Editor's note: Our "Risky Credits" series primarily focuses on U.S. and Canadian corporate issuers rated 'CCC+' and lower. Because many defaults are of companies in that category, ratings with negative outlooks or on CreditWatch negative are even more important to monitor.
Key Takeaways
- The number of 'CCC+' and below rated corporate issuers increased to 148 in October 2022, from 140 in September 2022, as the trailing three-month rating transition from 'B-' to 'CCC' increased to 1.9% from 1.6%, in the same period.
- Total debt outstanding of 'CCC+' and below issuers has now reached an 17-month high, jumping to US$ 230 billion from US$134 billion in the previous month.
- The healthcare sector led the increase in risky credits with three in October as certain lower-rated issuers in the sector face weaker than expected operating performance resulting in wider-than-expected cash flow deficits and weak liquidity.
- The consumer products sector leads with the most issuers rated 'CCC+' and below, as 31 issuers, -90%, are at risk for further downgrade.
'CCC+' and below rated debt increased to a 17-month high in October.
The number of 'CCC+' and lower rated issuers jumped by eight over the last month, amounting to US$97 billion in additional debt. Total debt outstanding has now reached its May 2021 level of $230 billion, but still well below its April 2020 peak of $347 billion (see chart 1). Meanwhile, the number of 'B-'rated issuers with a negative outlook and CreditWatch--a forward-looking indicator of corporate credit quality-- also increased to 60 in October 2022, from 52 in September 2022. Outstanding debt rated 'B-' with a negative outlook increased to $77 billion from $68 billion in the same period. We can expect the number of 'CCC+' and lower issuers to continue to climb.
Healthcare led additions this month, but the consumer products sector is most exposed to default risk.
The consumer sector leads with the most 'CCC+ and below' rated issuers with 31, of which 90% are on a negative outlook or CreditWatch. This is higher than at this point last year as issuers have seen a pullback in consumer spending because of higher prices and recession fears. The consumer sector already leads the 2022 U.S. default tally with seven through October, but we can expect defaults in this sector to continue rising. We expect the U.S. trailing-12-month speculative-grade corporate default rate to reach 3.7% by Septempber 2023, up from 1.6% in September 2022.
Chart 2
CLO credits show modest deterioration.
The stable to negative trend in U.S. broadly syndicated loan (BSL) collateralized loan obligation (CLO) collateral credit metrics continued in October, with most metrics remaining unchanged, while two important ones continued to have modest deterioration. The average BSL CLO 'CCC' basket also topped 5% in November, the first time since January 2022. However, the 5.02% average can be misleading because there is a significant vintage effect, with pre-pandemic CLOs having an average 'CCC' exposure of 5.80%, while post-pandemic CLOs averaged just 4.00%. Since some CLOs (mostly pre-pandemic ones) have already exceeded their 7.5% 'CCC' thresholds, we believe their overcollateralization (O/C) ratios may have market value haircuts within upcoming trustee reports.
Table 1
CLO BSL Index Metrics (CLO Insights 2022 U.S. BSL Index) | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
BSL | B-' Bucket | CCC' bucket | Non-Perform Bucket | CreditWatch Neg | Outlook Neg | |||||||
Jan-22 | 26.41% | 4.94% | 0.17% | 0.88% | 12.33% | |||||||
Feb-22 | 27.16% | 4.27% | 0.37% | 0.28% | 11.94% | |||||||
Mar-22 | 27.09% | 4.26% | 0.39% | 0.11% | 11.35% | |||||||
Apr-22 | 27.44% | 4.17% | 0.13% | 1.06% | 10.86% | |||||||
May-22 | 27.76% | 4.26% | 0.14% | 1.20% | 9.83% | |||||||
Jun-22 | 27.70% | 4.14% | 0.20% | 1.27% | 10.46% | |||||||
Jul-22 | 28.59% | 4.01% | 0.35% | 1.35% | 11.08% | |||||||
Aug-22 | 28.70% | 4.00% | 0.34% | 1.46% | 11.53% | |||||||
Sep-22 | 29.00% | 4.21% | 0.59% | 1.03% | 12.20% | |||||||
Oct-22 | 28.85% | 4.40% | 0.50% | 1.16% | 13.36% | |||||||
Nov-22 | 28.85% | 5.02% | 0.40% | 0.59% | 14.46% | |||||||
BSL CLO--Broadly syndicated loan collateralized loan obligation. SPWARF--S&P Global Ratings' weighted average rating factor. O/C--Overcollateralization. |
Table 2
Downgrades into 'CCC' And 'CC' Category Beginning 2022 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Rating Date | Issuer | Country | Sector | Rating To | Rating From | Debt Amount (US $ Mil) | ||||||||
8/1/2022 | Bausch Health Cos. Inc. | Canada | Health care | CCC+ | B | $44,402 | ||||||||
10/14/2022 | Finastra Ltd. | Cayman Islands | High technology | CCC+ | B- | $34,432 | ||||||||
10/28/2022 | Team Health Holdings Inc., | U.S. | Health care | CCC+ | B- | $9,849 | ||||||||
4/14/2022 | Talen Energy Supply LLC (Talen Energy Corp.) | U.S. | Utilities | CCC | B- | $6,329 | ||||||||
5/3/2022 | Intrado Corp. | U.S. | Telecommunications | CCC+ | B- | $5,407 | ||||||||
3/10/2022 | VEON Ltd. | Bermuda | Telecommunications | CCC+ | BB+ | $5,306 | ||||||||
8/24/2022 | Artera Services, LLC | U.S. | Capital goods | CCC+ | B- | $3,952 | ||||||||
9/12/2022 | Brand Industrial Services Inc., | U.S. | Capital goods | CCC+ | B- | $3,825 | ||||||||
10/7/2022 | Photo Holdings, LLC | U.S. | Media and entertainment | CCC | B- | $3,290 | ||||||||
5/11/2022 | Diebold Nixdorf Inc. | U.S. | High technology | CCC+ | B- | $3,207 | ||||||||
3/31/2022 | Monitronics International Inc. | U.S. | Media and entertainment | CCC+ | B- | $3,123 | ||||||||
7/29/2022 | Avaya Holdings Corp. | U.S. | High technology | CCC | B- | $2,943 | ||||||||
8/12/2022 | Party City Holdings Inc., (PC Nextco Holdings LLC) | U.S. | Retail/restaurants | CCC+ | B- | $2,923 | ||||||||
10/19/2022 | PECF USS Intermediate Holding III Corp. | U.S. | Chemicals, packaging and environmental services | CCC+ | B- | $2,550 | ||||||||
9/12/2022 | U.S. Renal Care Inc. | U.S. | Health Care | CCC+ | B- | $2,330 | ||||||||
5/19/2022 | Rite Aid Corp. | U.S. | Retail/restaurants | CCC+ | B- | $2,269 | ||||||||
8/23/2022 | Audacy Inc. | U.S. | Media and entertainment | CCC+ | B- | $1,780 | ||||||||
9/23/2022 | Wheel Pros Inc., | U.S. | Automotive | CCC+ | B- | $1,540 | ||||||||
8/22/2022 | Bed Bath & Beyond Inc. | U.S. | Retail/Restaurants | CCC | B- | $1,500 | ||||||||
7/29/2022 | Weber Inc. | U.S. | Consumer products | CCC+ | B | $1,500 | ||||||||
3/11/2022 | Logan Group Co. Ltd. | Cayman Islands | Homebuilders/real estate co. | CCC- | B- | $1,280 | ||||||||
9/29/2022 | National CineMedia Inc. | U.S. | Media and entertainment | CCC | B- | $1,220 | ||||||||
9/19/2022 | Five Point Holdings, LLC | U.S. | Homebuilders/real estate co. | CCC+ | B- | $1,200 | ||||||||
2/25/2022 | Cooper-Standard Holdings Inc., | U.S. | Automotive | CCC+ | B- | $990 | ||||||||
5/26/2022 | TecoStar Holdings Inc., | U.S. | Health care | CCC+ | B- | $950 | ||||||||
5/3/2022 | Carestream Health Inc. | U.S. | Health care | CC | B- | $948 | ||||||||
5/25/2022 | Carrols Restaurant Group Inc., | U.S. | Retail/restaurants | CCC+ | B- | $800 | ||||||||
6/17/2022 | Canopy Growth Corp. | Canada | Consumer products | CCC | B- | $750 | ||||||||
2/25/2022 | 8th Avenue Food & Provisions Inc., | U.S. | Consumer products | CCC+ | B- | $750 | ||||||||
10/19/2022 | Quincy Health, LLC | U.S. | Health Care | CCC | B- | $732 | ||||||||
7/18/2022 | IXS Holdings Inc., | U.S. | Automotive | CCC+ | B- | $620 | ||||||||
9/30/2022 | Lucky Bucks, LLC | U.S. | Media and entertainment | CCC | B | $555 | ||||||||
10/20/2022 | Victory Buyer, LLC | U.S. | Capital Goods | CCC+ | B- | $525 | ||||||||
8/17/2022 | Traeger Inc., | U.S. | Consumer products | CCC+ | B | $510 | ||||||||
10/20/2022 | China SCE Group Holdings Ltd. | Cayman Islands | Homebuilders/real estate co. | CCC+ | B- | $500 | ||||||||
10/26/2022 | Glatfelter Corp. | U.S. | Forest products and building materials | CCC+ | B+ | $500 | ||||||||
4/27/2022 | Phoenix Services International LLC | U.S. | Metals, mining and steel | CCC+ | B | $465 | ||||||||
6/8/2022 | P&L Development Holdings, LLC | U.S. | Consumer products | CCC+ | B- | $465 | ||||||||
4/14/2022 | NSA International, LLC | U.S. | Consumer products | CCC | B- | $450 | ||||||||
10/21/2022 | IAMGOLD Corp. | Canada | Metals, mining and steel | CCC+ | B- | $450 | ||||||||
2/11/2022 | INW Manufacturing, LLC | U.S. | Consumer products | CCC+ | B- | $440 | ||||||||
1/31/2022 | Halo Buyer Inc. | U.S. | Consumer products | CCC+ | B- | $440 | ||||||||
4/14/2022 | CoolSys Inc., | U.S. | Consumer products | CCC+ | B- | $440 | ||||||||
6/3/2022 | CareerBuilder, LLC | U.S. | Media and entertainment | CCC | B- | $415 | ||||||||
3/22/2022 | PlayPower Holdings Inc. | U.S. | Media and entertainment | CCC+ | B- | $400 | ||||||||
9/2/2022 | Fly Leasing Ltd. | Bermuda | Transportation | CCC- | B- | $391 | ||||||||
8/19/2022 | QualTek LLC | U.S. | Capital goods | CCC+ | B- | $380 | ||||||||
3/15/2022 | The Cleaver-Brooks Co. Inc., | U.S. | Capital goods | CCC | B- | $375 | ||||||||
9/16/2022 | Blue Ribbon, LLC (Blue Ribbon Intermediate Holdings LLC) | U.S. | Consumer products | CCC+ | B- | $368 | ||||||||
2/9/2022 | Lannett Co. Inc., | U.S. | Health Care | CCC+ | B- | $350 | ||||||||
5/12/2022 | pH Beauty Holdings I Inc., | U.S. | Consumer products | CCC+ | B- | $340 | ||||||||
2/11/2022 | Moran Foods, LLC (SAL Acquisition Corp.) | U.S. | Retail/restaurants | CCC+ | B- | $334 | ||||||||
4/1/2022 | CNG Holdings Inc., | U.S. | Financial institutions | CCC+ | B- | $310 | ||||||||
3/29/2022 | Skillz Inc. | U.S. | Media and entertainment | CCC+ | B- | $300 | ||||||||
10/21/2022 | Casa Systems Inc., | U.S. | High technology | CCC+ | B- | $300 | ||||||||
3/18/2022 | JHW Alphia Holdings Inc. | U.S. | Consumer products | CCC+ | B- | $285 | ||||||||
8/26/2022 | Sierra Enterprises LLC | U.S. | Consumer products | CCC+ | B- | $282 | ||||||||
6/23/2022 | Vida Capital Inc., | U.S. | Financial institutions | CCC | B- | $275 | ||||||||
2/7/2022 | Data Axle Inc. | U.S. | Media and entertainment | CCC | B- | $250 | ||||||||
9/9/2022 | UC Holdings Inc. (Chassix Holdings Inc.,) | U.S. | Automotive | CCC+ | B- | $225 | ||||||||
9/12/2022 | Wahoo Fitness Acquisition LLC | U.S. | Consumer products | CCC | B- | $225 | ||||||||
8/19/2022 | Array Midco Corp., | Canada | Consumer products | CCC+ | B- | $27 | ||||||||
Source: S&P Global Credit Research And Insights. Data as of Oct. 31, 2022. |
Table 3
Upgrades from 'CCC' And 'CC' Category Beginning 2022 | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Rating Date | Issuer | Country | Sector | Rating To | Rating From | Debt Amount (US $ Mil) | ||||||||
8/23/2022 | Bombardier Inc. | Canada | Aerospace and defense | B- | CCC+ | $6,360 | ||||||||
2/17/2022 | Nabors Industries Ltd. | Bermuda | Oil and gas | B- | CCC+ | $5,101 | ||||||||
5/23/2022 | U.S. | Consumer products | B- | CCC+ | $3,100 | |||||||||
1/18/2022 | Syniverse Holdings Inc., (Syniverse Technologies Corp.) | U.S. | Telecommunications | B- | CCC+ | $2,922 | ||||||||
2/4/2022 | Apex Tool Group, LLC | U.S. | Forest products and building materials | B- | CCC | $2,729 | ||||||||
4/5/2022 | DTI Holdco Inc., | U.S. | Media and entertainment | B- | CCC+ | $2,155 | ||||||||
4/4/2022 | KUEHG Corp. | U.S. | Media and entertainment | B- | CCC+ | $1,387 | ||||||||
8/17/2022 | Peabody Energy Corp. | U.S. | Metals, mining and steel | B- | CCC+ | $1,382 | ||||||||
6/23/2022 | Fitness International, LLC | U.S. | Media and entertainment | B- | CCC+ | $1,275 | ||||||||
6/10/2022 | Spectacle Bidco Holdings Inc. | Canada | Media and entertainment | B- | CCC+ | $1,232 | ||||||||
1/12/2022 | National CineMedia Inc. | U.S. | Media and entertainment | B- | CCC+ | $1,220 | ||||||||
7/29/2022 | Hovnanian Enterprises Inc. | U.S. | Homebuilders/real estate co. | B- | CCC+ | $1,166 | ||||||||
1/20/2022 | Electronics for Imaging Inc., | U.S. | High technology | B- | CCC+ | $1,100 | ||||||||
7/8/2022 | WaterBridge Operating LLC (WaterBridge Resources, LLC) | U.S. | Oil and gas | B- | CCC+ | $1,000 | ||||||||
6/10/2022 | Spring Education Group Inc. | U.S. | Media and entertainment | B- | CCC+ | $866 | ||||||||
9/23/2022 | SIRVA Inc. | U.S. | Transportation | B- | CCC+ | $850 | ||||||||
7/28/2022 | Vantage Specialty Chemicals Inc. | U.S. | Chemicals, packaging and environmental services | B- | CCC+ | $758 | ||||||||
4/4/2022 | Learning Care Group (US) No. 2 Inc. (Learning Care Group (US) Inc.) | U.S. | Media and entertainment | B- | CCC+ | $710 | ||||||||
5/13/2022 | Jazz Acquisition Inc. (Wencor Group LLC) | U.S. | Aerospace and defense | B- | CCC+ | $610 | ||||||||
2/25/2022 | Yellow Corp. | U.S. | Transportation | B- | CCC+ | $600 | ||||||||
8/25/2022 | JSG I Inc. | U.S. | Capital goods | B- | CCC+ | $460 | ||||||||
4/25/2022 | Cornerstone Chemical Co. | U.S. | Chemicals, packaging and environmental services | B- | CCC+ | $450 | ||||||||
4/12/2022 | BEP Ulterra Holdings Inc. | U.S. | Oil and gas | B- | CCC+ | $415 | ||||||||
3/14/2022 | Salem Media Group Inc. | U.S. | Media and entertainment | B- | CCC+ | $370 | ||||||||
9/9/2022 | New TMW LLC | U.S. | Consumer products | B- | CCC+ | $365 | ||||||||
2/23/2022 | Screenvision, LLC | U.S. | Media and entertainment | B- | CCC+ | $350 | ||||||||
5/6/2022 | Shape Technologies Group Inc., | U.S. | Capital goods | B- | CCC+ | $350 | ||||||||
6/14/2022 | KC Culinarte Holdings LP | U.S. | Consumer products | B- | CCC+ | $313 | ||||||||
1/13/2022 | JW Aluminum Continuous Cast Co. | U.S. | Metals, mining and steel | B- | CCC+ | $300 | ||||||||
8/12/2022 | Miller's Ale House Inc., | U.S. | Retail/restaurants | B- | CCC+ | $291 | ||||||||
9/1/2022 | Calceus Acquisition Inc., | U.S. | Consumer products | B- | CCC+ | $290 | ||||||||
4/21/2022 | RCP Vega Inc., | U.S. | High technology | B- | CCC+ | $260 | ||||||||
2/8/2022 | Crew Energy Inc. | Canada | Oil and gas | B- | CCC+ | $235 | ||||||||
Source: S&P Global Credit Research And Insights. Data as of Oct. 31, 2022. |
Related Research
- U.S. Corporate Bond Yields As Of Oct. 26, 2022, Oct. 27, 2022
- This Week In Credit, Oct. 24, 2022
- Weakest Links Jump As Rating Trends Turn Negative, Oct. 6, 2022
- 2022 Defaults Inch Past Year-To-Date 2021 Tally As Credit Conditions Worsen, Oct. 17, 2022
- Downgrades Expected To Pick Up As Demand Starts To Subside, Oct. 7, 2022
- Business Cycle Barometer: Worsening Near-Term Growth Prospects, Oct. 25, 2022
Rating Action
- Bausch Health Cos. Inc. Upgraded To 'CCC+' From 'SD' Following Completion Of Distressed Exchange; Outlook Stable, Oct. 5, 2022
- Glatfelter Corp. Downgraded To ‘CCC+‘ Due To Sharply Lower Profit And Upcoming Debt Maturity; Outlook Negative, Oct. 26, 2022
- IAMGOLD Corp. Downgraded To 'CCC+' From ‘B-’ On Looming Funding Gap; Outlook Negative, Oct. 22, 2022
This report does not constitute a rating action.
Credit Research and Insights: | 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 | |
Daniel Hu, FRM, New York + 1 (212) 438 2206; daniel.hu@spglobal.com | |
Research Contributor: | Yogesh Kumar, Pune; yogesh.kumar2@spglobal.com |
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