articles Ratings /ratings/en/research/articles/220223-default-transition-and-recovery-credito-real-becomes-first-default-in-2022-influenced-by-an-esg-factor-12287436 content esgSubNav
In This List
COMMENTS

Default, Transition, and Recovery: Credito Real Becomes First Default In 2022 Influenced By An ESG Factor

COMMENTS

Credit Trends: U.S. Corporate Bond Yields As Of Nov. 20, 2024

COMMENTS

Private Credit Could Bridge The Infrastructure Funding Gap

COMMENTS

The Opportunity Of Asset-Based Finance Draws In Private Credit

COMMENTS

Private Credit Casts A Wider Net To Encompass Asset-Based Finance And Infrastructure


Default, Transition, and Recovery: Credito Real Becomes First Default In 2022 Influenced By An ESG Factor

This Weeks Observations:

  • Emerging markets based Credito Real S.A.B. de C.V., SOFOM, E.N.R becomes the first default of 2022 where an environmental, social, and governance (ESG) credit factor was considered a key driver.
  • By region, the U.S. leads the tally with five, followed by emerging markets with four, while Europe and the other developed region (Australia, Canada, Japan, and New Zealand) have yet to experience a default in 2022.
  • S&P Global expect the U.S. trailing-12-month speculative-grade corporate default rate to reach 3% by December 2022 from 1.5% in December 2021.

The 2022 global corporate default tally reached nine after Mexico-based non-bank financial institution Credito Real S.A.B. de C.V., SOFOM, E.N.R. defaulted due to a missed interest payment on Feb. 9, 2022 (see "Credito Real Credit Issuer Rating Cut To 'SD' And Rating On CHF170M Senior Notes Cut To 'D' On Missed Principal Payment," Feb. 10, 2022). Our downgrade of Credito Real to 'SD' from 'CCC-' marks the first default in 2022 influenced by ESG credit factors —governance (risk management, culture, and oversight).

Over the course of 2021, potential downgrades influenced by ESG factors were more than twice as likely to lead to a downgrade. Moving into 2022, ESG considerations, especially in the continuing context of the pandemic, are more of a risk than an opportunity to credit quality (see "ESG Factors Influence Close To 1 In 4 Potential Downgrades As 2022 Unfolds," Feb. 3, 2022).

Table 1

The U.S. Region Leads The 2022 Default Tally So Far With Five, Followed By Emerging Market With Four
Region 12-month trailing speculative-grade default rate (%) 2022 YTD 2021 YTD 2021 Weakest links
U.S. *1.5 5 9 40 131
Emerging market 1.8 4 1 15 18
Europe *1.7 0 3 14 49
Other developed 2.2 0 0 3 9
Global 1.7 9 13 72 207
Note: *Trailing-12-month speculative grade default rates from Jan. 31, 2021 – Jan. 31, 2022, are preliminary and subject to change. Year-to-date data as of Feb. 16, 2022. Weakest link data is as of Dec. 31, 2021. Other developed region includes Australia, Canada, Japan, and New Zealand. Default counts may include confidentially rated issuers. Sources: S&P Global Ratings Research and S&P Global Market Intelligence’s CreditPro®.

Chart 1

image

Chart 2

image

Table 2

Global Corporate Defaults Tally At Nine So Far In 2022
Date Parent company Country/market Subsector To From Reason
1/4/2022

ION Geophysical Corp.

U.S. Oil and gas D CCC Missed principal and interest payments
1/4/2022 Confidential Confidential Utilities D NR Confidential
1/13/2022

R&F Properties (HK) Co. Ltd.

Hong Kong Homebuilders/real estate companies SD CC Distressed exchange
1/19/2022 Confidential Confidential Homebuilders/real estate companies SD CCC- Confidential
1/24/2022

Fusion Connect Inc.

U.S. Telecommunications SD CC Distressed exchange
2/1/2022

Future Retail Ltd.

India Retail/restaurants SD CCC- Missed principal payments
2/1/2022

TPC Group Inc. (TPC Group LLC)

U.S. Chemicals, packaging, and environmental services D CCC Missed interest payments
2/9/2022 Confidential Confidential Retail/restaurants SD CCC Confidential
2/10/2022

Credito Real S.A.B. de C.V., SOFOM, E.N.R.

Mexico Financial institutions SD CCC- Missed principal payments
Data as of Feb. 9, 2022. NR--Not rated. SD--Selective default. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro®.

Related Research

Default Studies

More analysis and statistics are available in our annual default studies, published on RatingsDirect:

Corporate (financial and nonfinancial)
Structured finance
U.S. public finance
Sovereign and international public finance

This report does not constitute a rating action.

Credit Markets Research:Nicole Serino, New York + 1 (212) 438 1396;
nicole.serino@spglobal.com
Secondary Contacts:Patrick Drury Byrne, Dublin (00353) 1 568 0605;
patrick.drurybyrne@spglobal.com
Yogesh Kumar, Pune;
yogesh.kumar2@spglobal.com

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

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

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

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

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


 

Create a free account to unlock the article.

Gain access to exclusive research, events and more.

Already have an account?    Sign in