credit rating on Intelsat S.A. to 'CCC+' from 'SD'. The rating action followed our review of Intelsat's repurchase of the senior notes belonging to its subsidiary.

Table 88

HoldIKKS SAS

• EUR320 million 6.75% notes due July 15, 2021

On July 18, 2018, S&P Global Ratings lowered its issuer credit rating on HoldIKKS SAS, the parent company of French premium fashion retailer IKKS Group SAS (collectively IKKS), to 'SD' from 'CCC-'. The downgrade followed IKKS' missed coupon payment on its €320 million senior secured notes due 2021. We lowered our issuer credit rating on IKKS to 'SD', rather than 'D', because we understood that IKKS remained current on the payment obligations under its supersenior revolving credit facility.

Earlier, the company had obtained consent from more than half of its bondholders to forbear their enforcement right until Oct. 20 on the nonpayment of its July coupon; this consent was sufficient to ensure that the bondholders would not accelerate the repayment of the senior secured notes on the nonpayment of this coupon.

Table 89

House of Fraser (UK & Ireland) Ltd.

• GBP175 million notes due Sept. 15, 2020

On July 30, 2018, S&P Global Ratings lowered its long-term issuer credit rating on U.K. department store retailer House of Fraser (UK & Ireland) Ltd. to 'SD' from 'CCC+'. The downgrade followed House of Fraser receiving court approval to make certain amendments to the terms of the group's existing capital structure. We viewed this as distressed because there was a possibility of payment default and an insolvency event if either the group's creditors or the courts had not approved the transaction.

On Aug. 3, 2018, S&P Global Ratings raised its long-term issuer credit rating on House of Fraser (UK & Ireland) Ltd. to 'CCC-' from 'SD' after the issuer successfully completed the legal process of extending the maturities of its debt to October 2020, alleviating some short-term liquidity pressures. However, we also noted that we believed there was an elevated risk that House of Fraser would face a near-term liquidity or insolvency event, unless it was able to find additional sources of cash.

Later, on Aug. 16, 2018, S&P Global Ratings lowered its long-term issuer credit rating on House of Fraser (UK & Ireland) Ltd. to 'D' from 'CCC-'. The rating action followed the issuer's entering of its operating subsidiaries into administration on Aug. 10, 2018. Sports Direct International PLC has now acquired the business and assets of House of Fraser from the company's administrators for £90 million. On Sept. 19, 2018, we withdrew all of our ratings on House of Fraser (UK & Ireland) Ltd. and its senior secured notes.

Table 90

Windstream Holdings Inc.

• US$554 million 6.375% senior notes due Aug. 1, 2023
• US$600 million 8.625% senior first-lien notes due Oct. 31, 2025
• US$832.6 million 8.75% senior notes due Dec. 15, 2024
• US$1.25 billion revolving bank loan due April 24, 2020
• US$1.347 billion term B-6 bank loan due March 29, 2021
• US$500 million 7.50% senior notes due June 1, 2022
• US$580 million term B-7 bank loan due Feb. 17, 2024
• US$600 million 7.50% senior notes due April 1, 2023
• US$700 million 6.375% senior notes due Aug. 1, 2023
• US$700 million 7.75% senior notes due Oct. 15, 2020
• US$950 million 7.75% senior notes due Oct. 1, 2021
• US$100 million 6.75% senior notes due April 1, 2028

On Aug. 3, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based telecommunications provider Windstream Holdings Inc. to 'SD' from 'CC'. The rating action followed the issuer's exchange of about $1 billion in face value of subsidiary Windstream Services LLC's 7.75% senior notes due in 2021, 7.5% senior notes due in 2022, 7.5% senior notes due in 2023, 6.375% senior notes due in 2023, and 8.75% senior notes due in 2024 at a discount to par. We viewed the completed exchange as tantamount to default because lenders were receiving less than the face value of these obligations and the company's long-term business prospects remained weak.

On Aug. 9, 2018, S&P Global Ratings raised its issuer credit rating on Windstream to 'CCC+' from 'SD' following the completion of the exchange.

Table 91

Fleetcorp Operasyonel Tasit Kiralama ve Turizm A.S.

On Aug. 9, 2018, S&P Global Ratings lowered its long- and short-term issuer credit ratings on Turkey-based operational car leasing and fleet management company Fleetcorp Operasyonel Tasit Kiralama ve Turizm A.S. to 'SD' from 'B/B'. The rating was lowered after we received public information that Fleetcorp had failed to pay at least one of its outstanding debt obligations in full and on time. At the end of July 2018, Fleetcorp's CEO and its chief financial officer both resigned, and no replacement had been appointed at the time of this rating action.

On Nov. 5, 2018, S&P Global Ratings lowered its global and national scale issuer credit ratings on Fleetcorp to 'D' from 'SD'. The rating action followed the issuer's filing for "ordinary concordat" (before bankruptcy), a bankruptcy protection scheme in the Turkish legal system. By this move, we believed, Fleetcorp had defaulted on the majority of its TRY1.5 billion of debt with suppliers and financial institutions.

On Dec. 19, 2018, S&P Global Ratings withdrew its 'D' global and national scale issuer credit ratings on Fleetcorp after the court officially declared the issuer as bankrupt on Nov. 6, 2018.

Table 92

American Tire Distributors Inc.

• US$1.05 billion 10.25% senior subordinated notes due March 1, 2022
• US$720 million term bank loan due Sept. 1, 2021
• US$165 million first-lien guaranteed senior secured bank loan due April 1, 2020
• US$80 million first-lien guaranteed senior secured bank loan due April 1, 2020
• US$850 million first-lien guaranteed senior secured bank loan due April 1, 2020

On Sept. 5, 2018, S&P Global Ratings lowered its long-term issuer credit rating on U.S.-based American Tire Distributors Inc. (ATD) to 'SD' from 'CCC'. The rating was lowered after ATD deferred an interest payment of approximately $53.8 million and elected to utilize its 30-day grace period under the indenture governing the notes.

On Oct. 4, 2018, S&P Global Ratings lowered its issuer credit rating on ATD to 'D' from 'SD' after the issuer filed for Chapter 11 reorganization in the District of Delaware.

Table 93

Derindere Turizm Otomotiv Sanayi ve Ticaret A.S.

• TRY56.22 million unsecured floating notes

On Sept. 5, 2018, S&P Global Ratings lowered its long- and short-term issuer credit ratings on Turkey-based fleet leasing company Derindere Turizm Otomotiv Sanayi ve Ticaret A.S. to 'SD' from 'CCC+/C'. The downgrade followed the issuer's failure to redeem its TRY50 million short-term bond due on Aug. 31, 2018.

Derindere's profitability and cash flow generation capacity had been badly hit by the severe deterioration of the economic environment in Turkey and by the unfavorable business and operating conditions in the Turkish fleet leasing sector. The steady weakening of the Turkish lira, increasing domestic interest rates, and Turkish banks' unwillingness to lend after Fleetcorp's selective default had increased the refinancing risk in the sector.

On Sept. 28, 2018, we withdrew the ratings at the issuer's request.

Table 94

Bellatrix Exploration Ltd.

• US$250 million 8.50% notes due May 15, 2020
• CAD50 million 6.75% subordinated convertible notes due Sept. 30, 2021
• CAD75 million first-lien senior secured bank loan due Nov. 26, 2019

On Sept. 13, 2018, S&P Global Ratings lowered its long-term issuer credit rating on Canada-based Bellatrix Exploration Ltd. to 'SD' from 'CC'. The downgrade followed Bellatrix's completion of a debt exchange transaction wherein it swapped a portion of senior unsecured notes due 2020 for new second-lien notes due 2023. Because the face value offered on the new notes was about 90% of the exchanged notes' original par value, we viewed the transaction as distressed.

Table 95

Legacy Reserves L.P.

• US$300 million 8.00% senior unsecured notes due Dec. 1, 2020
• US$250 million 6.625% notes due Dec. 1, 2021
• US$300 million second-lien term bank loan due Aug. 31, 2021
• US$1.5 billion first-lien guaranteed senior secured bank loan due April 1, 2019

On Sept. 21, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based oil and gas exploration and production company Legacy Reserves L.P. to 'SD' from 'CC'. The issuer was downgraded after it privately negotiated debt exchanges on a combined $130 million of its 8.0% senior notes due 2020 and 6.625% senior notes due 2021 for $130 million of new 8% convertible senior notes due 2023 and equity. The exchange was at nominal par value, but the maturity extension and potential of forced conversion into equity led us to assess the value as less than the original promise.

Subsequently, on Sept. 28, 2018, we raised our issuer credit rating on Legacy Reserves L.P. to 'CCC' from 'SD'.

Table 96

Jupiter Resources Inc.

• US$1.125 billion senior notes due Dec. 31, 2022
• US$425 million first-lien guaranteed senior secured bank loan due Sept. 30, 2019

On Oct. 1, 2018, S&P Global Ratings lowered its issuer credit rating on Canada-based exploration and production company Jupiter Resources Inc. to 'D' from 'CCC+'. The downgrade followed Jupiter's decision not to make its interest payment due on Oct. 1, 2018, on its 8.5% senior unsecured notes due 2022, instead entering a 30-day grace period under the notes' indenture.

Subsequently, on Jan. 15, 2019, S&P Global Ratings discontinued its ratings on the company, including the 'D' issuer credit rating.

Table 97

China Huayang Economic and Trade Group Co. Ltd.

• CNY1 billion 7.5% unsecured notes due Oct. 30, 2018
• CNY1 billion 7.5% unsecured notes due Dec. 16, 2018
• CNY1 billion 7% unsecured notes due Jan. 12, 2019
• CNY1 billion 7.5% unsecured notes due Jan. 20, 2019
• CNY1 billion 7.5% unsecured notes due May 7, 2019
• CNY800 million 6.25% unsecured notes due June 16, 2019
• CNY800 million 4.8% unsecured notes due Sept. 30, 2020
• CNY1.498 billion 5% unsecured notes due Nov. 22, 2021
• CNY402 million 5.6% unsecured notes due March 21, 2022
• CNY900 million 5.7% unsecured notes due April 27, 2022
• CNY213 million 7.5% unsecured notes due Nov. 2, 2022

On Oct. 2, 2018, S&P Global Ratings lowered its long-term issuer credit rating on Chinese petrochemicals company China Huayang Economic and Trade Group Co. Ltd. (Huayang) to 'SD' from 'B+'. We lowered the rating on Huayang because the company did not meet payments on its Chinese renminbi-denominated medium-term notes issued in 2015. The missed interest and principal amounted to RMB38.4 million and RMB750 million, respectively, and came due on Sept. 30, 2018, after investors exercised put options on the notes.

Later, on Nov. 9, 2018, S&P Global Ratings discontinued its 'SD' long-term issuer credit rating on the company.

Table 98

Astaldi SpA

• EUR750 million 7.125% notes due Dec. 1, 2020
• EUR140 million 4.875% senior unsecured notes due June 21, 2024
• EUR319 million revolver A unsecured bank loan due Nov. 7, 2019
• EUR181 million revolver B unsecured bank loan due Nov. 7, 2019
• EUR50 million revolver guaranteed unsecured bank loan due Dec. 31, 2018
• EUR5 million term unsecured bank loan due June 30, 2019
• EUR45 million term guaranteed unsecured bank loan due Dec. 31, 2018
• EUR30 million term unsecured bank loan due June 7, 2020
• EUR10 million term unsecured bank loan due Dec. 31, 2019
• EUR120 million revolver unsecured bank loan due Oct. 31, 2019
• EUR30 million term unsecured bank loan due Oct. 5, 2019

On Oct. 2, 2018, S&P Global Ratings lowered its issuer credit rating on Italian engineering and construction group Astaldi SpA to 'D' from 'CCC-'. The downgrade followed Astaldi's announcement on Sept. 28, 2018, that its board of directors had applied in a court in Rome for a composition with creditors "with reservation," in accordance with Italian insolvency law, and to continue operations as a going concern following the stalled sale of its bridge in Turkey. We considered these circumstances to be tantamount to a default because the application foresaw the suspension of payments related to outstanding obligations, unless authorized by the court, during the period related to the process of composition with creditors. As such, we did not expect Astaldi to make regular payments on its outstanding debt.

Table 99

Mattress Firm Holding Corp.

On Oct. 5, 2018, U.S.-based company Mattress Firm Holding Corp. filed for Chapter 11 bankruptcy protection.

Previously, on Sept. 27, 2016, the ratings on the issuer had been withdrawn at the company's request

Table 100

FR Dixie Acquisition Corp.

• US$24 million revolving bank loan due Dec. 18, 2018
• US$280 million term B bank loan due Dec. 18, 2018

On Oct. 10, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based electrical infrastructure contractor FR Dixie Acquisition Corp. to 'D' from 'CCC'. The downgrade reflected the recently missed interest and principal payments under the company's credit facility. The company had entered into a forbearance agreement with certain lenders. We viewed this as a general default and believed the company would likely elect not to meet its debt obligations with lenders while it sought an agreement on a financial restructuring plan with them.

Later, on Nov. 13, 2018, the ratings on the company were withdrawn.

Table 101

David's Bridal Inc.

• US$270 million 7.75% senior unsecured notes due Oct. 15, 2020
• US$520 million term loan B bank loan due Oct. 11, 2019

On Oct. 16, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based bridal gown and related apparel retailer David's Bridal Inc. to 'SD' from 'CCC-'. The downgrade followed David's Bridal's deferred interest payment on its $270 million 7.75% unsecured notes maturing 2020.

On Nov. 19, 2018, S&P Global Ratings lowered its issuer credit rating on David's Bridal Inc. to 'D' from 'SD'. The company announced on Nov. 19, 2018, it had filed a prepackaged Chapter 11 under the U.S. Bankruptcy Code.

Table 102

International Bank of Saint-Petersburg

On Oct. 17, 2018, S&P Global Ratings lowered its long-term issuer credit rating on International Bank of Saint-Petersburg (IBSP) to 'D' from 'B-'. The downgrade of IBSP reflected our view of the Central Bank of Russia's (CBR's) regulatory intervention, which included its appointment of a temporary administration at IBSP on Oct. 15, 2018, and the imposition of a three-month payment moratorium on IBSP. In our view, this would prevent IBSP from meeting its obligations over that period.

On Nov. 2, 2018, S&P Global Ratings withdrew its 'D/D' long- and short-term issuer credit ratings on IBSP. This followed the CBR's revocation of IBSP's banking license on Oct. 31, 2018, which was based on IBSP's failure to comply with federal laws and due to the decrease in the bank's capital adequacy ratio below the minimum level of 2% set by the regulator.

Table 103

Gastar Exploration Inc.

On Oct. 31, 2018, U.S.-based energy company Gastar Exploration Inc. filed for Chapter 11 bankruptcy protection.

Prior to this bankruptcy, on March 16, 2017, S&P Global Ratings had affirmed the 'CCC-' issuer credit rating on Gastar and subsequently withdrew the ratings at the company's request.

Table 104

Community Choice Financial Inc.

• US$395 million 10.75% notes due May 1, 2019
• US$42 million 9.00% notes due Dec. 31, 2020
• US$25 million 12.75% notes due May 1, 2020
• US$10 million 10.75% notes due May 1, 2019
• US$25 million 12.75% notes due May 1, 2020
• US$42 million first-lien guaranteed senior secured bank loan due Sept. 6, 2020

On Nov. 5, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based financial service provider Community Choice Financial Inc. (CCFI) to 'D' from 'CC'. The rating action followed CCFI's decision to defer a $13.72 million Nov. 1 interest payment on its senior secured notes and enter into a 30-day grace period. The missed payments were on the company's outstanding $247 million senior secured notes due May 2019 and $13 million senior secured notes due May 2020. Any default on the senior secured notes would likely trigger a cross-default provision on CCFI's $42 million first-lien secured revolver.

Subsequently, on Dec. 13, 2018, the ratings were withdrawn.

Table 105

PetroQuest Energy Inc.

• US$251.867 million 10.00% notes due Feb. 15, 2021
• US$14.170 million 10.00% notes due Feb. 15, 2021

On Aug. 2, 2018, S&P Global Ratings lowered its issuer credit on Louisiana-based oil and gas company PetroQuest Energy Inc. to 'CCC-' from 'CCC+' and withdrew the ratings at the company's request after the company announced it retained advisers to help explore alternatives for its capital structure.

The company subsequently filed for Chapter 11 bankruptcy protection on Nov. 7, 2018.

Table 106

FULLBEAUTY Brands Holdings Corp.

• US$345 million second-lien term bank loan due Oct. 13, 2023
• US$820 million first-lien term bank loan due Oct. 14, 2022

On Nov. 8, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based retailer FULLBEAUTY Brands Holdings Corp. to 'D' from 'CCC-'. The downgrade followed the company's missed interest payment on its $345 million second-lien term loan maturing 2023. Additionally, the company entered into forbearance agreements with its asset-based and first-lien lenders, and we anticipated that it would engage in an out-of-court restructuring across the capital structure before the end of the year.

Table 107

Johnston Press PLC

• £225 million 8.625% notes due June 1, 2019

On Nov. 21, 2018, S&P Global Ratings lowered its long-term issuer credit rating on U.K. publisher Johnston Press PLC to 'D' from 'CCC-'. Johnston Press entered a prepack administration on Nov. 17, 2018. The group entered into administration, under which a newly incorporated group, JPI Media, controlled by the group's noteholders, acquired substantially all of Johnston Press' assets.

Table 108

China Automation Group Ltd.

• US$30 million 8.75% guaranteed notes due Dec. 11, 2018

On Nov. 26, 2018, S&P Global Ratings lowered its long-term issuer credit rating on provider of safety and critical control systems China Automation Group Ltd. (CAG) to 'SD' from 'CC'. The downgrade followed the completion of Tri-Control's US$10 million debt exchange of its 8.75% senior unsecured notes due December 2018 for new 11% senior unsecured notes due November 2019. In our opinion, this exchange was not purely opportunistic because, we believed, CAG's nonpayment and default risk would remain high over the next 12 months even if the exchange was completed. This was because of CAG's very tight liquidity and large debt maturities.

On Dec. 7, 2018, S&P Global Ratings raised its long-term issuer credit rating on CAG to 'CCC' from 'SD'. This rating action reflected our view that the company's payment risk over the next 12 months had been reduced.

Table 109

Odebrecht Engenharia e Construcao S.A.

• US$300 million 6.00% notes due April 5, 2023
• US$500 million 5.25% notes due June 27, 2029
• US$500 million 7.00% bonds due April 21, 2020
• US$550 million 4.375% senior unsecured notes due April 25, 2025
• US$600 million 5.125% senior notes bonds due June 26, 2022
• US$750 million 7.50% perpetual notes
• US$850 million 7.125% notes due June 26, 2042

On Nov. 26, 2018, S&P Global Ratings lowered its global scale issuer credit rating on Brazil-based engineering and construction company Odebrecht Engenharia e Construcao S.A. (OEC) to 'D' from 'CC' following the company's announcement that Odebrecht Finance Ltd. would not make the $11.5 million interest payment related to its 2025 notes. OEC fully guarantees those notes. OEC also announced that it intended to engage in an out-of-court restructuring across its capital structure in order to pursue a more balanced financial position going forward.

Table 110

LBI Media Inc.

• US$115.2 million PIK toggle second-priority secured notes due April 15, 2020
• US$211.5 million 13.50% PIK toggle notes series II due 2020
• US$4.996 million 13.50% notes due April 15, 2020

On Nov. 27, 2018, S&P Global Ratings lowered its issuer credit rating on U.S.-based owner and operator of Spanish-language radio and television stations LBI Media Inc. to 'D' from 'CC' following the company's Chapter 11 bankruptcy filing to address its debt-heavy capital structure and unsustainable interest burden.

Prior to filing for bankruptcy protection, the company was operating under a 30-day grace period after it deferred its Nov. 15 interest payments due on its first- and second-lien notes. The company's radio operations have been challenged because of a secular shift in advertising spending toward digital platforms, as well as competitive challenges from larger rivals, which we expected to continue over the next year. We believed the company's inability to sufficiently invest in marketing and additional content due to its high interest payments had limited its revenue growth and profitability over the past few years.

On Jan. 3, 2019, S&P Global Ratings withdrew the ratings on the company.

Table 111

CMC di Ravenna Societa Cooperativa

• EUR250 million 6.875% callable notes due Aug. 1, 2022
• EUR325 million 6.00% notes due Feb. 15, 2023
• EUR165 million bonds due Dec. 31, 2019

On Dec. 6, 2018, S&P Global Ratings lowered its long-term issuer credit rating on Italian engineering and construction group CMC di Ravenna to 'D' from 'CC'. The downgrade followed CMC's announcement on Dec. 2, 2018, that its board of directors would apply on Dec. 4, 2018, to the Court of Ravenna for a composition with creditors "with reservation," in accordance with Italian insolvency law.

We considered these circumstances to be tantamount to a default because the application foresaw the suspension of payments related to outstanding obligations, unless authorized by the court, during the period related to the process of composition with creditors. As such, we did not expect CMC to make regular payments on its outstanding debt.

Table 112

Parker Drilling Co.

• US$225 million 7.50% senior unsecured notes due Aug. 1, 2020
• US$360 million 6.75% notes due July 15, 2022

On Dec. 12, 2018, S&P Global Ratings lowered its issuer credit rating on Houston-based oil and gas contract drilling services and rental tools provider Parker Drilling Co. to 'D' from 'B-'. The downgrade followed Parker Drilling's announcement that it voluntarily filed for Chapter 11 bankruptcy.

Table 113

Checkout Holding Corp.

• US$1.05 billion first-lien term bank loan series B due April 9, 2021
• US$100 million revolver bank loan due April 9, 2019
• US$460 million second-lien term bank loan series B due 2022

On Dec. 13, 2018, S&P Global Ratings lowered all of its ratings, including the issuer credit rating and first- and second-lien issue ratings, on U.S.-based print and digital media solutions provider Checkout Holding Corp. and subsidiary Catalina Marketing Corp. to 'D'. The downgrade followed the issuer's filing for Chapter 11 protection with the Delaware Bankruptcy Court to address its debt-heavy capital structure.

Table 114

Sterling Mid-Holdings Ltd.

• US$55 million 10.50% notes due June 15, 2020
• US$745 million 12.00% PIK toggle notes due June 16, 2020

On Dec. 13, 2018, S&P Global Ratings lowered its long-term issuer credit rating on Sterling Mid-Holdings Ltd. to 'SD' from 'CCC-'. The rating action followed Sterling's decision to restructure its debt agreements on its $922.8 million PIK toggle notes due 2020 (2016 notes) and its $55 million 10.5% cash pay notes due 2020 (2014 notes) so that the company could continue making PIK interest payments on the notes owned by its financial sponsor, Lone Star.

Table 115

Related Research

• Amid Growing Challenges, The U.S. Speculative-Grade Corporate Default Rate Is Set To Rise To 3.1% By December 2019, Feb. 14, 2019
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