Global rated corporate bond issuance set a high in 2020 at more than $3.2 trillion. With the 10-year U.S. Treasury yield below 1% for most of the year, much of this new issuance was used to refinance or replace existing debt. The level of overall global corporate debt rose by 7.6% (or $1.56 trillion) from a year earlier to $22.1 trillion as of Jan. 1, 2021 (see charts 1 and 2). This amount consists of corporate debt instruments (including bonds, notes, loans, revolving credit facilities, and preferred securities from financial and nonfinancial corporate issuers) that are rated by S&P Global Ratings.

Chart 1

Chart 2

Investor demand for yield drove the strong demand for corporate debt in 2020. Global bond issuance in the 'A', 'BBB', and 'BB' rating categories rose to record levels in 2020 as financing conditions remained extraordinarily accommodative for much of the year. Even with issuance reaching new highs, corporate bond yields fell across rating categories--affording lower funding costs to issuers (see charts 3 and 4).

Chart 3

Chart 4

Issuance surged after the unprecedented challenges posed by COVID-19 brought global economic activity to a standstill in March. Urgent policy responses by governments and central banks led to a surge in issuance as companies quickly sought funding to bolster liquidity and bridge operations. To some surprise, liquidity was available for issuers in all rating categories later in 2020, as investors showed confidence in policymakers' ability and commitment to provide ample and indefinite support.

For full-year 2020, global investment-grade debt (rated 'BBB-' or higher) rose by 6% (up $992 billion), and speculative-grade debt (rated 'BB+' or lower) rose by 12% (up $573 billion). The largest growth was in the 'BBB' and 'BB' rating categories, up $1.1 trillion and $327 billion, respectively. The growth in speculative-grade debt included not only net new issuance, but also the debt of several investment-grade issuers downgraded to speculative-grade (also referred to as fallen angels).

The number of fallen angels globally totaled 49 in 2020, and more than $385 billion in debt was affected by these downgrades. Some of the largest fallen angels in 2020 were Ford Motor Co., Occidental Petroleum Corp., The Kraft Heinz Co., Renault S.A., FirstEnergy Corp., and Atlantia SpA.

77% Of Global Corporate Debt Is Rated Investment-Grade

Investment-grade issuers tend to be larger, with greater capacity to meet financial commitments than lower-rated issuers. Most rated issuers globally are speculative-grade, and these tend to be smaller, with less revenue and less debt outstanding than investment-grade issuers. About 77% of rated corporate debt globally is investment-grade, even as just 49.7% of rated issuers globally are investment-grade.

Within investment-grade, the 'BBB' rating category is the largest, with $8.64 trillion in debt. Within speculative-grade, the 'BB' category is the largest, with $2.56 trillion (see chart 5). These two rating categories experienced the largest increases in debt in 2020, and part of this growth resulted from downgrades of debt from higher rating categories.

In the lowest rating category, 'CCC'/'C', debt rose by 35% to $536.6 billion. This sharp increase followed a spike in downgrades of lower-rated companies into the 'CCC'/'C' rating category: In 2020, nearly 13% of issuers that began the year rated in the 'B' category were downgraded to the 'CCC'/'C' category during the year. With these downgrades, the number of 'CCC'/'C' category issuers rose by 91% in 2020 to 455 as of Jan. 1, 2021, and this greatly contributed to the increase in 'CCC'/'C' category debt.

Chart 5

Table 1

By region, U.S.-based issuers (including those from the tax havens Bermuda and the Cayman Islands) account for the largest share of rated debt globally, with $10.71 trillion. Compared with Europe and the other developed region (Canada, Japan, Australia, and New Zealand), the U.S. has a much higher share of debt from nonfinancial companies, at 76%, compared with 52% in Europe and 49% in the other developed region.

The U.S. region also has the highest share of speculative-grade debt, with $3.14 trillion, representing 29% of U.S. corporate debt (see table 2). In part, this reflects the highly developed capital markets in the U.S. and its high degree of banking disintermediation.

Rated emerging market corporate debt totals $1.31 trillion, and this accounts for only 6% of rated debt globally. A considerable share of the region's overall outstanding debt is unrated. This study excludes debt instruments that are not rated or do not have global scale ratings.

Table 2

By country, the U.S., the U.K., France, and Germany each has over $1 trillion in rated corporate debt. Together, these countries account for 67% of the total global rated corporate debt. Among these, U.S.-based companies account for the largest share, with nearly $10.4 trillion (excluding debt from tax havens). The U.K. follows with $1.64 trillion, France with $1.47 trillion, and Germany with $1.27 trillion (see table 3).

Table 3

Among nonfinancial companies, the largest and most capital-intensive sectors often have the most debt outstanding in the market. The utilities, telecommunications, and consumer products sectors lead at $1.95 trillion, $1.5 trillion, and $1.42 trillion, respectively (see table 4).

Table 4

The sectors with the most investment-grade nonfinancial debt are utilities ($1.69 trillion), telecommunications ($1.03 trillion), and consumer products ($961 billion). On the other hand, the media and entertainment sector has the largest amount of speculative-grade debt ($707.4 billion), followed by telecommunications ($469.3 billion) and health care ($458 billion).

About 92% of the total debt of financial services issuers is investment-grade, and most of this debt is from financial institutions, such as banks and brokerages.

U.S. Rated Debt Increased By 8% In 2020

U.S. rated corporate debt increased by 8% year over year to $10.71 trillion as of Jan. 1, 2021. Low borrowing costs and the Federal Reserve's policy actions to support debt capital markets contributed to a surge in new issuance that pushed up the amount of rated corporate debt outstanding. While new bond issuance jumped to $1.7 trillion, much of the new issuance was used for refinancing or to replace higher-cost debt. U.S. corporate debt rose by $795 billion during the year:

• U.S. investment-grade-rated corporate debt increased by 5% to $7.57 trillion from a year earlier (see chart 6).
• Speculative-grade debt rose by 15% to $3.14 trillion, including loans and revolvers in addition to bonds and notes (see chart 7).
• The share of speculative-grade debt among all U.S. rated corporate debt widened to 29%, from 28% at the beginning of the 2020.
• Large fallen angels such as Occidental Petroleum Corp., Ford Motor Co., Apache Corp., and FirstEnergy Corp. (each with more than $10 billion in debt at the time of downgrade) contributed to the rising speculative-grade debt.
• The media and entertainment sector carried the most speculative-grade debt, with $542 billion.
• The automotive sector reported the largest increase in speculative-grade debt, up by 140% year over year to $156 billion as of Jan. 1, 2021. Ford's downgrade to speculative-grade accounted for much of this increase.

Chart 6

Chart 7

• The 'BBB' category accounts for the largest share of rated U.S. corporate debt, with $4.4 trillion, or 41% (see chart 8).
• Within speculative-grade, the 'BB' category accounts for the most debt, at $1.44 trillion, but the 'B' category closely follows with $1.34 trillion.
• Nonfinancial companies account for 73% of the debt rated in the 'BBB' category, at $3.2 trillion, while the other $1.21 trillion is from financial services.
• Within speculative-grade, the 'BB' category grew the most in absolute terms, up $228 billion (an increase of 19%) to $1.44 trillion, while the 'CCC'/'C' category grew the most in relative terms, up 24% to $360.1 billion.

Chart 8

Table 5

The U.S. nonfinancial sectors with the most debt are as follows (see table 6):

Rated corporate debt:  utilities ($1.03 trillion), high technology ($922.3 billion), media and entertainment ($813.7 billion), and telecommunications ($813.5 billion)

Investment-grade-rated corporate debt:  utilities ($837.2 billion), high technology ($660.1 billion), and telecommunications ($612 billion)

Speculative-grade-rated corporate debt:  media and entertainment ($542.1 billion), consumer products ($293.8 billion), and health care ($268.6 billion)

Table 6

As interest rates fell in 2020, speculative-grade companies increasingly shifted credit market funding to fixed-rate bonds from floating-rate leveraged loans. And with investor demand for fixed-rate debt surpassing demand for floating-rate debt, speculative-grade companies launched more than $95 billion in new bond-for-loan take-outs in 2020, according to data from LCD, an offering of S&P Global Market Intelligence. This shift contributed to the 28% increase (to $1.46 trillion) in the amount of speculative-grade nonfinancial bonds, while the supply of speculative-grade nonfinancial term loans increased just 2% (to $1.18 trillion).

Bonds and notes accounted for 51% of nonfinancial speculative-grade debt at the end of 2020, up from 45% at the beginning of 2020 as companies shifted more funding to the bond market, leading to a decline in loans and revolving credit facilities as a percentage of nonfinancial speculative-grade debt (see table 7).

After companies drew down more than $300 billion from revolvers in the first half of 2020 to bolster liquidity and working capital, they reduced their revolving credit facility capacity in the second half of the year with fresh funding from the bond market. As of Jan. 1, 2021, U.S. nonfinancial companies had $404.8 billion in revolving credit facilities that were rated (including both drawn and undrawn facilities), down by 14% ($67.3 billion) since the beginning of 2020.

Among nonfinancial entities, 24% of debt instruments are floating- or variable-rate. And among all U.S. corporate issuers (including financial services and nonfinancial companies), 26% of debt instruments are floating- or variable-rate. These instruments include bonds with a variable or floating rate as well as those with step-up or step-down provisions. We view recent increases in the Consumer Price Index as representing transitory effects and not runaway inflation, and we do not expect the Fed to raise rates until sometime in 2023 (see "The Jump In U.S. Inflation Is Transitory And Consistent With Our Recovery Story," May 14, 2021). As interest rates eventually increase, funding costs on these floating-rate instruments will begin to rise.

Table 7

European Corporate Debt Expanded By 10% In 2020

European corporate debt rose by 10% in 2020 to $8.1 trillion as of Jan. 1, 2021 (see chart 9). This growth largely reflects exchange rate fluctuations. Depreciation of the U.S. dollar accounted for most of the increase in the dollar value of European corporate debt; in euro terms, European corporate debt showed modest 1% growth over the same period (see appendix for tables in euros):

• While new issuance from European corporate entities approached $1 trillion in 2020, corporate debt increased by a smaller amount (up $728.8 billion).
• European investment-grade-rated corporate debt increased by 9% year over year to $6.7 trillion as of Jan. 1, 2021, while speculative-grade-rated debt rose by 14% to $1.4 trillion (see charts 9 and 10).
• Downgrades of European fallen angels in 2020 contributed to the increase in speculative-grade debt, and some of the largest European fallen angels during the year were Atlantia SpA, Renault S.A., IHO Verwaltungs GmbH, and ZF Friedrichshafen AG.
• Speculative-grade debt represents 17% of European rated corporate debt as of Jan. 1, 2021, up 1 percentage point from the prior year.

Chart 9

Chart 10

• The largest share of rated European corporate debt was in the 'BBB' category, with 37%, or $3.04 trillion (see chart 11).
• Nonfinancial companies carry almost $2 trillion of debt rated in the 'BBB' category, while financial services account for $1.06 trillion.
• European financial services companies carry $882.2 billion of debt rated 'AAA'. This includes secured debt, such as covered bonds, that may be rated higher than the corresponding issuer.
• Within speculative-grade, the 'BB' rating category accounts for the largest amount of debt, at $690.7 billion, followed closely by the 'B' category with $572.8 billion.

Chart 11

Table 8

The European nonfinancial sectors with the most debt are as follows (see table 9):

Rated corporate debt:  utilities ($585.8 billion), consumer products ($583.7 billion), and telecommunications ($541.5 billion)

Investment-grade-rated corporate debt:  utilities ($548.7 billion), consumer products ($464.7 billion), and oil and gas ($298 billion)

Speculative-grade-rated corporate debt:  telecommunications ($247.4 billion), media and entertainment ($124.9 billion), and consumer products ($118.9 billion)

Table 9

Bonds and notes account for most European corporate debt (about 90%), while loans and revolving credit facilities are more highly concentrated among speculative-grade and nonfinancial companies:

• Bonds and notes remain the predominant funding source for speculative-grade nonfinancials in Europe, at 52% of rated debt, up 1 percentage point from a year ago (see table 10).
• About 19% of rated nonfinancial sector corporate debt in Europe is in the form of loans and revolvers.
• As of Jan. 1, 2021, European nonfinancial companies had $112.5 billion in rated revolving credit facilities (including both drawn and undrawn facilities), down from $143.8 billion as of Jan. 1, 2020.
• Speculative-grade-rated nonfinancial sector corporate debt had a larger proportion of loans and revolvers (48%) than investment-grade (8%).

While 19% of European nonfinancial corporate debt consists of loans and revolvers, a somewhat higher share (23%) of the rated debt instruments have a floating or variable interest rate. Among European corporate entities overall (including financial and nonfinancial corporate issuers), the share of debt that is floating or variable rate is slightly higher, at 24%. While interest rates have remained exceptionally low following multiple policy responses from the European Central Bank to support credit market liquidity, once rates eventually rise, issuers of this floating- and variable-rate debt will face rising funding costs.

Table 10

Appendix: Euro-Denominated Tables

Table 11

Table 12

Table 13

Chart 12

Chart 13

Chart 14

Data Methodology

For this report, we analyzed the amount of financial and nonfinancial corporate debt rated by S&P Global Ratings.

We included the rated debt of all parent companies and their foreign subsidiaries in each region. We counted the debt of all of these companies regardless of the currency or market in which the debt was issued. We converted any non-U.S.-dollar-denominated debt to U.S. dollars based on exchange rates as of Jan. 1, 2021.

The issue types covered are loans, revolving credit facilities, bank notes, bonds, debentures, convertible bonds, covered bonds, intermediate notes, medium-term notes, index-linked notes, equipment pass-through certificates, and preferred stock. In the case of revolving credit facilities, the amount usually represents the original facility limit, not necessarily the amount that has been drawn. Debt amounts are tallied as the face value of outstanding rated debt instruments. We exclude individual issues that are not currently rated at the instrument level, as well as instruments from issuers that are currently rated 'D' (default) or 'SD' (selective default).

We aggregated the data by issue rating. We also aggregated sector-specific data according to the subsector of the issuer. The financial services sector is defined as all banks, brokers, insurance companies, asset managers, mortgage companies, and other financial institutions. We aggregated debt issued by financial arms of nonfinancial companies with the sector of the corporate parent.

For this study, we aggregated the amount of rated corporate debt among four regions:

• 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, Moldova, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the U.K.
• Emerging markets: Argentina, Armenia, Aruba, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belize, 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, 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, Russian Federation, 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

Related Research

• 'BBB' Pulse: Rising Stars Hit Highest Monthly Total Since Before The Pandemic, May 26, 2021
• Global Financing Conditions: Bond Issuance Could Decline 2.25% In 2021 To $8.2 Trillion, April 28, 2021
• Global Refinancing--Rated Corporate Debt Due Through 2025 Totals $11.3 Trillion, Feb. 8, 2021