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

COMMENTS

This Month In Credit: 2024 Data Companion

COMMENTS

Credit Trends: Risky Credits: U.S. And Canadian Risky Credits Drop For Third Straight Quarter Amid Sector Divergences

COMMENTS

Credit Trends: Risky Credits: Defaults Have Driven A Decline In European Risky Credits

COMMENTS

Credit Trends: Risky Credits: Emerging Markets: Issuance Activity And Deleveraging Plans


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®.

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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

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