Key Takeaways
- The global corporate default tally rose to 53 as of Aug. 31, with 10 defaults, and the U.S. health care sector the largest contributor.
- The number of U.S.-based defaults have picked up with August alone accounting for 25% of the year-to-date total.
- Emerging market defaults are over 60% higher than the same period in 2021, after three additional defaults in August.
- We forecast the U.S. and European trailing-12-month. speculative-grade corporate default rates to reach 3.5% and 3% respectively, by June 2023.
S&P Global Ratings' 2022 global corporate default tally has increased to 52 after nine companies defaulted in August:
- New-Jersey based OSG billing services company Output Services Group Inc.
- Mexico based leasing company Unifin Financiera S.A.B. de C.V..
- Texas based data center operator Dawn Acquisitions LLC
- Ireland-incorporated (U.S. based) pharmaceutical company Endo International PLC
- The U.S. based criminal detention and residential reentry facilities provider GEO Group Inc. (The)
- New York based Carestream Health Inc.
- Colorado based physician and advanced practice provider Envision Healthcare Corp.
- A Marshall Island incorporated (United Kingdom based) oil industry service provider Altera Infrastructure L.P.
- and two confidential issuers.
With 10 defaults in August, the pace of defaults has increased markedly from July as growth slows, inflation persists at heightened levels, and major central banks continue to hike rates resulting in increasing financing costs and tighter financing conditions.
With six defaults in the U.S. and only one default in Europe ,we estimated the U.S. 12-month trailing speculative-grade default rate to have increased in August 2022 to 1.5% while we estimate the Europe 12-month trailing speculative-grade default rate to have remained at 0.9%.Negative bias (the percentage of issuers with a negative outlook or on CreditWatch negative) is also increasing in both regions and we expect the 12-month-trailing speculative-grade default rate for the U.S. and the Europe could rise to 3.5% and 3% by June 2023, respectively (see "The U.S. Speculative-Grade Corporate Default Rate Could Reach 3.5% By June 2023," Aug. 18, 2022 and "The European Speculative-Grade Corporate Default Rate Could Rise To 3% By June 2023," Aug. 22, 2022).
Table 1
Global Corporate Default Summary | ||||||
---|---|---|---|---|---|---|
Region | 12-Month trailing speculative-grade default rate (%) | Weakest links | ||||
U.S. | *1.5 | 127 | ||||
Emerging market | 1.9 | 19 | ||||
Europe | *0.9 | 46 | ||||
Other developed | 1.5 | 10 | ||||
Global | 1.3 | 202 | ||||
Note: *Trailing-12-month speculative grade default rates for from Aug. 31, 2022- Aug. 31, 2022 are preliminary and subject to change.Trailing-12-month speculative grade default rates for from July 31, 2022- July 31, 2022. Year-to-date data as of Aug. 31, 2022. Weakest link data is as of June 27, 2022. 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®. |
Regional Divergences And Sectoral Trends
A clear divergence in regional and sector default trends remains. Half of the U.S. region's six defaults in August were concentrated within the U.S. health care sector as some lower-rated issuers in the sector face higher input costs on health care products, transportation, and labor because of higher and persistent inflation, which is weighing on EBITDA margins and cash flows. Although a steep recession would challenge sector revenues, we believe the pressure on margins and cashflow is manageable and the industry will see continued, albeit lower, growth (see "Industry Top Trends Update Health Care Inflationary Pressures On Margins," July 14, 2022).
Overall year to date, the homebuilders and real estate and consumer products sectors currently co-lead the 2022 default tally with 10 each. Meanwhile, other sectors that have benefited from higher for longer prices, including the oil and gas sector, have seen far fewer defaults than previous years. So far in 2022, there has been only one oil and gas default, compared with seven and 34, respectively, at this point in 2021 and 2020, the majority being U.S. and Canadian-based.
Despite the sharp rise in U.S. defaults last month, the regional tally is still nearly 20% below its 2021 year-to-date tally of 31 defaults, and at its lowest year-to-date level since 2014. The European default tally also remains historically low and is over 45% below previous year levels. In contrast, defaults in the emerging markets region are over 60% above 2021 year-to-date levels and emerging markets currently accounts for 38% of global defaults, considerably higher than previous year levels. A primary contributing factor is an uptick in China-based homebuilder defaults as the sector continues to be hit by weaker sales and delays to housing construction and delivery (see "Sector Roundup Asia-Pacific Q3 2022: Inflation And China: Rough Ride Ahead", July 4, 2022). (see chart 3).
Chart 1
Chart 2
Chart 3
Chart 4
Table 2
So Far In 2022, Total Global Default Tally Reaches 53 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Date | Parent company | Country/Market | Subsector | To | From | Reason | ||||||||
January 4, 2022 |
ION Geophysical Corp. |
U.S. | Oil and gas | D | CCC | Missed principal and interest payments | ||||||||
January 4, 2022 | Confidential | Confidential | Utilities | D | NR | Confidential | ||||||||
January 13, 2022 |
R&F Properties (HK) Co. Ltd. |
Hong Kong | Homebuilders/real estate companies | SD | CC | Distressed exchange | ||||||||
January 19, 2022 | Confidential | Confidential | Homebuilders/real estate companies | SD | CCC- | Confidential | ||||||||
January 24, 2022 |
Fusion Connect Inc. |
U.S. | Telecommunications | SD | CC | Distressed exchange | ||||||||
February 1, 2022 |
Future Retail Ltd. |
India | Consumer products | SD | CCC- | Missed principal payments | ||||||||
February 1, 2022 |
TPC Group Inc., (TPC Group LLC) |
U.S. | Health care | D | CCC | Missed interest payments | ||||||||
February 4, 2022 | Confidential | Confidential | Consumer products | D | NR | Confidential | ||||||||
February 9, 2022 | Confidential | Confidential | Consumer products | SD | CCC | Confidential | ||||||||
February 10, 2022 |
Credito Real, S.A.B. de C.V., SOFOM, E.N.R. |
Mexico | Financial institutions | SD | CCC- | Missed principal payments | ||||||||
February 11, 2022 | Confidential | Confidential | Homebuilders/real estate companies | SD | CC | Confidential | ||||||||
February 17, 2022 |
U.S. TelePacific Holdings Corp. |
U.S. | Telecommunications | SD | CCC- | Distressed exchange | ||||||||
March 15, 2022 |
Diamond Sports Group LLC |
U.S. | Media and entertainment | SD | CC | Distressed exchange | ||||||||
March 21, 2022 |
Mulhacen Pte. Ltd. |
Singapore | Financial institutions | D | CC | Distressed exchange | ||||||||
March 24, 2022 |
MHP SE |
Ukraine | Consumer products | SD | B- | Missed interest payments | ||||||||
April 1, 2022 |
Ruby Pipeline LLC |
U.S. | Utilities | D | CC | Missed principal payments | ||||||||
April 7, 2022 |
Owl Finance Ltd. |
U.K. | Media and entertainment | SD | CC | Distressed exchange | ||||||||
April 7, 2022 |
PSS Industrial Group Corp. |
U.S. | Utilities | D | CCC- | Missed principal and interest payments | ||||||||
April 8, 2022 |
Guangzhou R&F Properties Co. Ltd. |
China | Homebuilders/real estate companies | SD | CC | Distressed exchange | ||||||||
April 8, 2022 |
Kernel Holding S.A. |
Ukraine | Consumer products | SD | B- | Missed interest payments | ||||||||
April 11, 2022 | Confidential | Confidential | Homebuilders/real estate companies | SD | CC | Confidential | ||||||||
April 11, 2022 |
Promotora de Informaciones S.A. |
Spain | Media and entertainment | SD | CC | Distressed exchange | ||||||||
April 12, 2022 |
Dunn Paper Holdings Inc. |
U.S. | Chemicals, packaging, and environmental services | D | CCC | Missed interest payments | ||||||||
April 12, 2022 |
Grupo Kaltex S.A. de C.V. |
Mexico | Consumer products | D | CCC- | Missed principal payments | ||||||||
April 12, 2022 |
Petropavlovsk PLC |
U.K. | Metals, mining, and steel | SD | CCC- | Missed interest payments | ||||||||
April 13, 2022 | Confidential | Confidential | High technology | D | CCC | Confidential | ||||||||
April 14, 2022 |
EuroChem Group AG |
Switzerland | Chemicals, packaging, and environmental services | SD | CCC- | Missed interest payments | ||||||||
April 22, 2022 | Confidential | Confidential | Aerospace and defense | SD | CCC+ | Confidential | ||||||||
May 3, 2022 |
Envision Healthcare Corp. (Envision Healthcare Holdings Inc.) |
U.S. | Health care | SD | CCC | Distressed exchange | ||||||||
May 6, 2022 |
Safari Beteiligungs Gmbh |
Germany | Media and entertainment | SD | CC | Distressed exchange | ||||||||
May 10, 2022 |
Talen Energy Supply LLC |
U.S. | Utlities | D | CCC | Bankruptcy | ||||||||
May 26, 2022 | Confidential | Confidential | Financial institutions | SD | CCC- | Confidential | ||||||||
June 1, 2022 | Confidential | Confidential | Homebuilders/real estate companies | SD | CC | Confidential | ||||||||
June 10, 2022 | Confidential | Confidential | Homebuilders/real estate companies | SD | CC | Confidential | ||||||||
June 13, 2022 | Confidential | Confidential | Homebuilders/real estate companies | SD | CC | Confidential | ||||||||
June 16, 2022 |
Revlon Inc. |
U.S. | Consumer products | D | CCC- | Bankruptcy | ||||||||
June 21, 2022 |
Greenland Holding Group Co. Ltd. |
China | Homebuilders/real estate companies | SD | CC | Distressed exchange | ||||||||
June 30, 2022 |
Rite Aid Corp. |
U.S. | Retail/restaurants | SD | CC | Distressed exchange | ||||||||
July 6, 2022 |
Canopy Growth Corp. |
Canada | Consumer products | SD | CCC | Distressed exchange | ||||||||
July 7, 2022 |
SAS AB |
Sweden | Transportation | D | CC | Bankruptcy | ||||||||
July 14, 2022 |
SK HoldCo LLC |
U.S. | Automotive | SD | CC | Distressed exchange | ||||||||
July 18, 2022 | PT Sawit Sumbermas Sarana Tbk | Indonesia | Forest products and building materials | SD | CC | Distressed exchange | ||||||||
July 28, 2022 |
Mountain Province Diamonds Inc. |
Canada | Metals, mining, and steel | SD | CCC- | Distressed exchange | ||||||||
August 9, 2022 |
Output Services Group Inc. |
U.S. | Consumer products | D | CC | Bankruptcy | ||||||||
August 9, 2022 |
Unifin Financiera S.A.B. de C.V. |
Mexico | Financial institutions | D | B+ | Missed principal and interest payments | ||||||||
August 11, 2022 |
Dawn Acquisitions LLC (Infra Colodata Holdings LLC) |
U.S. | Telecommunications | SD | CCC | Distressed exchange | ||||||||
August 12, 2022 | Confidential | Confidential | Retail/restaurants | SD | CCC- | Confidential | ||||||||
August 17, 2022 |
Endo International PLC |
Ireland | Health care | D | CC | Bankruptcy | ||||||||
August 19, 2022 |
GEO Group Inc. (The) |
U.S. | Consumer products | SD | CC | Distressed exchange | ||||||||
August 23, 2022 |
Carestream Health Inc. |
U.S. | Health care | D | CC | Bankruptcy | ||||||||
August 29, 2022 | Confidential | Confidential | Homebuilders/real estate companies | SD | CCC | Confidential | ||||||||
August 30, 2022 |
Envision Healthcare Corp. (Envision Healthcare Holdings Inc.) |
U.S. | Health care | SD | CCC | Distressed exchange | ||||||||
Data as of Aug. 31, 2022. NR--Not rated. SD--Selective default. Sources: S&P Global Ratings Research and S&P Global Market Intelligence's CreditPro® Copyright © 2018 by Standard & Poor’s Financial Services LLC. All rights reserved. |
Related Research
- 'BBB' Pulse: Downside Risks Remain, Aug.17, 2022
- Declining Spending Combined With Higher Rates Could Tip The Scale For 'B' And 'B-' Rated U.S. Consumer Products Issuers, Aug. 13, 2022
- Envision Healthcare Corp. Downgraded To 'SD' From 'CCC' On Distressed Debt Exchange, Aug.31, 2022
- Carestream Health Inc. Downgraded To 'D' From 'CC' Following Chapter 11 Bankruptcy Filing, Aug. 23, 2022
- The GEO Group Inc. Downgraded To 'SD' From 'CC' On The Completion Of Its Distressed Debt Exchange, Debt Ratings Lowered, Aug. 20, 2022
- Endo International PLC Downgraded To 'D' From 'CC' Following Chapter 11 Bankruptcy Filing, Aug. 18, 2022
- Dawn Acquisitions LLC Downgraded To 'SD' On Below-Par Term Loan Purchases; Issue-Level Ratings Lowered To 'D', Aug. 12, 2022
- Unifin Financiera S.A.B. de C.V. Downgraded To 'D' On Debt Restructuring, Aug. 10, 2022
- The U.S. Speculative-Grade Corporate Default Rate Could Reach 3.5% By June 2023, Aug. 19, 2022
- The European Speculative-Grade Corporate Default Rate Could Rise To 3% By June 2023, Aug. 22, 2022
- Declining Spending Combined With Higher Rates Could Tip The Scale For 'B' And 'B-' Rated U.S. Consumer Products Issuers, Aug. 13, 2022
- Europe Braces For A Bleak Winter, Aug. 29, 2022
Default Studies
More analysis and statistics are available in our annual default studies, published on RatingsDirect:
Corporate (financial and nonfinancial)
- 2021 Annual Global Corporate Default And Rating Transition Study
- 2021 Annual U.S. Corporate Default And Rating Transition Study
- 2021 Annual Japanese Corporate Default And Rating Transition Study
- 2021 Annual Taiwan Ratings Corp. Corporate Default And Rating Transition Study
- 2021 Annual Taiwan Structured Finance Default And Rating Transition Study
- 2020 Annual Australia And New Zealand Corporate Default And Rating Transition Study
- 2020 Annual Infrastructure Default And Rating Transition Study
- 2020 Annual European Corporate Default And Rating Transition Study
- 2020 Annual Asia Corporate Default And Rating Transition Study
- 2020 Annual Greater China Corporate Default And Rating Transition Study
- 2020 Annual Latin American Corporate Default And Rating Transition Study
- 2020 Annual Global Financial Services Default And Rating Transition Study
- 2020 Annual Emerging And Frontier Markets Corporate Default And Rating Transition Study
Structured finance
- 2021 Annual Global Structured Finance Default And Rating Transition Study
- 2021 Annual Japanese Structured Finance Default And Rating Transition Study
- 2021 Annual Taiwan Structured Finance Default And Rating Transition Study
- 2020 Annual European Structured Finance Default And Rating Transition Study
- 2020 Annual Mexican Structured Finance Default And Rating Transition Study
U.S. public finance
Sovereign and international public finance
- 2021 Annual Global Sovereign Default And Rating Transition Study
- 2020 Annual International Public Finance Default And Rating Transition Study
- 2020 Annual Mexican National Scale Corporate And Public Finance Default And Rating Transition Study
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 | |
Research Contributor: | Vaishali Singh, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
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