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Default, Transition, and Recovery: Distressed Exchanges Spur A Sharp Rise In Corporate Defaults

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S&P Global Ratings' 2023 global corporate default tally has reached 37 following 14 defaults in March:

  • U.S.-based pharmaceutical manufacturer Akorn Operating Co. LLC
  • U.S.-based hospital chain Community Health Systems Inc.
  • U.S.-based marketing service provider LendingTree Inc.
  • U.S.-based tech-enabled, data-driven consumer loyalty solutions provider Loyalty Ventures Inc.
  • U.S.-based commercial bank Silicon Valley Bank
  • U.S.-based commercial bank SVB Financial Group
  • U.S.-based manufacturer and distributer of beauty and personal care products Bioplan USA Inc.
  • Brazilian-based airline Gol Linhas Aéreas Inteligentes S.A.
  • French-based visual and animation studio effects provider Technicolor Creative Studios
  • Irish-based manufacture and market distributor of pharmaceutical products Mallinckrodt PLC
  • Luxembourg-based chemical company Flint HoldCo S.a.r.l.
  • U.S.-based theater advertising company National CineMedia Inc.
  • U.K.-based travel retail platform provider Toro Private Holdings I Ltd.
  • U.S.-based fitness technology company Wahoo Fitness Acquisition LLC

The global corporate default tally is the highest year-to-date tally (through March 31) since 2009. The current total is tied with 2016, when stress in the U.S. oil and gas sector led to an elevated number of defaults.

By region, nearly two-thirds of defaults this month were from the U.S., where credit conditions deteriorated further in March amid banking-sector turmoil and expectations that the U.S. will slip into a shallow recession (see "Credit Conditions North America Q2 2023: Coalescing Stresses," March 28, 2023). Meanwhile in Europe, there were an additional four defaults in March, more than doubling its previous monthly tally. Given our expectation that economic conditions will continue to deteriorate through 2023, we expect the U.S. speculative-grade corporate default rate could reach 4% by December, while the European corporate speculative-grade default rate could reach 3.25% (see "Growing Strains Could Push The U.S. Speculative-Grade Corporate Default Rate To 4% By December 2023" and "The European Speculative-Grade Corporate Default Rate Could Rise To 3.25% By December 2023, Amid Uncertain Backdrop," Feb. 16, 2023).

Chart 1

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Media And Health Care Led Defaults In March

The media and entertainment sector continued to lead defaults in March, with over 30% of the total. Both uneven recovery from the COVID-19 pandemic and persistently high inflation have contributed to an elevated number of 'B-' and lower rated issuers in the sector and, thus, an increase in defaults. Given the sector still has a high number of weakest links--issuers rated 'B-' or lower with negative outlooks or on CreditWatch negative--we expect more defaults from this sector in the coming months. The health care sector also had three defaults in March--all of which have defaulted at least one other time over the past three years.

Distressed Exchanges Remain The Primary Reason For Default

Distressed exchanges remain the preferred method of restructuring, accounting for five out of 14 defaults in March. The number of distressed exchanges has risen in recent years as distressed issuers view out-of-court restructuring more favorably than other options, such as a traditional bankruptcy. With 16 distressed exchanges so far in 2023, the year-to-date total is nearly 50% higher than the 2009 and 2016 year-to-date tallies (see chart 3).

Table 1

Rising weakest links could create further default pressure in the coming months
Region 12-month-trailing speculative-grade default rate (%) Weakest links
U.S. 2.5* 193
Emerging markets 2.01 28
Europe 3.0* 50
Other developed 2.2 10
Global 2.1 281
*Trailing-12-month speculative grade default rates are from March 31, 2022-March 31, 2023, and are preliminary and subject to change. Other trailing-12-month speculative-grade default rates are from Feb. 28, 2022- Feb. 28, 2023. Weakest link data is as of Feb. 28, 2023. Other developed region includes Australia, Canada, Japan, and New Zealand. Default counts may include confidentially rated issuers. Sources: S&P Global Ratings Credit Research and S&P Global Market Intelligence’s CreditPro®.

Chart 2

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Chart 3

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Chart 4

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Table 2

Global corporate defaults so far in 2023
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
2/3/2023

Oi S.A.

Brazil Telecommunications D CCC- Missed principal and interest payments
2/9/2023

KNB Holdings Corp.

U.S. Consumer products D CCC- Bankruptcy
2/10/2023

Yak Access LLC

U.S. Capital goods D CCC Distressed exchange
2/14/2023

K&N Parent Inc.

U.S. Automotive D CCC- Distressed exchange
2/15/2023

99 cents only stores LLC

U.S. Retail/restaurants SD CCC+ Missed payments
2/15/2023

Avaya Holdings Corp.

U.S. High technology D CC Bankruptcy
2/15/2023

Diamond Sports Group LLC

U.S. Media and entertainment D CCC- Missed payments
2/16/2023

Confidential

Confidential Media and entertainment D CC Confidential
2/17/2023

AMC Entertainment Holdings Inc.

U.S. Media and entertainment SD CC Distressed exchange
2/17/2023

Premier Brands Group Holdings LLC

U.S. Consumer products SD CCC Distressed exchange
2/22/2023

Altisource Portfolio Solutions S.A.

Luxembourg Financial institutions SD CC Distressed exchange
2/22/2023

Foodco Bondco SAU

Spain Retail/restaurants SD CCC- Missed payments
2/24/2023

Bausch Health Cos. Inc.

Canada Health care SD CCC+ Distressed exchange
2/28/2023

Equinox Holdings Inc.

U.S. Media and entertainment SD CCC- Distressed exchange
2/28/2023

Rising Tide Holdings Inc.

U.S. Retail/restaurants SD CC Distressed exchange
3/1/2023

Akorn Operating Co. LLC

U.S. Health care D CCC+ Bankruptcy
3/2/2023

Community Health Systems Inc.

U.S. Health care SD B- Distressed exchange
3/6/2023

LendingTree Inc.

U.S. Media and entertainment SD B- Distressed exchange
3/10/2023

Loyalty Ventures Inc.

U.S. Media and entertainment D CCC+ Bankruptcy
3/10/2023

Silicon Valley Bank

U.S. Financial institutions D BBB Regulatory
3/14/2023

Bioplan USA Inc.

U.S. Media and entertainment D CCC Out-of-court restructuring
3/14/2023

Gol Linhas Aereas Inteligentes S.A.

Brazil Transportation SD CC Distressed exchange
3/14/2023

Technicolor Creative Studios SA

France Media and entertainment D CCC- Missed interest payments
3/16/2023

Mallinckrodt plc

Ireland Health care SD B- Distressed exchange
3/17/2023

National CineMedia Inc.

U.S. Media and entertainment D CCC- Missed payments
3/17/2023

SVB Financial Group

U.S. Financial institutions D NR Regulatory
3/23/2023

Flint HoldCo S.a.r.l.

Luxembourg Chemicals, packaging, and environmental services SD CCC Missed payments
3/31/2023

Toro Private Holdings I Ltd.

U.K. Transportation SD CCC+ Distressed exchange
3/31/2023

Wahoo Fitness Acquisition LLC

U.S. Consumer products D CCC- Missed payments
Data as of March 31, 2023. NR--Not rated. SD--Selective default. Sources: S&P Global Ratings Credit 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 nonfinancial)
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, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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