Key Takeaways
- With eight in January, defaults in 2023 are far higher than at this point in 2022 but only slightly above the 10-year average.
- More than half of defaults in January were within the retail sector, as some lower-rated issuers struggled with ongoing supply chain issues and cost pressures.
- We expect defaults to continue to rise in the near term given the pickup in rating transitions into the 'CCC' category.
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
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
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
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
- U.S. Corporate Credit Outlook 2023: Profit Pressures, Refinancing Risk, Feb. 2, 2023
- Risky Credits: Downgrades Of European Issuers In Q4 2022 Top Pre-Pandemic Levels, Feb. 1, 2023
- Risky Credits: Negative Swing For North American Issuers Rated 'CCC+' And Below, Feb. 1, 2023
- Risky Credits: Reshuffling Credit Risk In Emerging Markets, Feb. 1, 2023
- Missouri TopCo, Parent Of Matalan, Downgraded To 'SD' From 'CCC-' On Recapitalization Close; Debt Ratings Lowered To 'D', Jan. 31, 2023
- Cooper-Standard Holdings Inc. Rating Lowered To 'SD' From 'CC' On Distressed Exchange, Jan. 30, 2023
- Bed Bath & Beyond Inc. Downgraded To 'D' From 'CC' On Expected General Default, Jan. 27, 2023
- Serta Simmons Bedding LLC Downgraded To 'D' On Chapter 11 Filing, Jan. 24, 2023
- Industry Top Trends 2023: Retail and Restaurants, Jan. 23, 2023
- Mexarrend Issuer Credit Rating Cut To 'D' From 'CC' On Failure To Make Debt Payment, Jan. 20, 2023
- Party City Holdings Inc. Downgraded To 'D' From 'CCC' On Chapter 11 Bankruptcy Filing, Jan. 19, 2023
- Americanas S.A. Downgraded Multiple Notches To ‘D’ From ‘B’ After Being Granted Injunction Relief, Jan. 16, 2023
- Moran Foods LLC Downgraded To 'SD' From 'CCC+' On Completion Of Distressed Debt Exchange; Debt Ratings Lowered To 'D', Jan. 3, 2023
- Credit Conditions North America Q1 2023: Worse Before It Gets Better, Dec. 1, 2022
Default Studies
More analysis and statistics are available in our annual default studies, published on RatingsDirect:
Corporate (Financial and Non-Financial)
- 2021 Annual Global Financial Services Default And Rating Transition Study
- 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 European Corporate Default And Rating Transition Study
- 2021 Annual Asia Corporate Default And Rating Transition Study
- 2021 Annual Taiwan Ratings Corp. Corporate Default And Rating Transition Study
- 2021 Annual Greater China Corporate Default And Rating Transition Study
- 2021 Annual Emerging And Frontier Markets Corporate Default And Rating Transition Study
Structured Finance
- 2021 Global Structured Finance Defaults And Rating Transition Study
- 2021 Annual Japanese Structured Finance Default And Rating Transition Study
- 2021 Annual European Structured Finance Default And Rating Transition Study
- 2021 Annual Taiwan Structured Finance Default And Rating Transition Study
- 2021 Annual Mexican Structured Finance Default And Rating Transition Study
- 2021 Annual Global Leveraged Loan CLO Default And Rating Transition Study
Public Finance
- 2021 Annual U.S. Public Finance Default And Rating Transition Study
- 2021 Annual International Public Finance Default And Rating Transition Study
- 2021 Annual Mexican National Scale Corporate And Public Finance Default And Rating Transition Study
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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