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Default, Transition, and Recovery: Corporate Default Momentum Continues With Eight Defaults In January

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S&P Global Ratings' 2023 global corporate default tally has reached eight after the following defaults in January:

  • U.S.-based wholesale distributor Moran Foods LLC
  • Brazilian retailers Americanas S.A.
  • U.S.-based manufacturer and distributor of party goods Party City Holdings Inc.
  • Mexico-based nonbank financial institution Mexarrend S.A.P.I. de C.V.
  • U.S.-based bedding manufacturer Serta Simmons Bedding LLC
  • U.S.-based specialty retailer Bed Bath & Beyond Inc.
  • U.S.-based global automotive light-vehicle supplier Cooper-Standard Holdings Inc.
  • U.K.-based clothing and homewares seller Missouri TopCo Ltd.

Defaults in 2023 are nearly two-thirds higher than at this point in 2022. Even so, year-to-date global defaults are hovering just above the long-term average of 7.4 defaults. We expect defaults to continue to rise, given increased rating transitions into the 'CCC' category--notably from the 'B' rating category--which tend to prelude more meaningful increases in defaults (see the regional "Risky Credit" reports below). We expect the U.S. speculative-grade corporate default rate could reach 3.75% by September 2023, while the European corporate speculative-grade default rate could reach 3.25%, according to our November forecasts.

Chart 1

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Retailers Drive Defaults In January

Of the eight defaults in January, half were from the retail sector, which continues to deal with challenges from logistics, labor, and supplier cost inflation pressuring margins for retailers and their suppliers (see chart 2). We expect margins to remain squeezed in 2023 as inflation continues to erode consumer savings, leading to lower consumption. Additionally, higher interest rates will weaken cash flow and coverage ratios, which could spur distressed exchanges or other forms of restructuring (see "Industry Top Trends 2023: Retail and Restaurants," Jan. 23, 2023).

Chart 2

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Table 1

We Expect European Default Rates To Increase In The Coming Months
Region 12-month trailing speculative-grade default rate (%) Weakest links
U.S. 1.70* 181
Emerging market 2.24 22
Europe 2.27* 52
Other developed 2.26 8
Global 1.92 263
*Trailing-12-month speculative grade default rates for from Jan. 31, 2023-Jan. 31, 2023 are preliminary and subject to change. Trailing-12-month speculative grade default rates for from Dec. 31, 2022-Dec. 31, 2022. Year-to-date data as of Jan. 31, 2023. Weakest link data as of Nov. 25, 2022. Other developed region includes Australia, Canada, Japan, and New Zealand. Default counts may include confidentially-rated issuers. Sources: S&P Global Ratings Research & Insights and S&P Global Market Intelligence’s CreditPro®.

Chart 3

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Table 2

The 2023 Global Corporate Defaults Tally Reaches Eight
Date Parent company Country/market Subsector To From Reason
1/3/2023

Moran Foods LLC (SAL Acquisition Corp.)

U.S. Retail/restaurants SD CCC+ Distressed exchange
1/16/2023

Americanas S.A. (Lojas Americanas S.A.)

Brazil Retail/restaurants D B Missed principal and interest payments
1/19/2023

Party City Holdings Inc. (PC Nextco Holdings LLC)

U.S. Retail/restaurants D CCC Bankruptcy
1/20/2023

Mexarrend S.A.P.I. de C.V.

Mexico Financial institutions D CC Missed principal and interest payments
1/24/2023

Serta Simmons Bedding LLC

U.S. Consumer products D CCC- Bankruptcy
1/27/2023

Bed Bath & Beyond Inc.

U.S. Retail/restaurants D CC Missed principal and interest payments
1/30/2023

Cooper-Standard Holdings Inc.

U.S. Automotive SD CC Distressed exchange
1/31/2023

Missouri TopCo Ltd.

U.K. Consumer products SD CCC- Distressed exchange
Data as of Jan. 31, 2023. SD--Selective default. D--Default. Sources: S&P Global Ratings Research & Insights 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 Non-Financial)

Structured Finance

Public Finance

Sovereign and International Public Finance

This report does not constitute a rating action.

Credit Research & 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
Research Contributor:Vaishali Singh, Pune;
vaishali.singh2@spglobal.com

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