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2023 Short-Term Corporate Default And Rating Transition Study

Rating Activity for Short Term in 2023

S&P Global Ratings' corporate short term default tally fell to three in 2023, down from four in 2022 (see chart 1). This resulted in an overall default rate of 0.16% (down from 0.20%), lower than the historical weighted average of 0.19% per year. The highest recorded default rate for short-term debt issuers was in 2009, when 0.78% (from 15 defaults against 1,935 issuers, see table 1) of all ratings defaulted. Following the first observed default in 1997, there have been, on average, just over four defaults a year. Default activity has been very consistent over the past seven years, averaging under four, but with no fewer than two, and no more than five defaults in that time span.

Chart 1

image

Rating activity shows that changes in credit quality among short-term debt have, on average, tended to decrease over time, with an historical average of 2.7% upgrades per year, compared with 5.5% for downgrades. However, over the past three years, credit quality has tended to improve, with upgrades increasing in each of the past three years, while downgrades have either been equal or below upgrades.

Table 1

Global corporate short term rating activity (%)*
Year Issuers Upgrades (%) Downgrades§ (%) Defaults (%) Withrawn ratings (%) Changed ratings (%) Unchanged ratings (%) Downgrade/ upgrade ratio †
1981 1 0.00 0.00 0.00 0.00 0.00 100.00 n/a
1982 157 0.64 2.55 0.00 0.00 3.18 96.82 4.00
1983 192 2.08 3.13 0.00 0.00 5.21 94.79 1.50
1984 238 2.52 3.36 0.00 0.00 5.88 94.12 1.33
1985 285 2.81 7.72 0.00 0.35 10.88 89.12 2.75
1986 418 2.39 8.13 0.00 1.20 11.72 88.28 3.40
1987 470 2.34 4.89 0.00 1.28 8.51 91.49 2.09
1988 523 3.82 6.31 0.00 0.57 10.71 89.29 1.65
1989 580 5.34 4.48 0.00 0.69 10.52 89.48 0.84
1990 627 1.28 8.93 0.00 0.48 10.69 89.31 7.00
1991 688 2.18 6.40 0.00 0.44 9.01 90.99 2.93
1992 738 2.30 5.15 0.00 0.00 7.45 92.55 2.24
1993 793 3.53 5.55 0.00 0.00 9.08 90.92 1.57
1994 878 3.42 5.69 0.00 0.11 9.23 90.77 1.67
1995 1172 3.16 5.38 0.00 0.17 8.70 91.30 1.70
1996 1273 2.36 4.24 0.00 3.38 9.98 90.02 1.80
1997 1407 3.34 5.26 0.07 5.26 13.93 86.07 1.57
1998 1552 2.64 8.38 0.00 8.63 19.65 80.35 3.17
1999 1591 3.58 7.04 0.13 9.55 20.30 79.70 1.96
2000 1690 3.37 6.39 0.06 5.50 15.33 84.67 1.89
2001 1826 2.96 8.65 0.66 6.90 19.17 80.83 2.93
2002 1911 2.46 10.52 0.31 8.32 21.61 78.39 4.28
2003 1916 3.18 6.00 0.16 7.15 16.49 83.51 1.89
2004 1905 3.99 3.25 0.00 8.14 15.38 84.62 0.82
2005 1861 5.59 4.84 0.00 6.50 16.93 83.07 0.87
2006 1938 6.71 3.51 0.05 6.45 16.72 83.28 0.52
2007 1952 6.51 4.46 0.00 7.79 18.75 81.25 0.69
2008 1950 2.41 9.28 0.56 6.15 18.41 81.59 3.85
2009 1935 1.81 14.06 0.78 6.51 23.15 76.85 7.77
2010 1885 3.13 4.67 0.27 6.26 14.32 85.68 1.49
2011 1871 4.92 8.71 0.21 4.06 17.90 82.10 1.77
2012 1911 4.08 6.80 0.10 6.23 17.22 82.78 1.67
2013 1936 2.79 3.72 0.10 3.05 9.66 90.34 1.33
2014 2012 2.49 4.27 0.10 4.77 11.63 88.37 1.72
2015 2044 2.69 5.72 0.64 4.75 13.80 86.20 2.13
2016 2058 3.16 4.28 0.39 6.51 14.33 85.67 1.35
2017 2026 5.97 3.06 0.20 5.63 14.86 85.14 0.51
2018 2000 3.05 1.95 0.20 5.20 10.40 89.60 0.64
2019 2006 2.94 2.29 0.25 4.34 9.82 90.18 0.78
2020 1999 0.60 6.00 0.20 3.85 10.66 89.34 10.00
2021 1982 2.37 2.37 0.10 3.58 8.43 91.57 1.00
2022 1962 2.65 1.22 0.20 5.50 9.58 90.42 0.46
2023 1909 2.72 2.25 0.16 3.61 8.75 91.25 0.83
Weighted Average 3.32 5.47 0.19 5.12 14.10 85.90 2.17
Average 3.08 5.37 0.14 3.93 12.51 87.49 2.25
Median 2.81 5.15 0.06 4.34 10.88 89.12 1.68
Std. Dev. 1.42 2.71 0.20 2.99 5.06 5.06 1.97
Min 0.00 0.00 0.00 0.00 0.00 76.85 0.46
Max 6.71 14.06 0.78 9.55 23.15 100.00 10.00
*This table compares the net change in ratings from the first to the last day of each year. All intermediate ratings are disregarded. §Excludes downgrades to D, shown separately in the default column. †Downgrades to 'D' excluded in this metric. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Rating Distributions

The population of short-term corporate ratings has always been much smaller than the long-term rating population, starting in 2023, with 1909 active ratings, compared with the long-term rated population of 6,977. The population of short-term ratings has steadily grown since the 1990s, rising to a peak of 2,058 at the start of 2016. There is not a clear investment-grade versus speculative-grade demarcation for short-term ratings, a 'B' rating is considered to have significant speculative characteristics (see the Appendix for additional information). The highest percentage of 'B' and lower short-term ratings was also in 2016, with just under 19%. The plurality of ratings are 'A-2', with 28%, while at the start of 2023, 9.2% were at the highest rating (A-1+). The highest total number of these ratings was in 1998, with 459.

Chart 2

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The financial services sector (including insurance) is slightly larger at the end of 2023, than the non-financial sector (1,006 for financial services and 882 for nonfinancial corporates), but with a wider distribution of ratings across the rating scale. Most non-financial issuers are in the 'A-2' rating tranche, with 61% of all ratings (538). As a percentage, the financial services sector is 18% in the speculative grades, compared with only 6% of the non-financial sector.

Chart 3

image

Short Term Defaults and Default Rates

There were three publicly-rated defaults in 2023 (and no confidentially-rated defaults), down from four in 2022 (three public and one confidential). In each instance, the issuers also defaulted on their long-term debt. For additional information, see the rating action reports for Casino Guichard - Perrachon S.A., Muganbank OJSC, and Adler Group S.A.

Table 2

Itemized global corporate short-term defaults 2023
Country Default date Next-to-last rating Date of next-to-last rating Three-month-prior rating Six-month-prior rating One-year-prior rating First rating Date of first rating
Adler Group S.A. Luxembourg 4/17/2023 C 5/5/2022 C C B A-3 11/28/2018
Casino Guichard - Perrachon S.A. France 8/31/2023 C 10/7/2022 C C B A-2 5/12/1999
Muganbank OJSC Azerbaijan 10/25/2023 B 6/22/2021 B B B C 4/6/2010
*Indicates companies that were 'NR' prior to default. N/A--Not applicable. Source: S&P Global Ratings Credit Research & Insights; S&P Global Market Intelligence's CreditPro®.

As with our long-term ratings, S&P Global short-term ratings show an inverse relationship between higher ratings and lower incidents of default. On average, higher rated short-term debt will default less frequently than lower rated debt, and the historical averages bear out this relationship (see table 3). Due to small sample sizes and the infrequency of default, there are individual years where there have been more defaults at high ratings than at lower ratings.

By sector, financial institutions, excluding insurance, have the most consistent default activity, averaging 0.4% defaults per year since 2008 (see table 4). There are no defaults among our short-term ratings from the insurance sector. The highest historical weighted average of defaults is in the forest and building products/homebuilders sector, with just 0.5 defaults per year on average. The highest industry level default rate for short-term ratings was energy and natural resources, with 3.26% of ratings default in 2015.

Table 3

Global corporate short-term annual default rates by rating category (%)
A-1+ A-1 A-2 A-3 B C
1981 n/a 0.00 n/a n/a n/a n/a
1982 0.00 0.00 0.00 n/a n/a n/a
1983 0.00 0.00 0.00 0.00 n/a n/a
1984 0.00 0.00 0.00 0.00 n/a n/a
1985 0.00 0.00 0.00 0.00 n/a n/a
1986 0.00 0.00 0.00 0.00 0.00 0.00
1987 0.00 0.00 0.00 0.00 0.00 0.00
1988 0.00 0.00 0.00 0.00 0.00 0.00
1989 0.00 0.00 0.00 0.00 0.00 n/a
1990 0.00 0.00 0.00 0.00 0.00 n/a
1991 0.00 0.00 0.00 0.00 0.00 n/a
1992 0.00 0.00 0.00 0.00 0.00 n/a
1993 0.00 0.00 0.00 0.00 0.00 0.00
1994 0.00 0.00 0.00 0.00 0.00 n/a
1995 0.00 0.00 0.00 0.00 0.00 n/a
1996 0.00 0.00 0.00 0.00 0.00 0.00
1997 0.00 0.00 0.26 0.00 0.00 0.00
1998 0.00 0.00 0.00 0.00 0.00 0.00
1999 0.00 0.00 0.00 0.00 0.00 13.33
2000 0.00 0.00 0.19 0.00 0.00 0.00
2001 0.00 0.81 0.16 0.00 5.79 0.00
2002 0.00 0.00 0.15 0.00 1.57 6.98
2003 0.00 0.00 0.00 0.69 0.64 2.04
2004 0.00 0.00 0.00 0.00 0.00 0.00
2005 0.00 0.00 0.00 0.00 0.00 0.00
2006 0.00 0.00 0.00 0.00 0.45 0.00
2007 0.00 0.00 0.00 0.00 0.00 0.00
2008 0.24 0.21 0.44 0.68 2.15 3.70
2009 0.00 0.20 0.46 1.03 3.41 9.38
2010 0.00 0.00 0.00 0.00 1.94 2.38
2011 0.00 0.00 0.00 0.00 1.37 2.33
2012 0.00 0.00 0.00 0.00 0.44 2.04
2013 0.00 0.00 0.00 0.00 0.00 3.85
2014 0.00 0.00 0.00 0.00 0.00 3.13
2015 0.00 0.00 0.00 0.00 1.63 13.33
2016 0.00 0.00 0.00 0.00 0.93 8.06
2017 0.00 0.00 0.00 0.00 0.32 4.62
2018 0.00 0.00 0.00 0.00 1.15 0.00
2019 0.00 0.00 0.00 1.34 0.95 0.00
2020 0.00 0.00 0.00 0.00 0.32 100.00
2021 0.00 0.00 0.00 0.00 0.32 10.00
2022 0.00 0.00 0.00 0.00 0.34 27.27
2023 0.00 0.00 0.00 0.00 0.40 13.33
Average 0.01 0.03 0.04 0.09 0.63 7.06
Median 0.00 0.00 0.00 0.00 0.00 2.04
Std. Dev. 0.04 0.13 0.11 0.29 1.16 18.02
Min 0.00 0.00 0.00 0.00 0.00 0.00
Max 0.24 0.81 0.46 1.34 5.79 100.00
Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 4

Global corporate short-term annual default rates by industry (%)
Aerospace / automotive / capital goods / metal Consumer / service sector Energy & natural resources FI Forest & building products / homebuilders Health care / chemicals High technology / computers/office equip. Insurance Leisure time / media Real estate Telecom Transportation Utility
1981 n/a n/a n/a n/a n/a 0.00 n/a n/a n/a n/a n/a n/a n/a
1982 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a 0.00 0.00 0.00
1983 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a 0.00 0.00 0.00
1984 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a 0.00 0.00 0.00
1985 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a 0.00 0.00 0.00
1986 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a 0.00 0.00 0.00
1987 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a 0.00 0.00 0.00
1988 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a 0.00 0.00 0.00
1989 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 n/a 0.00 0.00 0.00
1990 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1991 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1992 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1993 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1994 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1995 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1996 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1997 0.00 0.00 0.00 0.17 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1998 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1999 1.53 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2000 0.00 0.00 0.00 0.00 2.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2001 0.00 0.00 0.00 1.05 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.53
2002 0.66 0.00 0.00 0.50 0.00 0.00 0.00 0.00 0.00 0.00 1.89 0.00 0.00
2003 0.00 0.62 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.96 0.00 0.40
2004 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2005 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2006 0.71 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2007 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2008 0.00 0.00 0.00 1.03 0.00 0.00 0.00 0.00 2.22 0.00 0.00 0.00 0.00
2009 0.00 1.49 0.00 1.12 0.00 0.00 2.78 0.00 0.00 2.44 0.00 0.00 0.00
2010 0.00 0.00 0.00 0.53 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2011 0.00 0.00 0.00 0.32 0.00 0.00 0.00 0.00 0.00 2.17 0.00 0.00 0.00
2012 0.00 0.00 0.00 0.21 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2013 0.00 0.00 0.00 0.10 2.70 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2014 0.00 0.00 1.19 0.10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2015 0.00 0.00 3.26 0.77 2.63 0.00 2.70 0.00 0.00 0.00 0.00 0.00 0.00
2016 0.00 0.00 0.00 0.67 2.63 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2017 0.00 0.74 0.00 0.19 2.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2018 0.00 0.00 0.00 0.40 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2019 0.00 0.00 0.00 0.29 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.82
2020 0.00 0.00 1.33 0.10 3.03 0.00 2.38 0.00 0.00 0.00 0.00 0.00 0.00
2021 0.00 0.00 1.43 0.10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2022 0.00 0.71 0.00 0.30 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2023 0.00 0.71 0.00 0.10 0.00 0.00 0.00 0.00 0.00 1.82 0.00 0.00 0.00
Weighted Average 0.09 0.10 0.24 0.28 0.46 0.00 0.23 0.00 0.07 0.19 0.12 0.00 0.10
Average 0.07 0.10 0.17 0.19 0.38 0.00 0.19 0.00 0.05 0.19 0.09 0.00 0.07
Median 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Std. Dev. 0.27 0.30 0.60 0.31 0.95 0.00 0.68 0.00 0.34 0.62 0.41 0.00 0.27
Min 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Max 1.53 1.49 3.26 1.12 3.03 0.00 2.78 0.00 2.22 2.44 1.96 0.00 1.53
Includes investment-grade and speculative-grade rated entities. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 5

Global corporate short term short-term cumulative default rates by broad sector and time frame (%)
Financial institutions Insurance All financials All nonfinancials
One-Month Three-Mos. 12-Mos. One-Month Three-Mos. 12-Mos. One-Month Three-Mos. 12-Mos. One-Month Three-Mos. 12-Mos.
1981 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1982 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1983 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1984 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1985 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1986 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1987 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1988 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1989 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1990 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1991 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1992 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1993 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1994 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1995 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1996 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1997 0.00 0.00 0.17 0.00 0.00 0.00 0.00 0.00 0.15 0.00 0.00 0.00
1998 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1999 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.24
2000 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.10 0.11
2001 0.87 0.76 1.05 0.00 0.00 0.00 0.78 0.68 0.94 0.00 0.00 0.41
2002 0.12 0.12 0.50 0.00 0.00 0.00 0.11 0.11 0.45 0.00 0.00 0.20
2003 0.00 0.12 0.00 0.00 0.00 0.00 0.00 0.11 0.00 0.11 0.11 0.31
2004 0.00 0.11 0.00 0.00 0.00 0.00 0.00 0.10 0.00 0.00 0.00 0.00
2005 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2006 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.11
2007 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2008 0.50 0.70 1.03 0.00 0.00 0.00 0.46 0.64 0.93 0.12 0.12 0.11
2009 0.00 0.32 1.12 0.00 0.00 0.00 0.00 0.29 1.02 0.00 0.00 0.47
2010 0.00 0.11 0.53 0.00 0.00 0.00 0.00 0.10 0.48 0.00 0.00 0.00
2011 0.11 0.11 0.32 0.00 0.00 0.00 0.10 0.10 0.29 0.00 0.00 0.12
2012 0.00 0.00 0.21 0.00 0.00 0.00 0.00 0.00 0.19 0.00 0.00 0.00
2013 0.00 0.00 0.10 0.00 0.00 0.00 0.00 0.00 0.10 0.00 0.00 0.11
2014 0.00 0.00 0.10 0.00 0.00 0.00 0.00 0.00 0.09 0.00 0.00 0.11
2015 0.10 0.29 0.77 0.00 0.00 0.00 0.09 0.27 0.71 0.22 0.22 0.55
2016 0.29 0.38 0.67 0.00 0.00 0.00 0.27 0.35 0.61 0.00 0.00 0.11
2017 0.00 0.10 0.19 0.00 0.00 0.00 0.00 0.09 0.18 0.00 0.00 0.22
2018 0.00 0.10 0.40 0.00 0.00 0.00 0.00 0.09 0.37 0.00 0.00 0.00
2019 0.20 0.20 0.29 0.00 0.00 0.00 0.18 0.18 0.27 0.00 0.00 0.22
2020 0.00 0.00 0.10 0.00 0.00 0.00 0.00 0.00 0.09 0.00 0.00 0.33
2021 0.00 0.00 0.10 0.00 0.00 0.00 0.00 0.00 0.09 0.00 0.00 0.11
2022 0.00 0.10 0.30 0.00 0.00 0.00 0.00 0.10 0.28 0.00 0.00 0.11
2023 0.00 0.11 0.10 0.00 0.00 0.00 0.00 0.10 0.10 0.00 0.00 0.23
Average 0.02 0.06 0.20 0.00 0.00 0.00 0.02 0.05 0.19 0.01 0.03 0.10
Median 0.00 0.00 0.05 0.00 0.00 0.00 0.00 0.00 0.04 0.00 0.00 0.00
Std. Dev. 0.07 0.12 0.32 0.00 0.00 0.00 0.06 0.11 0.29 0.04 0.06 0.14
Min 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Max 0.87 0.87 1.71 0.00 0.00 0.00 0.78 0.78 1.55 0.41 0.52 0.58
Note: All Financials refers to financial institutions and insurance combined. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Chart 4

image

Table 6

Global corporate short- term cumulative average default rates, 1981-2023 (%)
(%) --Time (months)--
1 2 3 4 5 6 7 8 9 10 11 12
Global
A-1+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.01
A-1 0.00 0.01 0.01 0.01 0.02 0.02 0.02 0.03 0.03 0.03 0.04 0.04
A-2 0.00 0.00 0.01 0.01 0.01 0.02 0.02 0.03 0.03 0.04 0.04 0.05
A-3 0.02 0.03 0.04 0.05 0.06 0.08 0.10 0.12 0.14 0.15 0.17 0.19
B 0.03 0.08 0.13 0.19 0.26 0.32 0.38 0.45 0.52 0.59 0.67 0.75
C 0.85 1.53 2.18 2.75 3.23 3.66 4.07 4.41 4.75 5.08 5.38 5.64
All rated 0.02 0.03 0.05 0.07 0.09 0.10 0.12 0.13 0.15 0.17 0.18 0.20
Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 7

Global corporate short term cumulative average default rates by sector (1981-2023) (%)
(%) --Time (months)--
1 2 3 4 5 6 7 8 9 10 11 12
Nonfinancials
A-1+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-1 0.00 0.01 0.01 0.02 0.02 0.03 0.03 0.04 0.04 0.05 0.05 0.05
A-2 0.00 0.00 0.01 0.01 0.01 0.02 0.02 0.03 0.03 0.03 0.04 0.04
A-3 0.02 0.03 0.03 0.04 0.04 0.05 0.06 0.07 0.08 0.09 0.10 0.11
B 0.02 0.05 0.08 0.13 0.19 0.24 0.31 0.37 0.43 0.49 0.56 0.64
C 2.37 4.39 6.41 8.17 9.74 11.06 12.19 13.32 14.46 15.51 16.39 17.01
All rated 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.09 0.10 0.11 0.12 0.13
Financials and insurance
A-1+ 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.01 0.01 0.01 0.01 0.01
A-1 0.00 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02 0.02 0.02 0.03
A-2 0.00 0.00 0.01 0.01 0.01 0.02 0.02 0.03 0.04 0.05 0.06 0.07
A-3 0.02 0.03 0.04 0.06 0.08 0.11 0.14 0.16 0.19 0.22 0.24 0.26
B 0.03 0.09 0.15 0.21 0.28 0.35 0.41 0.49 0.56 0.63 0.71 0.79
C 0.67 1.21 1.70 2.13 2.48 2.82 3.14 3.40 3.64 3.89 4.13 4.36
All rated 0.02 0.05 0.07 0.10 0.12 0.14 0.16 0.18 0.21 0.23 0.25 0.27
Financials (excluding insurance)
A-1+ 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.01 0.01 0.01 0.01 0.01
A-1 0.00 0.01 0.01 0.01 0.01 0.02 0.02 0.02 0.02 0.02 0.03 0.03
A-2 0.00 0.00 0.01 0.01 0.02 0.02 0.03 0.03 0.04 0.05 0.06 0.07
A-3 0.02 0.03 0.04 0.06 0.09 0.11 0.14 0.17 0.20 0.23 0.25 0.27
B 0.03 0.09 0.15 0.21 0.28 0.35 0.42 0.49 0.56 0.64 0.71 0.79
C 0.67 1.21 1.70 2.13 2.48 2.82 3.14 3.40 3.65 3.89 4.13 4.36
All rated 0.03 0.05 0.08 0.11 0.13 0.16 0.18 0.20 0.23 0.25 0.28 0.30
Insurance
A-1+ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-1 0 0 0 0 0 0 0 0 0 0 0 0
A-2 0 0 0 0 0 0 0 0 0 0 0 0
A-3 0 0 0 0 0 0 0 0 0 0 0 0
B 0 0 0 0 0 0 0 0 0 0 0 0
C 0 0 0 0 0 0 0 0 0 0 0 0
All rated 0 0 0 0 0 0 0 0 0 0 0 0
Source: S&P Global Ratings Credit Research & Insights; S&P Global Market Intelligence's CreditPro®

Table 8

Global 2023 short-term corporate transition rates
Global From/To A-1+ A-1 A-2 A-3 B C D NR
A-1+ 95.45 2.84 0.00 0.00 0.00 0.00 0.00 1.70
A-1 0.47 93.90 3.76 0.00 0.00 0.00 0.00 1.88
A-2 0.00 2.79 92.63 1.56 0.11 0.00 0.00 2.91
A-3 0.00 0.00 8.00 83.33 3.33 0.67 0.00 4.67
B 0.00 0.00 0.00 5.26 85.43 0.40 0.40 8.50
C 0.00 0.00 0.00 0.00 0.00 60.00 13.33 26.67
Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 9

Global corporate short-term average transition rates (1981-2023) (%)
30-day
From/to A-1+ A-1 A-2 A-3 B C D NR
A-1+ 99.12 0.60 0.03 0.00 0.00 0.00 0.00 0.23
A-1 0.24 98.79 0.65 0.01 0.00 0.00 0.00 0.31
A-2 0.01 0.26 98.99 0.36 0.04 0.00 0.00 0.34
A-3 0.01 0.03 1.19 97.01 0.91 0.03 0.02 0.80
B 0.01 0.00 0.04 0.36 98.15 0.32 0.03 1.09
C 0.01 0.00 0.01 0.03 1.50 96.00 0.85 1.61
60-day
From/to A-1+ A-1 A-2 A-3 B C D NR
A-1+ 98.26 1.20 0.07 0.01 0.00 0.00 0.00 0.47
A-1 0.48 97.59 1.28 0.02 0.01 0.00 0.01 0.61
A-2 0.02 0.52 97.99 0.70 0.08 0.00 0.00 0.69
A-3 0.02 0.06 2.36 94.10 1.76 0.05 0.03 1.63
B 0.01 0.01 0.09 0.71 96.35 0.57 0.08 2.19
C 0.02 0.00 0.03 0.03 2.96 92.58 1.53 2.85
90-day
From/to A-1+ A-1 A-2 A-3 B C D NR
A-1+ 97.39 1.79 0.10 0.01 0.00 0.00 0.00 0.70
A-1 0.72 96.40 1.90 0.04 0.01 0.01 0.01 0.91
A-2 0.04 0.78 96.99 1.02 0.12 0.01 0.01 1.04
A-3 0.03 0.09 3.51 91.30 2.54 0.06 0.04 2.44
B 0.02 0.01 0.14 1.05 94.59 0.80 0.13 3.27
C 0.03 0.00 0.04 0.04 4.40 89.27 2.18 4.04
12-month
From/to A-1+ A-1 A-2 A-3 B C D NR
A-1+ 89.95 6.61 0.56 0.06 0.03 0.01 0.01 2.77
A-1 2.66 86.34 6.92 0.24 0.10 0.01 0.04 3.69
A-2 0.13 2.92 88.56 3.23 0.69 0.04 0.05 4.38
A-3 0.10 0.32 12.95 69.67 7.08 0.24 0.19 9.45
B 0.04 0.03 0.64 3.79 80.21 2.07 0.75 12.46
C 0.02 0.02 0.09 0.05 15.61 64.89 5.64 13.68
Source: S&P Global Ratings Credit Research & Insights; S&P Global Market Intelligence's CreditPro®

Table 10

Global corporate short-term one-month average transition rates (1981-2023) (%)
From/To A-1+ A-1 A-2 A-3 B C D NR
A-1+ 99.12 0.60 0.03 0.00 0.00 0.00 0.00 0.23
(1.07) (0.95) (0.12) (0.03) (0.00) (0.02) (0.00) (0.34)
A-1 0.24 98.79 0.65 0.01 0.00 0.00 0.00 0.31
(1.79) (1.97) (0.67) (0.06) (0.02) (0.03) (0.05) (0.36)
A-2 0.01 0.26 98.99 0.36 0.04 0.00 0.00 0.34
(0.06) (0.39) (0.72) (0.45) (0.11) (0.02) (0.02) (0.29)
A-3 0.01 0.03 1.19 97.01 0.91 0.03 0.02 0.80
(0.11) (0.20) (1.52) (2.32) (1.38) (0.37) (0.11) (0.98)
B 0.01 0.00 0.04 0.36 98.15 0.32 0.03 1.09
(0.06) (0.04) (0.33) (0.71) (1.81) (0.76) (0.11) (1.29)
C 0.01 0.00 0.01 0.03 1.50 96.00 0.85 1.61
(0.21) (0.00) (0.14) (0.39) (6.01) (7.79) (2.37) (4.49)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 11

Global corporate short-term two-month average transition rates (1981-2023) (%)
From/To A-1+ A-1 A-2 A-3 B C D NR
A-1+ 98.26 1.20 0.07 0.01 0.00 0.00 0.00 0.47
(1.74) (1.52) (0.17) (0.04) (0.01) (0.02) (0.00) (0.55)
A-1 0.48 97.59 1.28 0.02 0.01 0.00 0.01 0.61
(2.54) (2.85) (1.06) (0.09) (0.03) (0.04) (0.07) (0.56)
A-2 0.02 0.52 97.99 0.70 0.08 0.00 0.00 0.69
(0.09) (0.60) (1.16) (0.72) (0.15) (0.03) (0.03) (0.47)
A-3 0.02 0.06 2.36 94.10 1.76 0.05 0.03 1.63
(0.16) (0.28) (2.20) (3.30) (1.92) (0.40) (0.14) (1.56)
B 0.01 0.01 0.09 0.71 96.35 0.57 0.08 2.19
(0.08) (0.06) (0.44) (1.02) (2.58) (0.99) (0.20) (1.96)
C 0.02 0.00 0.03 0.03 2.96 92.58 1.53 2.85
(0.30) (0.00) (0.99) (0.30) (8.51) (10.36) (3.25) (5.01)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 12

Global corporate short-term three-month average transition rates (1981-2023) (%)
From/To A-1+ A-1 A-2 A-3 B C D NR
A-1+ 97.39 1.79 0.10 0.01 0.00 0.00 0.00 0.70
(2.35) (2.02) (0.22) (0.06) (0.02) (0.03) (0.00) (0.74)
A-1 0.72 96.40 1.90 0.04 0.01 0.01 0.01 0.91
(3.13) (3.58) (1.42) (0.11) (0.04) (0.05) (0.08) (0.75)
A-2 0.04 0.78 96.99 1.02 0.12 0.01 0.01 1.04
(0.11) (0.78) (1.60) (0.96) (0.21) (0.04) (0.04) (0.64)
A-3 0.03 0.09 3.51 91.30 2.54 0.06 0.04 2.44
(0.19) (0.36) (2.69) (4.07) (2.42) (0.47) (0.17) (2.02)
B 0.02 0.01 0.14 1.05 94.59 0.80 0.13 3.27
(0.09) (0.07) (0.55) (1.26) (3.20) (1.16) (0.27) (2.46)
C 0.03 0.00 0.04 0.04 4.40 89.27 2.18 4.04
(0.36) (0.00) (1.39) (0.34) (10.34) (12.20) (3.86) (5.44)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Table 13

Global corporate short-term 12-month average transition rates (1981-2023) (%)
From/To A-1+ A-1 A-2 A-3 B C D NR
A-1+ 89.95 6.61 0.56 0.06 0.03 0.01 0.01 2.77
(5.89) (4.56) (0.65) (0.17) (0.11) (0.09) (0.04) (2.23)
A-1 2.66 86.34 6.92 0.24 0.10 0.01 0.04 3.69
(5.86) (7.30) (3.44) (0.29) (0.20) (0.06) (0.15) (2.29)
A-2 0.13 2.92 88.56 3.23 0.69 0.04 0.05 4.38
(0.25) (2.08) (4.52) (2.09) (0.69) (0.11) (0.12) (2.21)
A-3 0.10 0.32 12.95 69.67 7.08 0.24 0.19 9.45
(0.42) (0.83) (5.89) (7.16) (4.48) (0.86) (0.42) (4.53)
B 0.04 0.03 0.64 3.79 80.21 2.07 0.75 12.46
(0.15) (0.22) (1.46) (2.84) (6.45) (2.00) (0.82) (4.98)
C 0.02 0.02 0.09 0.05 15.61 64.89 5.64 13.68
(0.28) (1.38) (2.93) (0.39) (17.81) (18.80) (7.28) (8.18)
Note: Numbers in parentheses are weighted standard deviations. Source: S&P Global Ratings Credit Research & Insights, S&P Global Market Intelligence's CreditPro®

Appendix II: Data Methodology And Region Definitions

This study covers 4,941 obligors from 114 countries that had short-term local currency ratings in the period beginning in 1981 and ended in December 2023. We included corporate financial and nonfinancial issuers in our study. The short-term issuer ratings are usually associated with issuers that have issued debt types including commercial paper, certificates of deposit, equipment trust certificates, and senior and subordinated short-term notes.

As with long-term ratings, S&P Global's expresses short-term ratings in terms of default risk, which refers to the capacity and willingness of the obligor/issuer to meet its financial commitments in a timely manner and in accordance with the terms of the obligation. Failure to pay a financial obligation--rated or unrated--will lead to S&P Global's revising its ratings to 'D', 'SD', or 'R'. Both short-term and long-term issuer credit ratings focus entirely on the default risk of the entity. There is a strong link between short-term and long-term rating systems, particularly among investment-grade borrowers (rated 'BBB-' or higher). Still, the long-term rating does not fully determine the short-term rating, as exhibited by the overlap in rating categories.

S&P Global's ongoing enhancement of the database used to generate this analysis could lead to outcomes that differ in some degree from those reported in the previous study. However, this poses no continuity problem because each study reports statistics back to Dec. 31, 1980. Therefore, each analysis is self-contained and effectively supersedes all previous versions.

Ratings definitions

'A-1': short-term obligation rated 'A-1' is rated in the highest category by S&P Global Ratings. The obligor's capacity to meet its financial commitments on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitments on these obligations is extremely strong.

'A-2': A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitments on the obligation is satisfactory.

'A-3': A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken an obligor's capacity to meet its financial commitments on the obligation.

'B': A short-term obligation rated 'B' is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties that could lead to the obligor's inadequate capacity to meet its financial commitments.

For the purposes of this study, we exclude the 'B-1', 'B-2', and 'B-3' distinctions for 'B'.

'C': A short-term obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitments on the obligation.

'D': A short-term obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. A rating on an obligation is lowered to 'D' if it is subject to a distressed debt restructuring.

For more information, see "S&P Global's Ratings Definitions," published December 2nd, 2024.

Regional definitions

Within this study, tables and charts are often presented using specific geographic regions. Some countries can be included in multiple regions, and S&P Global Ratings does not have corporate issuer credit ratings in every country. The regions covered in this study are:

U.S. and tax havens: U.S., Bermuda, and the Cayman Islands

Other developed: Australia, Brunei Darussalam, Canada, Israel, Japan, Republic of Korea, New Zealand, and Singapore

Europe: Austria, Belgium, British Virgin Islands, Bulgaria, Channel Islands, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, Ireland, Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova Republic of, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the U.K.

Emerging markets in this study consist of the following subregions:

Asia-Pacific: Bangladesh, Bhutan, China, Fiji, Hong Kong, India, Indonesia, Macao Special Administrative Region of China, Malaysia, Mongolia, Pakistan, Papua New Guinea, Philippines, Sri Lanka, Taiwan, Thailand, British Indian Ocean Territory, and Vietnam

EMEA: Angola, Armenia, Azerbaijan, Bahrain, Belarus, Bosnia and Herzegovina, Bulgaria, Cote d'Ivoire, Croatia, Cyprus, Egypt, Estonia, Gabon, Georgia, Ghana, Hungary, Jordan, Kazakhstan, Kenya, Kuwait, Latvia, Lebanon, Lithuania, Mauritius, Montenegro, Morocco, Namibia, Nigeria, Oman, Poland, Qatar, Republic of Moldova, Romania, Russia, Saudi Arabia, Slovakia, South Africa, Tunisia, Turkiye, Ukraine, United Arab Emirates, and Uzbekistan

Latin America and Caribbean: Argentina, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Honduras, Jamaica, Mexico, Panama, Paraguay, Peru, Trinidad and Tobago, and Uruguay

Frontier markets in this study consist of the following subregions:

Asia-Pacific: Cambodia and Marshall Islands

EMEA: Liberia, Syria, and Togo

Latin America and Caribbean: Aruba, Bahamas, Curacao, Netherlands Antilles*, Turks and Caicos Islands, and Venezuela

*The Netherlands Antilles was dissolved in 2010.

Appendix III: Default And Transition Methodology And Definitions

Definition of default

An obligor rated 'SD' (selective default) or 'D' (default) is in default on one or more of its financial obligations, including rated and unrated financial obligations but excluding hybrid instruments classified as regulatory capital or in nonpayment according to terms. An obligor is considered in default unless S&P Global Ratings believes that such payments will be made within five business days of the due date in the absence of a stated grace period, or within the earlier of the stated grace period or 30 calendar days.

A 'D' rating is assigned when S&P Global Ratings believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. An 'SD' rating is assigned when S&P Global Ratings believes that the obligor has selectively defaulted on a specific issue or class of obligations but will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. S&P Global Ratings lowers its rating on an obligor to 'D' or 'SD' if the obligor is conducting a distressed exchange offer.

'R' (regulatory intervention) indicates that an obligor is under regulatory supervision owing to its financial condition. This does not necessarily indicate a default event, but during the period of regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. Preferred stock is not considered a financial obligation; thus, a missed preferred stock dividend is not normally equated with default. On July 5, 2020, we removed the 'R' symbol from all rating scales.

We deem 'D', 'SD', and 'R' issuer ratings to be defaults for the purposes of this study. A default is assumed to take place on the earliest of:

The date S&P Global Ratings revised the rating(s) to 'D', 'SD', or 'R';

The date a debt payment was missed;

The date a distressed exchange offer was announced; or

The date the debtor filed for, or was forced into, bankruptcy.

When an issuer defaults, it is not uncommon for S&P Global Ratings to subsequently withdraw the 'D' rating. For the purposes of this study, if an issuer defaults, we end its rating history at 'D'. If any defaulting entity reemerges from bankruptcy--or otherwise restructures its defaulted debt instruments, thereby reestablishing regular, timely payment of all its debts--we reenter this issuer into the database as a new entity. Its rating history after the default event is included in all calculations as entirely separate from its experience leading up to its earlier default.

Many practitioners use statistics from this default study to estimate the "probability of default" and "probability of rating transition." It is important to note that S&P Global Ratings' credit ratings do not imply a specific probability of default.

Calculations

Static pool methodology. S&P Global's conducts its default studies on the basis of groupings called static pools. We form static pools by grouping issuers by rating category at the beginning of each period covered by the study. Each static pool is followed from that point forward. All companies included in the study are assigned to one or more static pools. When an issuer defaults, that default is assigned back to all of the static pools to which the issuer belonged.

S&P Global's uses the static pool methodology to avoid certain pitfalls in estimating default rates. This is to ensure that default rates account for rating migration and to allow for default rates to be calculated across multiperiod time horizons. Some methods for calculating default and rating transition rates might charge defaults against only the initial rating on the issuer, ignoring more recent rating changes that supply more current information. Other methods may calculate default rates using only the most recent year's default and rating data--this method may yield comparatively low default rates during periods of high rating activity because it ignores prior years' default activity.

The pools are static in the sense that their membership remains constant over time. Each static pool can be interpreted as a buy-and-hold portfolio. Because errors, if any, are corrected by every new update and because the criteria for inclusion or exclusion of companies in the default study are subject to minor revisions as time goes by, it is not possible to compare static pools across different studies. Therefore, every new update revises results back to the same starting date of Dec. 31, 1980, so as to avoid continuity problems. Entities that have had ratings withdrawn--that is, revised to NR--are surveilled with the aim of capturing a potential default. We exclude these companies, as well as those that have defaulted, from subsequent static pools.

For instance, the 1981 static pool consists of all companies rated as of 12:01 a.m. on Jan. 1, 1981. Adding those companies first rated in 1981 to the surviving members of the 1981 static pool forms the 1982 static pool. All rating changes that took place are reflected in the newly formed 1982 static pool. We used this same method to form static pools for 1983 through 2023.

Consider the following example: An issuer is originally rated 'A-1' in mid-1986 and is downgraded to 'A-2' in 1988. This is followed by a rating withdrawal (NR) in 1990 and a default ('D') in 1993. This hypothetical company would be included in the 1987 and 1988 pools with the 'A-1' rating, which it was rated at the beginning of those years. Likewise, it would be included in the 1989 and 1990 pools with the 'A-2' rating. It would not be part of the 1986 pool because it was not rated as of the first day of that year, and it would not be included in any pool after the last day of 1990 because the rating had been withdrawn by then. Yet each of the four pools in which this company was included (1987-1990) would record its 1993 default at the appropriate time horizon. S&P Global's withdraws ratings when an entity's entire debt is paid off or when the program or programs rated are terminated and the relevant debt extinguished. Rating withdrawals can also occur as a result of mergers and acquisitions. In other cases, S&P Global's withdraws ratings because of a lack of cooperation, particularly when a company is experiencing financial difficulties and refuses to provide all the information needed to continue surveillance on the ratings, or at the entity's request.

Default rate calculation. We calculated annual default rates for each static pool: first in units and later as percentages with respect to the number of issuers in each rating category. Finally, we combined these percentages to obtain cumulative default rates for the 43 years covered by the study.

Issuer-weighted default rates. Averages that appear in this study are calculated based on the number of issuers rather than the dollar amounts affected by defaults or rating changes. Although dollar amounts provide information about the portion of the market that is affected by defaults or rating changes, issuer-weighted averages are a more useful measure of the performance of ratings. Many practitioners utilize statistics from this default study to estimate "probability of default" and "probability of rating transition." It is important to note that S&P Global's ratings do not imply a specific probability of default.

Average cumulative default rate calculation. We derived cumulative default rates that average the experience of all static pools by calculating marginal default rates, conditional on survival (survivors being nondefaulters) for each possible time horizon and for each static pool, weight averaging the conditional marginal default rates and accumulating the average conditional marginal default rates. We calculated conditional default rates by dividing the number of issuers in a static pool that default at a

specific time horizon by the number of issuers that survived (did not default) to that point in time. Weights are based on the number of issuers in each static pool. Cumulative default rates are one minus the product of the proportion of survivors (nondefaulters).

Transition analysis

Transitions basically measure the upward or downward movement in issuer ratings for a given time period by comparing issuer ratings at the beginning of a time period with ratings at the end of the period. To compute rating transition rates by rating category for a particular time horizon, we compared the rating on each entity at the end of a particular period with the rating at the beginning of the same period. An issuer that remained rated for more than one period was counted as many times as the number of periods it was rated. For instance, using a one-month time horizon, an issuer with a first rating on June 18, 1984, that was continually rated from this point until July 21, 1991 would appear in 100 consecutive 30-day (or one-month) transition matrices from July 1984 to July 1991. In the one-month July 1991 transition matrix, the hypothetical company rating history would end. There would one of two outcomes, S&P Global's removed its rating on the company, so the transition in July 1991 would be to NR, or the company defaulted, so the transition in July 1991 would be counted as 'D'. All 1981 static pool members still rated on Dec. 31, 2009, had 348 30-day transitions, 347 60-day transitions, and 336 12-month transitions. It is important to note that we used 12-month transitions in this study (i.e., January 1981 to December 1981, February 1981 to January 1982, and so on). In the annual corporate long-term default studies, one-year annual transitions are used, which look at each Jan. 1-Dec. 31 period, which results in only 29 pools.

Each transition matrix displays all rating movements between rating categories from the beginning of the period through end of the period. For each rating listed in the matrix's left-most column, which shows the rating at the beginning of the period, there are seven possible movements, which are the ratings listed in the following seven columns. These seven correspond to ratings 'A-1+' to 'D', plus an entry for NR.

This report does not constitute a rating action.

Rarings Performance Analytics:Nick W Kraemer, FRM, New York + 1 (212) 438 1698;
nick.kraemer@spglobal.com
Ratings Performance Analytics:Zev R Gurwitz, Albany + 1 (212) 438 7128;
zev.gurwitz@spglobal.com
Research Contributors:Nivritti Mishra Richhariya, CRISIL Global Analytical Center, an S&P Global Ratings affiliate, Mumbai
Lyndon Fernandes, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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