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COMMENTS

Credit Trends: Risky Credits: The Number Of U.S. And Canadian 'CCC' Rated Companies Shrinks By 25% Since May 2020 Peaks

COMMENTS

Credit Trends: U.S. Corporate Bond Yields As Of Jan. 8, 2025

COMMENTS

2023 Short-Term Corporate Default And Rating Transition Study

COMMENTS

Credit Trends: U.S. Corporate Bond Yields As Of Dec. 11, 2024

COMMENTS

Default, Transition, and Recovery: Global Speculative-Grade Corporate Default Rate To Decline To 3.5% By September 2025


Credit Trends: Risky Credits: The Number Of U.S. And Canadian 'CCC' Rated Companies Shrinks By 25% Since May 2020 Peaks

(Editor's Note: Our "Risky Credits: series focuses on U.S. and Canadian 'CCC' rated corporate issuers, as well as their first cousins rated 'B-'. Because the majority of defaults are from companies rated in the 'CCC' category, these and 'B-' rated companies with negative outlooks or ratings on CreditWatch negative are even more important to monitor in this unprecedented downturn and uncertain recovery.)

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On This Month's Front Burner

Upgrades outpace downgrades--again.  The 'CCC' rating category upgrades continue to outpace downgrades for the fifth consecutive month. The greatest number of upgrades in 2021 so-far, came from the media and entertainment sector (12) followed by oil and gas (10; with four upgrades in April, largely due to the recovery in oil prices), and retail and restaurants (5). The downgrade rate (the number of 'CCC' category and below rated downgrades divided by the total rating actions) ticked up to 27% in April (see chart 2).

'CCC' (and 'B/B-') rated corporate bond issuance booms.  U.S. and Canadian 'CCC' and below rated corporate bond issuance for 2021 rose to $20.5 billion in April, 163% higher than a year earlier. While 'B' rated issuance (excluding 'B+' ratings) in first-quarter 2021 were nearly four times higher than its 2020 year-to-date level. Issuance in 2020 was largely investment grade, while 2021 so far has been mostly in the lower rating categories. We expect global corporate issuance to contract 2.25% this year (see "COVID-19 Impact: Key Takeaways From Our Articles," published April 7, 2021, on RatingsDirect)

Defaults slowed in first-quarter 2021.  There were seven defaults in the U.S. and Canada region in April--in keeping with 2021's monthly tallies of single digits. This brought the total 2021 defaults in the region so far to 21, less than half of 2020's year-to-date total of 43. Two of the seven additions in April were from the oil and gas sector, and another two from consumer products companies.

Transitioning to 'CCC' slows to a crawl.  Transitions into the 'CCC' rating category from 'B-' remained low at only 1% in April 2021, and transitions into 'B-' from 'B' ratings dropped to zero. The negative bias (have a negative outlook or CreditWatch placement with negative implications) of 'CCC' rated issuers has lowered to 73%, the lowest since 2018, but this still indicates potential downgrades. The negative bias for 'B-' rated issuers have also dipped slightly to 22% in April 2021--marginally higher than its February 2020 value of 20%.

Spreads tighten in 'CCC' category (again).  U.S. 'CCC' and 'B' composite spreads dropped to prepandemic levels in December 2020. While the 'CCC' spreads narrowed further to 617 bps, the lowest value since 2019, whereas the 'B' spread has also narrowed slightly to 399 bps. Despite rising inflation, investors are still willing to take on additional risk.

Bids recover.  The average bid of 'B' rated loans has improved slightly since our last report to 98.9, as of March 31, 2021, while the bid for 'CCC' rated loans has increased to 92.0.

CLO collateral actions.  As the corporate loan market recovers from the credit effects of the pandemic, we have seen a modest but material improvement in the credit metrics of U.S. broadly syndicated loan (BSL) collateralized loan obligations (CLOs), trending since the second half of 2020. For issuers with loans held in U.S., BSL CLOs during first-quarter 2021, rating upgrades have outpaced downgrades by about two to one (71 to 35) and we raised our ratings on a handful of loan issuers in the 'CCC' category.

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Table 1
Top 20 Rating Changes To 'CCC' From 'B-' By Debt Amount (YTD)
Rating date Issuer Country Sector Rating to Rating from Debt amount (mil. $)
4/15/2020 Finastra Ltd. Cayman Islands High technology CCC+ B- 36,029
3/24/2020 Bombardier Inc. Canada Aerospace and defense CCC+ B- 9,287
4/17/2020 First Quantum Minerals Ltd. Canada Metals, mining, and steel CCC+ B- 6,000
7/21/2020 Clear Channel Outdoor Holdings Inc. U.S. Media and entertainment CCC+ B- 5,835
4/27/2020 Hertz Global Holdings Inc. U.S. Transportation CCC- B- 5,050
5/14/2020 Nabors Industries Ltd Bermuda Oil and gas exploration and production CCC+ B- 3,725
4/10/2020 GTT Communications Inc. U.S. Telecommunications CCC+ B- 3,415
4/8/2020 Advantage Solutions Inc. U.S. Consumer products CCC+ B- 3,345
1/27/2021 Viking Cruises Ltd. (Viking Holdings Ltd) U.S. Media and entertainment CCC+ B- 3,225
4/8/2020 Varsity Brands Holding Co Inc. U.S. Consumer products CCC+ B- 2,800
3/27/2020 CDS Group Canada Media and entertainment CCC- B- 2,745
9/4/2020 Cengage Learning Holdings II Inc. U.S. Media and entertainment CCC+ B- 2,580
9/4/2020 McGraw-Hill Education Inc. U.S. Media and entertainment CCC+ B- 2,125
1/3/2020 Aveanna Healthcare LLC (Aveanna Healthcare Holdings Inc.) U.S. Health care CCC+ B- 2,091
4/23/2020 FXI Holdings Inc. U.S. Chemicals, packaging, and environmental services CCC+ B- 2,075
8/19/2020 Wesco Aircraft Holdings Inc. (Wolverine Intermediate Holding Corp.) U.S. Aerospace and defense CCC+ B- 2,075
4/8/2020 Helix Acquisition Holdings Inc. U.S. Capital goods CCC+ B- 2,055
4/17/2020 Life Time Inc. U.S. Media and entertainment CCC+ B- 1,984
6/12/2020 AVSC Holding Corp. U.S. Media and entertainment CCC B- 1,980
4/23/2020 Syniverse Holdings Inc. U.S. Telecommunications CCC+ B- 1,922
Data as of April 30, 2021. Source: S&P Global Ratings.

Table 2

Top 20 Rating Upgrades From 'CCC' Category
Rating date Issuer Country Sector Rating to Rating from Debt amount (Mil. $)
10/7/2020 Uniti Group Inc. U.S. Telecommunications B- CCC- 10,216
4/29/2021 Endeavor Operating Co. LLC U.S. Media and entertainment B CCC+ 9,172
1/21/2021 NGL Energy Partners L.P. U.S. Utility B CCC+ 8,200
4/9/2021 First Quantum Minerals Ltd Canada Metals, mining, and steel B CCC+ 5,900
4/15/2021 MEG Energy Corp. Canada Oil and gas B+ CCC+ 3,550
12/15/2020 McGraw-Hill Education Inc. U.S. Media and entertainment B- CCC+ 3,520
1/21/2021 Petco Holdings Inc. U.S. Retail/Restaurants B- CCC+ 3,200
3/24/2021 SM Energy Co. U.S. Oil and gas B- CCC+ 2,747
2/10/2021 Cengage Learning Holdings II Inc. U.S. Media and entertainment B- CCC+ 2,555
11/30/2020 CT Technologies Intermediate Holdings Inc. U.S. Media and entertainment B- CCC+ 2,532
3/3/2021 Kenan Advantage Group Inc. U.S. Transportation B- CCC+ 2,398
7/21/2020 Kronos Acquisition Holdings Inc. U.S. Consumer products B- CCC+ 2,290
10/30/2020 Advantage Solutions Inc. U.S. Consumer products B CCC+ 2,100
3/16/2021 FXI Holdings Inc. U.S. Chemicals, packaging, and environmental services B- CCC+ 2,075
1/7/2021 Urban One Inc. U.S. Media and entertainment B- CCC 1,872
9/25/2020 New Academy Holding Co. LLC U.S. Retail/Restaurants B- CCC+ 1,825
3/31/2021 Priority Holdings LLC (Priority Technology Holdings Inc.) U.S. High technology B- CCC+ 1,777
3/29/2021 Vine Oil & Gas L.P. (Vine Energy Inc.) U.S. Oil and gas B- CCC+ 1,760
8/31/2020 LTI Holdings Inc. U.S. Capital goods B- CCC+ 1,740
2/18/2021 Mohegan Tribal Gaming Authority U.S. Media and entertainment B- CCC+ 1,696
Data as of April 30, 2021. Source: S&P Global Ratings.

Related Research

This report does not constitute a rating action.

Credit Markets Research:Nicole Serino, New York + 1 (212) 438 1396;
nicole.serino@spglobal.com
Sudeep K Kesh, New York + 1 (212) 438 7982;
sudeep.kesh@spglobal.com
Leveraged Finance:Robert E Schulz, CFA, New York + 1 (212) 438 7808;
robert.schulz@spglobal.com
Ramki Muthukrishnan, New York + 1 (212) 438 1384;
ramki.muthukrishnan@spglobal.com

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