articles Ratings /ratings/en/research/articles/220406-credit-trends-the-number-of-north-american-ccc-rated-issuers-is-steady-despite-subdued-primary-activity-12336602 content esgSubNav
In This List
COMMENTS

Credit Trends: The Number Of North American ‘CCC’ Rated Issuers Is Steady Despite Subdued Primary Activity

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


Credit Trends: The Number Of North American ‘CCC’ Rated Issuers Is Steady Despite Subdued Primary Activity

(Editor's Note: Our "Risky Credits" series focuses on corporate issuers rated in the 'CCC' category. Because the majority of defaults are from these companies, those with negative outlooks or ratings on CreditWatch negative are even more important to monitor in this uncertain economic recovery.)

image

March 2022 Highlights:

North America's 'CCC' count steadied.   The number of 'CCC+' and below rated issuers in the U.S. and Canada remained at 135 in March--the lowest level since February 2020. This number could increase due to ongoing supply chain disruptions or a persistent increase in input costs or interest rates adversely impacting operating performance or profitability. The percentage of issuers with a positive bias (either with a positive outlook or CreditWatch) is twice its five-year average at 12%, signaling potential for upgrades out of the 'CCC' rating category (see chart 1).

U.S. defaults are less than half of last year's levels.   So far in 2022, there have been only seven defaults from the U.S., compared to 15 at this point in 2021. The U.S. default rate remains low at just 1.5%, however, S&P Global expects it to increase to 3% by December 2022 (see "The U.S. Speculative-Grade Corporate Default Rate Could Reach 3% By Year-End As Risks Continue To Increase," Feb. 16, 2022).

'CCC+' and below issuance has fallen to a four-year low.   Issuance in the 'CCC' rating category has fallen to just US$7.5 billion year-to-date, down 84% from US$48.7 billion at this point in 2021. Reduced risk appetite and rising financing costs have weakened the favorable financing conditions we saw throughout 2021, increasing refinancing risk for 'CCC' rated issuers.

U.S. 'CCC' composite spreads widened by 17% so far in 2022.   'CCC' spreads were at 706 basis points (bps) as of March 24 but are still considerably lower than their pandemic high of 1,828 bps in March 2020. The increase in market volatility and rising spreads primarily reflect uncertainties around the path of U.S. monetary policy in the face of inflation and the potential impact of higher rates on economic growth.

The most exposed sector is media and entertainment.   Among 'CCC' rated issuers, the media and entertainment sector has the highest debt exposure at US$41.4 billion, 50% of which has a negative bias. The sector remains the most vulnerable to a weaker-than-expected operating environment.

'CCC+' and below corporate debt due in the near term remains low.   Lower rated issuers have taken advantage of two years of cheap funding to extend maturities, leaving 'CCC+' and below corporate debt due in the near term at a manageable level (see chart 4).

Collateralized loan obligation (CLO) credit metrics remain stable.   Positive momentum for corporate ratings has been decelerating and is now returning to more typical historical patterns following the wave of upgrades in 2021. As a result, CLO credit metrics remained stable at the start of April as upgrades just outnumbered downgrades across U.S. broadly syndicated loan (BSL) CLO exposures in March 2022. A small handful of obligors (some widely held) were placed on CreditWatch negative in March, slightly increasing U.S. CLO exposure to obligors on CreditWatch negative.

Chart 1

image

Chart 2

image

Chart 3

image

Chart 4

image

Chart 5

image

Table 1

2022 Downgrades Into The 'CCC' Category
Rating date Issuer Country Sector Rating to Rating from Debt amount (mil. US$)
3/10/2022

VEON Ltd.

Bermuda Telecommunications CCC+ BB+ 5,306
3/11/2022

Logan Group Co. Ltd.

Cayman Islands Homebuilders/real estate co. CCC- B- 1,280
2/25/2022

Cooper-Standard Holdings Inc.

United States Automotive CCC+ B- 990
2/25/2022

8th Avenue Food & Provisions Inc.

United States Consumer products CCC+ B- 750
1/31/2022

Halo Buyer Inc.

United States Consumer products CCC+ B- 440
2/11/2022

INW Manufacturing, LLC

United States Consumer products CCC+ B- 440
3/22/2022

PlayPower Holdings Inc.

United States Media and entertainment CCC+ B- 400
3/15/2022

The Cleaver-Brooks Co. Inc.

United States Capital goods CCC B- 375
2/9/2022

Lannett Co. Inc.

United States Health care CCC+ B- 350
2/11/2022

Moran Foods LLC

United States Retail/restaurants CCC+ B- 334
3/29/2022

Skillz Inc.

United States Media and entertainment CCC+ B- 300
3/18/2022

JHW Alphia Holdings Inc.

United States Consumer products CCC+ B- 285
2/7/2022

Data Axle Inc.

United States Media and entertainment CCC B- 250
Data as of March 31, 2022. Source: S&P Global Ratings.

Table 2

2022 Upgrades From The 'CCC' Category
Rating date Issuer Country Sector Rating to Rating from Debt amount (mil. US$)
2/17/2022

Nabors Industries Ltd.

Bermuda Oil and gas exploration and production B- CCC+ 5,101
1/18/2022

Syniverse Holdings Inc.

United States Telecommunications B- CCC+ 2,922
2/4/2022

Apex Tool Group LLC

United States Forest products and building materials B- CCC 2,729
1/12/2022

National CineMedia Inc.

United States Media and entertainment B- CCC+ 1,220
1/20/2022

Electronics for Imaging Inc.

United States High technology B- CCC+ 1,100
2/25/2022

Yellow Corp.

United States Transportation B- CCC+ 600
2/23/2022

Screenvision LLC

United States Media and entertainment B- CCC+ 350
1/13/2022

JW Aluminum Continuous Cast Co.

United States Metals, mining, and steel B- CCC+ 300
2/8/2022

Crew Energy Inc.

Canada Oil and gas exploration and production B- CCC+ 235
3/14/2022

Salem Media Group Inc.

United States Media and entertainment B- CCC+ 370
Data as of March 31, 2022. Source: S&P Global Ratings.

Table 3

CLO BSL Index Metrics (CLO Insights 2022 U.S. BSL Index)
BSL 'B-' bucket (%) 'CCC' bucket (%) Nonperform bucket (%) S&P Global Ratings' weighted average rating factor CreditWatch negative (%) Outlook negative (%)
Jan-22 26.41 4.94 0.17 2,700 0.88 12.33
Feb-22 27.16 4.27 0.37 2,708 0.28 11.94
Mar-22 27.09 4.26 0.39 2,708 0.11 11.35
Apriil 2022 27.44 4.17 0.13 2,690 1.06 10.86
BSL CLO--Broadly syndicated loan collateralized loan obligation.

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
Patrick Drury Byrne, Dublin (00353) 1 568 0605;
patrick.drurybyrne@spglobal.com
Leveraged Finance:Ramki Muthukrishnan, New York + 1 (212) 438 1384;
ramki.muthukrishnan@spglobal.com
Minesh Patel, CFA, New York + 1 (212) 438 6410;
minesh.patel@spglobal.com
Secondary Contact:Daniel Hu, FRM, New York + 1 (212) 438 2206;
daniel.hu@spglobal.com
Research Contributors:Yogesh Kumar, CRISIL Global Analytical Center, an S&P affiliate, Mumbai
Vaishali Singh, Pune;
vaishali.singh2@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