Default, Transition, and Recovery: 2020 Annual Global Corporate Default And Rating Transition Study

The COVID-19 pandemic and lockdowns in 2020 led to one of the deepest recessions since the Great Depression roughly 90 years ago. Normally, recessions include, or are followed shortly by, marked increases in corporate defaults. Default activity in 2020 did increase, but to a lesser extent than recent recessions (see chart 1 and table 1). Corporate downgrades also increased, to near an all-time high. But in both cases, defaults and downgrades were largely limited to the lowest rating categories, resulting in generally strong ratings performance in 2020. Broadly consistent with 2019, almost 54% of defaults in 2020 came from two sectors: consumer services and energy and natural resources (with 122 defaults combined). However, defaults from most other sectors increased as

...- In a year marked by the worst economic contraction since the Great Depression, our ratings performed well, with all rated defaults in 2020 beginning the year with speculative-grade ratings. - Of the 198 companies that defaulted in 2020 that were rated at the start of the year, all but 12 were in the 'B' category or lower, and 57% were in the '###'/'C' category, leading to a one-year global Gini ratio of 86.1%. - Credit deterioration was significant in 2020, with a new historical low upgrade rate (2.8%) and one of the highest annual downgrade rates (18.5%). This brought the downgrade-to-upgrade ratio to a new high of 6.6. - Defaults increased in many sectors in 2020, though the consumer services and energy and natural resources sectors once again led the global default tally, together accounting for almost 54% of the total. The COVID-19 pandemic and lockdowns in 2020 led to one of the deepest recessions since the Great Depression roughly 90 years ago. Normally, recessions include, or are...

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