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Credit Trends: Risky Credits: North American Risky Credits Continue Descent Into 2025

COMMENTS

Credit Trends: U.S. Corporate Bond Yields As Of May 7, 2025

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Default, Transition, and Recovery: 2024 Annual U.S. Public Finance Default And Rating Transition Study

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Credit Trends: U.S. Corporate Bond Yields As Of April 30, 2025

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Credit Trends: This Month In Credit: 2025 Data Companion


Credit Trends: Risky Credits: North American Risky Credits Continue Descent Into 2025

(Editor's Note: Our "Risky Credits" series focuses on U.S. and Canadian corporate issuers rated 'CCC+' and lower. Because many defaults are of companies in those categories, ratings with negative outlooks or on CreditWatch negative are even more important to monitor.)

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Key Highlights

Risky credit in North America continued to decline into 2025.  The number of North American issuers rated 'CCC+' and below decreased to 149 as of January 2025, from 155 in September 2024. However, total debt rose to $349 billion from $337 billion in the same period. Despite a decrease in overall count, debt at 'CCC+' and below rated issuers remains historically high with $349 billion outstanding, $86 billion over the five-year average. Additionally, seven issuers carry over $10 billion in debt outstanding, six of which are on negative outlooks or CreditWatch--indicating higher risk of a downgrade. They are concentrated in the heath care and telecommunication sectors including Bausch Health Cos. Inc., EchoStar Corp., Altice USA Inc., Medical Properties Trust Inc., Community Health Systems Inc., and iHeartMedia Inc.

Chart 1

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The number of issuers downgraded to 'CCC+' and below has surpassed those upgraded out of the rating category by 17 to eight since September 2024. Despite this, the monthly average for downgrades fell to 4.25 as of Jan. 31, 2025, versus 5.0 in third-quarter 2024.

By sector, media and entertainment experienced the most downgrades into the 'CCC' category with six including: Auction.com Holding Co. Inc., Cumulus Media Inc., Affinity Interactive, Urban One Inc., College Parent L.P., and Hubbard Radio LLC.

Half of these downgrades were due to weak and challenging operating performance amid ongoing declines in broadcast radio advertising. Notably, this industry is affected by cyclical and secular challenges in a soft economic environment, along with heightened competition from alternative media. The remaining media and entertainment downgrades were due to increased leverage, weak operating performance, and/or refinancing risk.

The consumer products sector experienced the most upgrades since September 2024, including: pH Beauty Holdings I Inc., Sierra Enterprises LLC, Premier Brands Group Holdings LLC, Traeger Inc., and Outerstuff LLC. Most of these issuers were upgraded due to improvements in operating performance, liquidity, and leverage.

Chart 2

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Near-term refinancing risk seems manageable for issuers in the 'B' and 'CCC' rating categories with maturity walls peaking in 2028. However, lower-rated borrowers tend to be vulnerable to refinancing pressure, especially during periods of volatility or tighter financing conditions. Of 'CCC+' and below rated debt, 25% amounting to $68.8 billion is coming due during the next two years. Given the uncertainties around inflation and monetary policy, the easing in financing conditions for U.S. borrowers may have stalled. This could make it harder for issuers in the 'CCC+' and below rating category to meet their refinancing needs (see "Global Refinancing: Credit Market Resurgence Helps Ease Upcoming Maturities," published Feb. 4, 2025, on RatingsDirect).

Chart 3

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Reported debt to EBITDA for 'CCC+' and below rated issuers was mixed across sectors.   Overall debt to EBITDA fell to 11.1x as of Sept. 30, 2024, from 11.5x in the previous quarter, with about half of the sectors recording a decrease in their weighted-average adjusted debt to EBITDA ratios. Meanwhile, other sectors like health care, business and consumer services, and media and entertainment saw increases in their weighted-average debt to EBITDA due to both weaker operating performance and still-high interest rates. Issuers continue to focus on liquidity in 2025.

Chart 4

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Broadly syndicated loan (BSL) collateralized loan obligation (CLO) metrics showed signs of improvement in 2024, alongside overall credit quality.   Loans from 'B-' obligors in U.S. BSL CLOs have steadily declined since peaking at just over 30% in mid-2023. After reaching a recent low in October 2024, at just under 25% of total BSL CLO assets, we lowered our ratings on a handful of widely held issuers in different industries to 'B-' in December 2024, resulting in a small uptick back above 25%.

Table 1

Collateralized loan obligation BSL index metrics (CLO insights U.S. BSL index; %)
As of date 'B- bucket' CCC' bucket Nonperform bucket CreditWatch neg Outlook neg
1/31/2024* 26.11 6.39 0.88 0.35 17.89
2/29/2024* 26.41 6 0.98 0.53 16.56
3/31/2024* 26.15 6.81 0.74 0.66 16.15
4/30/2024* 25.70 6.44 0.97 0.93 15.95
5/31/2024* 25.42 6.67 0.48 0.95 15.62
6/30/2024* 25.30 6.36 0.4 1.14 15.04
7/31/2024* 25.19 6.46 0.32 0.94 15.13
8/30/2024* 25.18 6.4 0.57 1.11 14.82
9/30/2024* 25.07 6.37 0.59 1.44 15.00
10/31/2024* 24.73 6.21 0.54 1.29 14.22
11/30/2024* 25.38 5.37 0.69 1.17 13.36
12/31/2024** 25.57 5.65 0.51 1.31 13.41
1/20/2025*** 25.54 5.77 0.69 1.08 12.87
*Index metrics based on end of month ratings and pricing data and as of month portfolio data available. **Index metrics based on Dec. 31, 2024, ratings and pricing data and latest portfolio data available to us. ***Index metrics based on Jan. 20, 2025, ratings and pricing data and latest portfolio data available to us.

Table 2

Downgrades into 'CCC' category beginning 2024
Rating date Issuer Country Sector Rating to Rating from
1/4/2024 Hughes Satellite Systems Corporation (EchoStar Corporation) United States Telecommunications CCC+ BB
1/12/2024 GoTo Group, Inc. United States High technology CCC+ B-
1/16/2024 Baffinland Iron Mines Corp. Canada Metals, mining, & steel CCC B-
2/6/2024 Pluto Acquisition I, Inc. United States Health care CC B-
2/27/2024 Cumulus Media Inc. United States Media & entertainment CC B-
3/1/2024 iHeartMedia Inc. United States Media & entertainment CCC+ B
3/11/2024 WW International, Inc. United States Consumer products CCC+ B-
3/12/2024 Emergent BioSolutions Inc. United States Health care CCC+ B-
3/15/2024 American Rock Salt Company LLC United States Metals, mining, & steel CCC+ B-
3/26/2024 Sandvine LP Canada High technology CCC B-
4/4/2024 Athletico Holdings, LLC United States Health care CCC+ B-
4/12/2024 Pathway Vet Alliance LLC United States Health care CCC+ B-
4/30/2024 Dodge Construction Network LLC United States Consumer products CCC+ B-
5/2/2024 Del Monte Foods, Inc. United States Consumer products CCC+ B-
5/2/2024 SIRVA Inc. United States Consumer products CCC B-
5/10/2024 Forest City Realty Trust Inc. (Brookfield Corporation) United States Homebuilders/real estate co. CCC+ B-
5/10/2024 TJC Spartech Acquisition Corp. (Spartech Parent Corp.) United States Capital goods CCC+ B-
5/10/2024 Connect Holding II LLC United States Telecommunications CCC B-
5/15/2024 Altice USA, Inc. United States Telecommunications CCC+ B-
5/20/2024 Calumet Specialty Products Partners LP United States Utility CCC+ B-
5/24/2024 LD Holdings Group LLC United States Financial institutions CCC+ B-
5/24/2024 Lereta, LLC United States Media & entertainment CCC+ B-
5/29/2024 Cobra Holdings, Inc. (Confluence Technologies, Inc.) United States Consumer products CCC+ B-
6/5/2024 American Tire Distributors Inc. United States Automotive CCC+ B-
6/13/2024 Upstream Newco, Inc. United States Health care CCC+ B
6/13/2024 Vertex Energy, Inc. United States Utility CCC B-
6/17/2024 PAI Holdco, Inc. United States Retail/restaurants CCC+ B-
6/21/2024 Aegis Toxicology Sciences Corporation (Aegis Acquistion, Inc.) United States Health care CCC+ B-
6/28/2024 EagleView Technology Corp. United States Media & entertainment CCC B-
7/3/2024 Container Store Group, Inc. (The) United States Retail/restaurants CCC+ B-
7/18/2024 Allen Media, LLC United States Media & entertainment CCC+ B-
7/18/2024 CMG Media Corporation (CMG Holdings, Inc.) United States Media & entertainment CCC+ B-
7/22/2024 Congruex Group LLC United States Capital goods CCC B-
7/23/2024 Corus Entertainment Inc. Canada Media & entertainment CCC B-
7/24/2024 Franchise Group Inc. United States Retail/restaurants CCC+ B-
8/9/2024 EmployBridge Holding Co United States Media & entertainment CCC+ B-
8/16/2024 Gainwell Holding Corp. United States Health care CCC+ B-
8/19/2024 Redstone Buyer LLC United States High technology CCC+ B-
8/22/2024 GrafTech International Ltd. United States Metals, mining, & steel CCC+ B-
8/23/2024 TMK Hawk Parent, Corp. United States Consumer products CCC B-
8/28/2024 Optiv, Inc. United States High technology CCC+ B-
8/29/2024 Berry Corporation United States Oil & gas exploration & production CCC+ B-
9/20/2024 Naked Juice LLC United States Consumer products CCC+ B-
9/27/2024 Thrive Merger Sub, LLC United States Health care CCC+ B-
10/3/2024 Golden West Packaging Group LLC United States Chemicals, packaging, & environmental services CCC- B-
10/18/2024 Physician Partners LLC United States Health care CCC+ B-
10/22/2024 Auction.com Holding Company, Inc. United States Media & entertainment CCC+ B-
10/24/2024 VeriFone Systems Inc. (Vertex HoldCo Inc.) United States High technology CCC+ B-
11/6/2024 Emerald Technologies (U.S.) AcquisitionCo., Inc. United States High technology CCC+ B-
11/19/2024 Cumulus Media Inc. United States Media & entertainment CCC+ B-
11/21/2024 Medical Properties Trust Inc. United States Homebuilders/real estate co. CCC+ B-
12/3/2024 Affinity Interactive United States Media & entertainment CCC+ B-
12/13/2024 Urban One, Inc. United States Media & entertainment CCC+ B-
12/17/2024 Flexsys Holdings Inc. United States Chemicals, packaging, & environmental services CCC+ B
12/19/2024 Knight Health Holdings LLC United States Health care CCC+ B-
12/24/2024 MultiPlan Corp. United States Health care CC B
Source: S&P Global Credit Research And Insights. Data as of Dec. 31, 2024.

Table 2.1

Downgrades into 'CCC' category beginning 2025
Rating Date Issuer Country Sector Rating To Rating From
1/13/2025 Alvogen Pharma US, Inc. (Alvogen Lux Holdings S.a.r.l.) United States Health care CCC+ B-
1/14/2025 JOANN Inc. United States Retail/restaurants CCC B-
1/16/2025 College Parent LP United States Media & entertainment CCC+ B-
1/23/2025 Hubbard Radio, LLC United States Media & entertainment CCC+ B-
1/28/2025 ModivCare Inc. United States Health care CCC+ B-
Source: S&P Global Credit Research And Insights. Data as of Jan. 31, 2025.

Table 3

Upgrades from 'CCC' category beginning 2024
Rating date Issuer Country Sector Rating to Rating from
1/26/2024 Artera Services, LLC United States Capital goods B- CCC+
3/5/2024 KAMC Holdings, Inc. United States Consumer products B- CCC+
3/14/2024 Patchell Holdings Inc. Canada Media & entertainment B- CCC+
3/21/2024 Vericast Corp. United States Media & entertainment B- CCC
4/8/2024 LendingTree, Inc. United States Media & entertainment B- CCC+
4/11/2024 Five Point Holdings, LLC United States Homebuilders/Real estate co. B- CCC+
4/12/2024 Michaels Companies, Inc. (The) United States Retail/restaurants B- CCC+
4/19/2024 IAMGOLD Corporation Canada Metals, mining, & steel B- CCC+
4/22/2024 Hubbard Radio, LLC United States Media & entertainment B- CCC+
5/7/2024 Aptim Corp. United States Capital goods B- CCC+
6/4/2024 Bulldog Purchaser Inc. United States Media & entertainment B- CCC+
6/6/2024 Triumph Group Inc. United States Aerospace & defense B- CCC+
6/7/2024 IXS Holdings, Inc. United States Automotive B- CCC+
7/23/2024 Kronos Worldwide Inc. United States Chemicals, packaging, & environmental services B- CCC+
7/30/2024 MicroStrategy Inc. United States High technology B- CCC+
7/31/2024 Syniverse Corporation United States Telecommunications B- CCC+
8/14/2024 Carvana Co. United States Automotive B- CCC+
8/15/2024 Team Health Holdings, Inc. United States Health care B- CCC
8/20/2024 Power Stop LLC United States Automotive B- CCC+
8/29/2024 Great Lakes Dredge & Dock Corp. United States Capital goods B- CCC+
9/11/2024 Emergent BioSolutions Inc. United States Health care B- CCC
9/26/2024 Glatfelter Corp. United States Forest Products & building materials B+ CCC+
10/23/2024 Flame NewCo United States Metals, mining, & steel B- CCC+
11/18/2024 Advanced Integration Technology LP United States Aerospace & defense B- CCC+
12/9/2024 Traeger, Inc. United States Consumer products B- CCC+
12/16/2024 Outerstuff LLC United States Consumer products B- CCC+
Source: S&P Global Credit Research And Insights. Data as of Dec. 31, 2024.

Table 3.1

Upgrades from 'CCC' category beginning 2025
Rating date Issuer Country Sector Rating to Rating from
1/17/2025 pH Beauty Holdings I, Inc. United States Consumer products B- CCC
1/24/2025 Form Technologies LLC United States Capital foods B- CCC
1/31/2025 Sierra Enterprises LLC United States Consumer products B- CCC+
1/31/2025 Premier Brands Group Holdings LLC United States Consumer products B- CCC
Source: S&P Global Credit Research And Insights. Data as of Jan. 31, 2025.

Related Research

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
Leveraged Finance:Minesh Patel, CFA, New York + 1 (212) 438 6410;
minesh.patel@spglobal.com
Secondary Contact:Daniel Hu, FRM, New York + 1 (212) 438 2206;
daniel.hu@spglobal.com
Research Contributor:Suresh N Kasa, Mumbai;
suresh.kasa@spglobal.com

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