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Credit Market Research
www.fitchratings.com September 24, 2014
Global
Fitch Ratings Global Cross-Asset Default Update
Benign Conditions Endure in 2014
Special Report
Modest, Low Rated Defaults: Global default activity remains subdued in 2014, a product of
central bank easing and stable to improving regional economies. Across corporates, structured
finance, sovereigns and public finance, Fitch recorded no investment-grade defaults in the first
half of the year and unexceptional activity below investment grade.
Corporates: The Fitch-rated global corporate default rate through June was 0.35% and the
speculative-grade default rate was 1.12%. Corporate rating activity was both balanced and
contained in the first half, with less than 10% of ratings affected by downgrades and upgrades.
In addition, rating stability spanned financial and industrial entities. Good fundamentals
notwithstanding, the return of shareholder-oriented transactions signals that post-crisis
conservatism, a key support of the low default rate environment, is waning.
Sovereigns: There were no sovereign defaults recorded in the first six months of the year.
However, Argentina’s July missed payment brings the year’s tally to one following its
downgrade to ‘RD’. Developed market credit quality stabilized in the first half while emerging
market momentum slowed, effectively ending the convergence of developed and emerging
market sovereign ratings. Downside risks remain, most notably for select sovereigns affected
by geopolitical stress.
Public Finance: There were no Fitch-rated U.S. or international public finance defaults
recorded in the first half of 2014. U.S. states and local governments continue to manage
ongoing budget challenges, including significant pension and healthcare liabilities but with the
backdrop of improving tax receipts. Puerto Rico’s public finances remain a key area of
concern.
Structured Finance: Impairment activity across global structured finance in the first half of
2014 was the lowest since the economic crisis. Overwhelmingly, impairments originated from
older vintage ‘CCC’ rated bonds. The resulting speculative-grade impairment rate was 3.1%.
The ABS sector registered the lowest overall impairment rate, 0.07%, versus 0.7% for CMBS,
1.0% for structured credit (SC) and 1.4% for RMBS. Increased lender competition is driving
down asset quality in certain sectors like CMBS and subprime auto ABS, which could put
pressure on future rating performance.
Related Research
Fitch Ratings Global Corporate Finance
2013 Transition and Default Study
(March 2014)
Fitch Ratings Global Structured Finance
2013 Transition and Default Study
(March 2014)
Fitch Ratings Sovereign 2013 Transition
and Default Study
(March 2014)
Fitch Ratings International Public
Finance 2013 Transition and Default
Study (March 2014)
Fitch Ratings U.S. Public Finance 2013
Transition and Default Study (March
2014)
Analysts
Charlotte L. Needham
+1 212 908-0794
charlotte.needham@fitchratings.com
Stephanie K. Mah
+1 212 908-0884
stephanie.mah@fitchratings.com
Mariarosa Verde
+1 212 908-0791
mariarosa.verde@fitchratings.com
Group Credit Officers
John Hatton
+44 20 3530-1061
john.hatton@fitchratings.com
Stuart Jennings
+44 20 3530-1142
stuart.jennings@fitchratings.com
Thomas McCormick
+1 212 908-0235
thomas.mccormick@fitchratings.com
James Moss
+1 312 368-3213
james.moss@fitchratings.com
Fitch Global Default Rates by Major Sector: First-Half 2014
(%) Corporates Sovereigns
U.S. Public
Finance
Int’l Public
Finance ABS
a
CMBS
a
RMBS
a
Structured
Credit
a
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 1.08 0.00 0.00 0.00 0.98 0.58 0.58 0.00
CCC
b
19.35 0.00 0.00 0.00 7.69 5.63 7.35 10.66
Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Speculative Grade 1.12 0.00 0.00 0.00 0.81 2.36 3.32 2.73
All 0.35 0.00 0.00 0.00 0.07 0.70 1.42 1.04
a
Includes impairments defined as migration to ‘CC’, ‘C’ or ‘D’.
b
Includes ‘CCC’ to ‘C’ categories for corporates, sovereigns and public finance.
Source: Fitch.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 2
September 24, 2014
Global Default Trends
Related Criteria
Distressed Debt Exchange
(June 2014)
0.32
0.07 0.10
1.28
2.58
0.49 0.30
0.65 0.51 0.35
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Source: Fitch.
Fitch Global Corporate Default Rates
AAA
0.5%
AA
4%
A
25%
BBB
39%
BB
16%
B
12%
CCC to C
2%
Source: Fitch.
Fitch Global Corporate Rating Mix
(As of June 30, 2014)
1.37
0.68
0.31 0.45
0.67
0.85 1.02 1.02
0.73
0.07
0.0
0.5
1.0
1.5
2.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Fitch Global ABS Default Rates
Source: Fitch.
AAA
53%
AA
9%
A
16%
BBB
13%
BB
5%
B
4%
CCC
0.5%
Source: Fitch.
Fitch Global ABS Rating Mix
(As of June 30, 2014)
1.11
0.00 0.00
0.96
0.00
0.98
0.00
0.96 0.97
0.00
0.0
0.5
1.0
1.5
2.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
aOne default recorded in each year, 2005, 2008, 2010, 2012, 2013, consisting of Dominican
Republic, Ecuador, Jamaica, Greece and Jamaica, respectively.
Source: Fitch.
Fitch Sovereign Default Ratesa
AAA
12%
AA
9%
A
14%
BBB
25%
BB
17%
B
21%
CCC to C
2%
Source: Fitch.
Fitch Sovereign Rating Mix
(As of June 30, 2014)
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 3
September 24, 2014
Global Default Trends (Continued)
0.40 0.30 0.13
1.16
4.28
10.06
12.33
9.48
4.93
0.70
0
3
6
9
12
15
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Source: Fitch.
Fitch Global CMBS Default Rates
AAA
40%
AA
7%
A
13%
BBB
12%
BB
9%
B
8%
CCC
11%
Source: Fitch.
Fitch Global CMBS Rating Mix
(As of June 30, 2014)
0.56 0.39
2.22
16.59
30.66
14.19
10.47
5.49
1.57 1.42
0
5
10
15
20
25
30
35
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Fitch Global RMBS Default Rates
Source: Fitch.
AAA
18%
AA
12%
A
15%
BBB
14%
BB
11%
B
13%
CCC
18%
Source: Fitch.
Fitch Global RMBS Rating Mix
(As of June 30, 2014)
0.97 0.63
2.81
12.45
25.69
20.52
6.38
2.84 2.63
1.04
0
5
10
15
20
25
30
35
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
SC – Structured credit.
Source: Fitch.
Fitch Global SC Default Rates
AAA
20%
AA
11%
A
15%BBB
18%
BB
14%
B
13%
CCC
8%
SC – Structured credit.
Source: Fitch.
Fitch Global SC Rating Mix
(As of June 30, 2014)
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 4
September 24, 2014
North America Default Trends
0.49
0.07 0.00
1.67
3.85
0.40 0.41
0.75
0.17 0.34
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
NA – North America.
Source: Fitch.
Fitch NA Corporate Default Rates
AAA
0.4%
AA
4%
A
29%
BBB
44%
BB
13%
B
7%
CCC to C
2%
NA – North America.
Source: Fitch.
Fitch NA Corporate Rating Mix
(As of June 30, 2014)
0.04
0.00
0.06
0.03 0.03 0.03 0.03 0.03
0.09
0.00
0.0
0.5
1.0
1.5
2.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Source: Fitch.
Fitch U.S. Public Finance Default Rates
AAA
13%
AA
50%
A
25%
BBB
8%
BB
3%
B
0.4%
CCC to C
0.1%
Source: Fitch.
Fitch U.S. Public Finance Rating Mix
(As of June 30, 2014)
1.57
0.77
0.35 0.42 0.43
0.90 1.06
1.17
0.88
0.04
0.0
0.5
1.0
1.5
2.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Fitch NA ABS Default Rates
NA – North America.
Source: Fitch.
AAA
56%
AA
8%
A
16%
BBB
12%
BB
4%
B
4% CCC
0.4%
Fitch NA ABS Rating Mix
(As of June 30, 2014)
NA – North America.
Source: Fitch.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 5
September 24, 2014
North America Default Trends (Continued)
0.46 0.35 0.16
1.32
4.01
10.93
13.22
9.93
4.43
0.61
0
3
6
9
12
15
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Fitch NA CMBS Default Rates
NA – North America.
Source: Fitch.
AAA
43%
AA
6%
A
12%
BBB
11%
BB
9%
B
8%
CCC
11%
Fitch NA CMBS Rating Mix
(As of June 30, 2014)
NA – North America.
Source: Fitch.
0.60 0.42
2.40
17.88
33.73
16.16
12.08
6.46
1.77 1.66
0
5
10
15
20
25
30
35
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Fitch NA RMBS Default Rates
NA – North America.
Source: Fitch.
AAA
13%
AA
10%
A
15%
BBB
14%
BB
12%
B
15%
CCC
21%
Fitch NA RMBS Rating Mix
(As of June 30, 2014)
NA – North America.
Source: Fitch.
1.64 0.99
4.13
15.85
32.94 33.04
8.82
4.09 3.84
0.50
0
5
10
15
20
25
30
35
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
NA – North America. SC – Structured credit.
Source: Fitch.
Fitch NA SC Default Rates
AAA
28%
AA
7%
A
15%
BBB
15%
BB
13%
B
13%
CCC
9%
NA – North America. SC – Structured credit.
Source: Fitch.
Fitch NA SC Rating Mix
(As of June 30, 2014)
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 6
September 24, 2014
Europe, Middle East and Africa Default Trends
0.00 0.00 0.00 0.00
2.48
0.61
0.95
0.36
0.00
0.33
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Source: Fitch.
Fitch EMEA ABS Default Rates
AAA
43%
AA
22%
A
19%
BBB
11%
BB
3%
B
1%
CCC
1%
Source: Fitch.
Fitch EMEA ABS Rating Mix
(As of June 30, 2014)
0.00 0.00
0.23
1.00
1.98
0.34 0.33 0.34
0.56
0.32
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Source: Fitch.
Fitch EMEA Corporate Default Rates
AAA
1%
AA
4%
A
27%
BBB
34%
BB
15%
B
16%
CCC to C
3%
Source: Fitch.
Fitch EMEA Corporate Rating Mix
(As of June 30, 2014)
AAA
5%
AA
23%
A
12%
BBB
39%
BB
15%
B
4%
CCC to C
2%
Source: Fitch.
Fitch International Public Finance Rating Mix
(As of June 30, 2014)
0.00 0.00
0.65
0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.0
0.5
1.0
1.5
2.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
aEMEA comprised 85% of international public finance ratings as of June 30, 2014.
Source: Fitch.
Fitch International Public Finance Default Ratesa
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 7
September 24, 2014
Europe, Middle East and Africa Default Trends (Continued)
0.00 0.00 0.00 0.33
6.55 5.51 5.58
7.42
9.57
1.76
0
3
6
9
12
15
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Source: Fitch.
Fitch EMEA CMBS Default Rates
AAA
10%
AA
14%
A
15%
BBB
24%
BB
11%
B
13%
CCC
13%
Source: Fitch.
Fitch EMEA CMBS Rating Mix
(As of June 30, 2014)
0.07 0.00 0.04
1.77 1.74
0.58
0.89
0.72 0.76
0.40
0.0
0.5
1.0
1.5
2.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Source: Fitch.
Fitch EMEA RMBS Default Rates
AAA
31%
AA
22%
A
15%
BBB
14%
BB
9%
B
6%
CCC
4%
Source: Fitch.
Fitch EMEA RMBS Rating Mix
(As of June 30, 2014)
0.00 0.06 0.42
4.64
12.53
2.31
3.83
1.63 1.35 1.64
0
3
6
9
12
15
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
SC – Structured credit.
Source: Fitch.
Fitch EMEA SC Default Rates
AAA
13%
AA
14%
A
15%
BBB
21%
BB
15%
B
14%
CCC
7%
Fitch EMEA SC Rating Mix
(As of June 30, 2014)
SC – Structured credit.
Source: Fitch.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 8
September 24, 2014
Asia Pacific Default Trends
Latin America Default Trends
0.68 0.63
0.00
1.55
1.99
1.46
0.00
1.26
1.81
0.55
0.0
0.5
1.0
1.5
2.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Source: Fitch.
Fitch Latin America Corporate Default Rates
A
8%
BBB
41%
BB
29%
B
22%
CCC to C
0.3%
Note: 'AAA' and 'AA' are 0%.
Source: Fitch.
Fitch Latin America Corporate Rating Mix
(As of June 30, 2014)
0.00 0.00 0.00
0.84
1.61
1.94
4.28
1.47
0.31
0.00
0.0
1.0
2.0
3.0
4.0
5.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
Fitch APAC Structured Finance Default Rates
APAC – Asia Pacific.
Source: Fitch.
AAA
58%
AA
9%
A
10%
BBB
13%
BB
8%
B
2%
CCC
0.3%
Fitch APAC Structured Finance Rating Mix
(As of June 30, 2014)
APAC – Asia Pacific.
Source: Fitch.
0.00 0.00
0.25
0.47
0.24
0.61
0.00
0.57
0.28 0.25
0.0
0.5
1.0
1.5
2.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 June
2014
YTD
(%)
APAC – Asia Pacific.
Source: Fitch.
Fitch APAC Corporate Default Rates
AA
9%
A
25%
BBB
36%
BB
18%
B
11%
CCC to C
0.2%
APAC – Asia Pacific. Note: ʻAAA’ is 0%.
Source: Fitch.
Fitch APAC Corporate Rating Mix
(As of June 30, 2014)
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 9
September 24, 2014
Profile of First-Half 2014 Defaults
Fitch-Rated Global Corporate IDR Defaults
(January–June 2014)
Issuer Sector Country
Rating at
BOY
Alliance Bank JSC Banking and Finance Kazakhstan C
Aralco S.A. — Industria e Comercio Industrials Brazil B
Baghlan Group FZCO Industrials Azerbaijan B–
Energy Future Competitive Holdings Industrials United States C
Energy Future Holdings Corp. (formerly TXU Corp.) Industrials United States CC
Energy Future Intermediate Holdings, Inc. Industrials United States CC
PT Bakrie Telecom Tbk Industrials Indonesia C
Sifco S.A. Industrials Brazil B–
Solocal Group Industrials France B–
Texas Competitive Electric Holdings Company LLC Industrials United States C
BOY – Beginning of year. IDR – Issuer Default Rating.
Source: Fitch.
ABS
1% CMBS
12%
RMBS
81%
SC
6%
SC – Structured credit.
Source: Fitch.
Fitch Structured Finance First-Half
2014 Impairments
(By Sector)
EMEA
12%
NA
88%
NA – North America.
Source: Fitch.
Fitch Structured Finance First-Half
2014 Impairments
(By Region)
Pre-2003
5%
2003
11%
2004
17%
2005
25%
2006
16%
2007
25%
2008
1%
Source: Fitch.
Fitch Structured Finance First-Half
2014 Impairments
(By Vintage)
B
5.6
B–
0.4
CCC
94.0
Source: Fitch.
Fitch Structured Finance First-Half
2014 Impairments
(By Rating at Beginning of Year)
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 10
September 24, 2014
Annual Global Default Trends By Rating Category
Fitch Global Corporate Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.63 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.68 0.23 0.00 0.00 0.00 0.00 0.00
BBB 0.25 0.00 0.00 0.44 0.32 0.00 0.10 0.00 0.00 0.00
BB 0.00 0.25 0.00 2.29 2.51 0.00 0.00 0.00 1.37 0.00
B 0.47 0.00 0.33 2.88 8.05 0.30 0.56 1.58 1.37 1.08
CCC to C 10.20 2.27 6.06 18.18 53.45 21.82 12.50 31.58 7.14 19.35
Investment Grade 0.10 0.00 0.00 0.57 0.24 0.00 0.05 0.00 0.00 0.00
Speculative Grade 1.06 0.30 0.41 3.23 8.89 1.67 0.91 2.15 1.66 1.12
All 0.32 0.07 0.10 1.28 2.58 0.49 0.30 0.65 0.51 0.35
Source: Fitch.
Fitch Sovereign Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.56 0.00
CCC to C 33.33 0.00 0.00 100.00 0.00 50.00 0.00 100.00 0.00 0.00
Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Speculative Grade 2.94 0.00 0.00 2.27 0.00 2.50 0.00 2.50 2.50 0.00
All 1.11 0.00 0.00 0.96 0.00 0.98 0.00 0.96 0.97 0.00
Source: Fitch.
Fitch Global ABS Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.38 0.00 0.00 0.00 0.00 0.00
A 0.45 0.00 0.00 0.00 0.00 1.00 1.05 0.00 0.00 0.00
BBB 0.15 0.00 0.16 0.00 0.14 0.83 0.18 0.00 0.00 0.00
BB 3.50 0.77 0.00 1.64 1.59 4.24 2.48 6.58 0.00 0.00
B 20.00 10.94 0.00 7.89 13.64 9.09 9.62 10.67 12.50 0.98
CCC 51.85 38.10 27.78 37.93 52.00 29.17 41.18 36.36 30.43 7.69
Investment Grade 0.12 0.00 0.03 0.00 0.06 0.31 0.17 0.00 0.00 0.00
Speculative Grade 17.51 10.17 4.74 8.47 10.77 8.63 9.31 10.44 7.34 0.81
All 1.37 0.68 0.31 0.45 0.67 0.85 1.02 1.02 0.73 0.07
Source: Fitch.
Fitch Global CMBS Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.07 0.04 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.65 1.13 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 1.98 1.87 0.18 0.22 0.63 0.00
BBB 0.00 0.00 0.00 0.43 4.30 7.13 0.61 0.37 0.55 0.00
BB 0.00 0.00 0.00 2.38 11.61 14.08 3.62 3.23 2.89 0.00
B 1.30 1.68 0.85 7.63 16.44 27.79 41.93 14.81 6.20 0.58
CCC 19.67 13.46 11.11 30.61 50.00 47.15 46.82 52.43 30.71 5.63
Investment Grade 0.00 0.00 0.00 0.10 1.37 1.79 0.13 0.09 0.20 0.00
Speculative Grade 1.63 1.28 0.68 5.51 15.22 26.37 32.89 27.46 15.82 2.36
All 0.40 0.30 0.13 1.16 4.28 10.06 12.33 9.48 4.93 0.70
Source: Fitch.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 11
September 24, 2014
Annual Global Default Trends By Rating Category (Continued)
Fitch Global RMBS Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 5.17 9.58 0.19 0.24 0.00 0.00 0.00
AA 0.00 0.00 0.37 11.35 8.13 1.34 0.48 0.00 0.00 0.00
A 0.00 0.03 1.07 20.60 22.66 2.13 1.22 0.16 0.05 0.00
BBB 0.18 0.54 5.84 34.36 43.18 5.82 4.98 0.86 0.00 0.00
BB 1.70 1.73 13.47 50.73 75.41 15.74 12.07 3.22 0.00 0.00
B 8.46 3.66 18.43 71.65 88.28 27.28 28.33 9.29 0.73 0.58
CCC 59.30 46.99 19.39 75.24 96.87 59.52 56.32 33.67 8.44 7.35
Investment Grade 0.02 0.08 1.02 11.20 14.91 1.36 1.06 0.15 0.01 0.00
Speculative Grade 7.26 4.08 15.29 60.59 86.31 43.88 39.60 17.92 3.67 3.32
All 0.56 0.39 2.22 16.59 30.66 14.19 10.47 5.49 1.57 1.42
Source: Fitch.
Fitch Global Structured Credit Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.26 2.52 3.43 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 1.60 5.56 12.40 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 2.31 10.03 31.78 0.27 0.00 0.00 0.00 0.00
BBB 0.14 0.00 5.22 13.47 29.50 4.02 0.36 0.00 0.00 0.00
BB 1.36 0.00 12.03 26.82 27.57 16.86 0.64 0.00 0.94 0.00
B 9.09 10.14 4.11 44.19 48.95 34.48 7.29 2.12 3.49 0.00
CCC 34.69 33.33 23.53 65.00 66.67 62.81 29.53 16.33 14.06 10.66
Investment Grade 0.03 0.00 1.88 6.96 17.80 1.21 0.10 0.00 0.00 0.00
Speculative Grade 7.09 5.26 10.65 38.35 44.77 40.26 12.92 5.92 5.84 2.73
All 0.97 0.63 2.81 12.45 25.69 20.52 6.38 2.84 2.63 1.04
Source: Fitch.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 12
September 24, 2014
Annual North America Default Trends By Rating Category
Fitch North America Corporate Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.70 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.76 0.51 0.00 0.00 0.00 0.00 0.00
BBB 0.39 0.00 0.00 0.64 0.64 0.00 0.21 0.00 0.00 0.00
BB 0.00 0.54 0.00 2.76 2.60 0.00 0.00 0.00 0.00 0.00
B 1.33 0.00 0.00 4.61 11.35 0.00 0.00 1.50 0.00 0.00
CCC to C 14.81 0.00 0.00 20.00 71.43 17.24 12.90 24.14 7.14 17.39
Investment Grade 0.17 0.00 0.00 0.69 0.52 0.00 0.11 0.00 0.00 0.00
Speculative Grade 1.84 0.31 0.00 4.53 13.64 1.40 1.22 2.91 0.67 1.47
All 0.49 0.07 0.00 1.67 3.85 0.40 0.41 0.75 0.17 0.34
Source: Fitch.
Fitch U.S. Public Finance Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 2.50 0.00 0.00 0.00 0.00 1.59 0.00 0.00
B 0.00 0.00 6.25 0.00 7.69 0.00 10.00 0.00 0.00 0.00
CCC to C 33.33 0.00 0.00 25.00 0.00 14.29 0.00 0.00 30.00 0.00
Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Speculative Grade 2.27 0.00 3.33 1.96 1.72 1.49 1.41 1.23 3.37 0.00
All 0.04 0.00 0.06 0.03 0.03 0.03 0.03 0.03 0.09 0.00
Source: Fitch.
Fitch North America ABS Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.45 0.00 0.00 0.00 0.00 0.00
A 0.53 0.00 0.00 0.00 0.00 1.25 1.41 0.00 0.00 0.00
BBB 0.17 0.00 0.18 0.00 0.00 0.94 0.20 0.00 0.00 0.00
BB 3.70 0.81 0.00 0.92 0.91 5.15 3.05 8.20 0.00 0.00
B 20.34 11.67 0.00 6.06 11.43 7.69 12.82 12.90 13.64 1.09
CCC 51.85 38.10 29.41 43.48 38.89 38.89 50.00 50.00 41.18 0.00
Investment Grade 0.14 0.00 0.03 0.00 0.04 0.36 0.19 0.00 0.00 0.00
Speculative Grade 18.15 10.67 5.15 7.88 7.36 9.74 10.42 12.63 9.09 0.52
All 1.57 0.77 0.35 0.42 0.43 0.90 1.06 1.17 0.88 0.04
Source: Fitch.
Fitch North America CMBS Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.05 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.57 1.55 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 2.11 2.45 0.00 0.00 0.27 0.00
BBB 0.00 0.00 0.00 0.35 2.90 8.68 0.39 0.24 0.45 0.00
BB 0.00 0.00 0.00 2.58 9.58 15.30 3.32 2.60 1.93 0.00
B 1.32 1.73 0.89 7.68 15.72 28.55 44.29 15.20 3.75 0.00
CCC 19.67 13.46 12.12 34.09 50.85 53.56 47.15 53.30 28.80 5.22
Investment Grade 0.00 0.00 0.00 0.08 1.01 2.12 0.06 0.04 0.12 0.00
Speculative Grade 1.71 1.36 0.74 5.85 14.01 27.55 34.34 28.40 14.58 2.11
All 0.46 0.35 0.16 1.32 4.01 10.93 13.22 9.93 4.43 0.61
Source: Fitch.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 13
September 24, 2014
Annual North America Default Trends By Rating Category (Continued)
Fitch North America RMBS Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 5.51 10.47 0.22 0.27 0.00 0.00 0.00
AA 0.00 0.00 0.41 12.58 9.70 1.69 0.63 0.00 0.00 0.00
A 0.00 0.03 1.19 23.26 27.42 2.81 1.57 0.20 0.06 0.00
BBB 0.20 0.60 6.48 39.22 51.26 7.19 6.14 1.11 0.00 0.00
BB 1.79 1.84 14.50 53.98 79.98 17.80 14.52 3.58 0.00 0.00
B 8.36 3.71 18.81 72.14 89.94 28.35 30.32 10.02 0.69 0.58
CCC 59.30 48.15 20.93 79.79 98.28 60.39 57.28 34.19 8.08 7.23
Investment Grade 0.03 0.09 1.10 12.15 16.77 1.62 1.27 0.19 0.02 0.00
Speculative Grade 7.43 4.27 16.16 63.07 89.11 45.73 42.18 19.06 3.65 3.41
All 0.60 0.42 2.40 17.88 33.73 16.16 12.08 6.46 1.77 1.66
Source: Fitch.
Fitch North America Structured Credit Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.47 2.77 5.42 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 2.17 6.12 15.09 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 2.54 10.01 42.44 0.50 0.00 0.00 0.00 0.00
BBB 0.21 0.00 7.37 15.89 40.34 6.91 0.68 0.00 0.00 0.00
BB 1.89 0.00 16.42 33.06 33.96 27.20 1.20 0.00 1.68 0.00
B 10.87 12.20 5.17 46.25 55.56 51.17 11.64 3.27 4.27 0.00
CCC 43.59 42.86 28.00 67.83 63.83 79.28 29.86 17.47 15.56 4.23
Investment Grade 0.05 0.00 2.76 8.21 24.85 2.39 0.22 0.00 0.00 0.00
Speculative Grade 9.25 6.72 13.94 43.96 50.06 56.72 15.63 7.33 7.55 1.23
All 1.64 0.99 4.13 15.85 32.94 33.04 8.82 4.09 3.84 0.50
Source: Fitch.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 14
September 24, 2014
Annual Europe, Middle East and Africa Default Trends By Rating Category
Fitch EMEA Corporate Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.76 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.92 0.00 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 2.70 4.81 0.00 0.00 0.00 2.21 0.00
B 0.00 0.00 0.00 0.84 5.97 0.81 1.47 0.74 1.42 1.23
CCC to C 0.00 0.00 18.18 12.50 35.71 16.67 14.29 40.00 0.00 20.00
Investment Grade 0.00 0.00 0.00 0.60 0.00 0.00 0.00 0.00 0.00 0.00
Speculative Grade 0.00 0.00 0.91 2.10 7.14 1.32 1.26 1.11 1.74 0.93
All 0.00 0.00 0.23 1.00 1.98 0.34 0.33 0.34 0.56 0.32
Source: Fitch.
Fitch International Public Finance Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
CCC to C 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Speculative Grade 0.00 0.00 5.26 0.00 0.00 0.00 0.00 0.00 0.00 0.00
All 0.00 0.00 0.65 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Source: Fitch.
Fitch EMEA ABS Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 0.00 1.52 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 0.00 8.33 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 20.00 13.33 0.00 0.00 0.00 0.00
CCC 0.00 0.00 0.00 0.00 85.71 0.00 25.00 12.50 0.00 20.00
Investment Grade 0.00 0.00 0.00 0.00 0.29 0.00 0.00 0.00 0.00 0.00
Speculative Grade 0.00 0.00 0.00 0.00 33.33 5.13 7.32 3.23 0.00 5.26
All 0.00 0.00 0.00 0.00 2.48 0.61 0.95 0.36 0.00 0.33
Source: Fitch.
Fitch EMEA CMBS Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.64 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 1.16 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 2.04 0.00 0.88 0.93 2.25 0.00
BBB 0.00 0.00 0.00 1.12 12.72 0.79 1.82 1.04 1.12 0.00
BB 0.00 0.00 0.00 1.67 33.85 8.33 5.97 8.20 9.80 0.00
B 0.00 0.00 0.00 0.00 41.67 16.90 10.61 14.29 19.30 4.55
CCC 0.00 0.00 0.00 0.00 40.00 32.10 32.43 43.08 47.27 10.00
Investment Grade 0.00 0.00 0.00 0.24 3.61 0.17 0.63 0.50 0.98 0.00
Speculative Grade 0.00 0.00 0.00 1.32 35.37 19.64 16.91 22.22 25.77 4.69
All 0.00 0.00 0.00 0.33 6.55 5.51 5.58 7.42 9.57 1.76
Source: Fitch.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 15
September 24, 2014
Annual Europe, Middle East and Africa Default Trends By Rating Category (Continued)
Fitch EMEA RMBS Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.29 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 1.15 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 1.12 0.00 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 1.43 0.19 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 10.93 7.02 2.27 1.14 1.02 0.00 0.00
B 50.00 0.00 0.00 57.89 32.00 4.55 3.23 1.85 1.41 0.63
CCC 0.00 0.00 8.33 10.00 40.98 12.66 25.33 18.18 18.82 9.64
Investment Grade 0.00 0.00 0.00 0.80 0.04 0.00 0.00 0.00 0.00 0.00
Speculative Grade 2.38 0.00 0.65 14.86 18.79 5.30 6.98 4.72 4.30 2.05
All 0.07 0.00 0.04 1.77 1.74 0.58 0.89 0.72 0.76 0.40
Source: Fitch.
Fitch EMEA Structured Credit Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 1.39 0.86 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.37 3.35 7.60 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 2.02 3.80 11.06 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 6.09 13.31 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 10.42 16.77 0.63 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 31.91 31.82 4.27 1.44 0.78 2.70 0.00
CCC 0.00 9.09 11.11 41.18 78.18 13.97 29.57 14.29 10.71 20.00
Investment Grade 0.00 0.00 0.39 2.93 6.79 0.00 0.00 0.00 0.00 0.00
Speculative Grade 0.00 0.81 0.75 17.79 31.93 5.90 9.18 4.01 3.47 4.46
All 0.00 0.06 0.42 4.64 12.53 2.31 3.83 1.63 1.35 1.64
Source: Fitch.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 16
September 24, 2014
Annual Asia Pacific Default Trends By Rating Category
Fitch Latin America Corporate Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 1.43 0.00 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.22 0.00
B 0.00 0.00 0.00 1.85 5.88 0.00 0.00 2.47 4.00 2.50
CCC to C 14.29 11.11 0.00 20.00 12.50 27.27 0.00 100.00 33.33 0.00
Investment Grade 0.00 0.00 0.00 1.06 0.00 0.00 0.00 0.00 0.00 0.00
Speculative Grade 1.25 1.06 0.00 2.02 3.81 2.68 0.00 2.38 3.57 1.08
All 0.68 0.63 0.00 1.55 1.99 1.46 0.00 1.26 1.81 0.55
Source: Fitch.
Annual Latin America Default Trends By Rating Category
Fitch Asia Pacific Corporate Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 1.64 0.00 0.00 0.00 0.00 1.56 0.00
B 0.00 0.00 7.69 4.55 4.55 0.00 0.00 3.45 0.00 0.00
CCC 0.00 0.00 0.00 0.00 0.00 66.67 0.00 50.00 0.00 50.00
Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Speculative Grade 0.00 0.00 1.27 2.41 1.28 2.47 0.00 2.27 1.10 0.90
All 0.00 0.00 0.25 0.47 0.24 0.61 0.00 0.57 0.28 0.25
Source: Fitch.
Fitch Asia Pacific Structured Finance Default Rates
(%) 2005 2006 2007 2008 2009 2010 2011 2012 2013
June 2014
YTD
AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
BBB 0.00 0.00 0.00 0.00 2.54 0.00 0.00 0.00 0.00 0.00
BB 0.00 0.00 0.00 3.45 9.09 2.00 2.04 0.00 0.00 0.00
B 0.00 0.00 0.00 16.67 15.79 16.67 13.04 0.00 0.00 0.00
CCC 0.00 0.00 0.00 50.00 0.00 20.83 73.33 56.25 33.33 0.00
Investment Grade 0.00 0.00 0.00 0.00 0.50 0.00 0.00 0.00 0.00 0.00
Speculative Grade 0.00 0.00 0.00 7.69 10.53 10.91 25.49 10.23 2.44 0.00
All 0.00 0.00 0.00 0.84 1.61 1.94 4.28 1.47 0.31 0.00
Source: Fitch.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 17
September 24, 2014
Methodology
Corporates
Fitch’s corporate default rates are calculated on an issuer basis, examining the long-term
Issuer Default Ratings (IDRs), including Fitch global, publicly rated financial and nonfinancial
corporate entities (including Fitch-rated parent companies and their subsidiaries, where the
subsidiaries have outstanding debt or securities rated by Fitch). Fitch employs a static pool
approach in calculating default rates. The static pools or, alternatively, cohorts are created by
grouping issuer ratings that are active and outstanding at the beginning of the period under
observation.
Fitch defines a default as the failure of an obligor to make timely payment of principal and/or
interest under contractual terms of any financial obligation, or the bankruptcy filing,
administration, receivership, liquidation or other winding-up or cessation of the business of an
obligor. Default also includes the distressed exchange of an obligation when both of the
following apply: the restructuring imposes a material reduction in terms compared with the
original contractual terms; the restructuring or exchange is conducted in order to avoid
bankruptcy, similar insolvency or intervention proceedings or a traditional payment default.
All public ratings are included in the static pool data until the ratings are withdrawn; they are
then excluded from future static pools. However, for the purpose of calculating corporate
default rates, Fitch tracks withdrawn ratings on a continual basis and includes defaults on
withdrawn ratings for the cohorts in which the ratings were active and outstanding.
Sovereigns
Fitch’s sovereign default rates are also calculated on an issuer basis and include all global,
publicly rated, sovereign long-term foreign-currency IDRs. Fitch employs a static pool approach
in calculating sovereign default (same as above).
Fitch defines a sovereign default as the failure to make timely payment of principal and/or
interest on either a rated foreign-currency debt instrument or other material foreign-currency
debt obligations, such as Paris or London Club liabilities, where the sovereign in question was
rated by Fitch at the time of such a default or the distressed exchange of an obligation, where
creditors are offered securities with diminished structural or economic terms compared with the
existing obligation.
International Public Finance
Fitch’s international public finance default rates are calculated on an issuer basis and
encompass all Fitch global, publicly rated, international public finance long-term foreign-
currency IDRs. Fitch employs a static pool approach in calculating default rates (same as
above).
An international public finance default is defined as the failure of an obligor to make timely
payment of principal and/or interest under contractual terms of any financial obligation, or the
distressed exchange of an obligation, where creditors are offered securities with diminished
structural or economic terms compared with the existing obligation.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 18
September 24, 2014
U.S. Public Finance
Fitch employs a static pool approach in calculating U.S. public finance default rates and
includes all Fitch publicly rated unenhanced long-term ratings. Fitch uses a security rating
derived by consolidating identical ratings on all public, unenhanced-parity obligations.
Default on a U.S. public finance security is defined as the failure to make a payment of
principal and/or interest under the contractual terms of the rated obligation, or the bankruptcy
filings, administration, receivership, liquidation or other winding-up or cessation of the business
of an issuer/obligor. Default also includes the distressed exchange of an obligation when both
of the following apply: the restructuring imposes a material reduction in terms compared with
the original contractual terms; the restructuring or exchange is conducted in order to avoid
bankruptcy, similar insolvency or intervention proceedings or a traditional payment default.
Structured Finance
All Fitch global public structured finance (ABS, CMBS, RMBS and structured credit) long-term,
international debt ratings are included in the statistics discussed in this report. Default rates are
based on rated tranches. A tranche is defined as a class of securities or certificates within the
same rating category. Similarly rated tranches from the same deal at issuance are counted
separately as discrete observations. Private ratings and insured issues, where the rating is
dependent on a third-party credit enhancement provider, are excluded from the study. Interest-
only bonds are also excluded.
To calculate default rates, cohorts are created using ratings outstanding at the beginning of the
observation period. Across structured finance, Fitch tracks default or near default (or
alternatively, impairment). This includes all bonds downgraded to ‘CC’ or below where either a
payment default has occurred or a default of some kind appears probable.
It is important to observe that the default rates outlined in this study represent a distinct
historical period and may not represent future rating default patterns. Default rates are
influenced by a number of factors, including credit enhancement, macroeconomic variables,
and credit conditions.
Credit Market Research
Fitch Ratings Global Cross-Asset Default Update 19
September 24, 2014
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information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings Fitch must rely
on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal
and tax matters. Further, ratings are inherently forward-looking and embody assumptions and predictions about future events
that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings can be affected by
future events or conditions that were not anticipated at the time a rating was issued or affirmed.
The information in this report is provided “as is” without any representation or warranty of any kind. A Fitch rating is an opinion
as to the creditworthiness of a security. This opinion is based on established criteria and methodologies that Fitch is
continuously evaluating and updating. Therefore, ratings are the collective work product of Fitch and no individual, or group of
individuals, is solely responsible for a rating. The rating does not address the risk of loss due to risks other than credit risk,
unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared
authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein.
The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for
the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the
securities. Ratings may be changed or withdrawn at anytime for any reason in the sole discretion of Fitch. Fitch does not
provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not
comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or
taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors,
and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency
equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or
guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to
US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall
not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the
United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of
any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available
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Fitch Ratings Global Cross-Asset Default Update

  • 1. Credit Market Research www.fitchratings.com September 24, 2014 Global Fitch Ratings Global Cross-Asset Default Update Benign Conditions Endure in 2014 Special Report Modest, Low Rated Defaults: Global default activity remains subdued in 2014, a product of central bank easing and stable to improving regional economies. Across corporates, structured finance, sovereigns and public finance, Fitch recorded no investment-grade defaults in the first half of the year and unexceptional activity below investment grade. Corporates: The Fitch-rated global corporate default rate through June was 0.35% and the speculative-grade default rate was 1.12%. Corporate rating activity was both balanced and contained in the first half, with less than 10% of ratings affected by downgrades and upgrades. In addition, rating stability spanned financial and industrial entities. Good fundamentals notwithstanding, the return of shareholder-oriented transactions signals that post-crisis conservatism, a key support of the low default rate environment, is waning. Sovereigns: There were no sovereign defaults recorded in the first six months of the year. However, Argentina’s July missed payment brings the year’s tally to one following its downgrade to ‘RD’. Developed market credit quality stabilized in the first half while emerging market momentum slowed, effectively ending the convergence of developed and emerging market sovereign ratings. Downside risks remain, most notably for select sovereigns affected by geopolitical stress. Public Finance: There were no Fitch-rated U.S. or international public finance defaults recorded in the first half of 2014. U.S. states and local governments continue to manage ongoing budget challenges, including significant pension and healthcare liabilities but with the backdrop of improving tax receipts. Puerto Rico’s public finances remain a key area of concern. Structured Finance: Impairment activity across global structured finance in the first half of 2014 was the lowest since the economic crisis. Overwhelmingly, impairments originated from older vintage ‘CCC’ rated bonds. The resulting speculative-grade impairment rate was 3.1%. The ABS sector registered the lowest overall impairment rate, 0.07%, versus 0.7% for CMBS, 1.0% for structured credit (SC) and 1.4% for RMBS. Increased lender competition is driving down asset quality in certain sectors like CMBS and subprime auto ABS, which could put pressure on future rating performance. Related Research Fitch Ratings Global Corporate Finance 2013 Transition and Default Study (March 2014) Fitch Ratings Global Structured Finance 2013 Transition and Default Study (March 2014) Fitch Ratings Sovereign 2013 Transition and Default Study (March 2014) Fitch Ratings International Public Finance 2013 Transition and Default Study (March 2014) Fitch Ratings U.S. Public Finance 2013 Transition and Default Study (March 2014) Analysts Charlotte L. Needham +1 212 908-0794 charlotte.needham@fitchratings.com Stephanie K. Mah +1 212 908-0884 stephanie.mah@fitchratings.com Mariarosa Verde +1 212 908-0791 mariarosa.verde@fitchratings.com Group Credit Officers John Hatton +44 20 3530-1061 john.hatton@fitchratings.com Stuart Jennings +44 20 3530-1142 stuart.jennings@fitchratings.com Thomas McCormick +1 212 908-0235 thomas.mccormick@fitchratings.com James Moss +1 312 368-3213 james.moss@fitchratings.com Fitch Global Default Rates by Major Sector: First-Half 2014 (%) Corporates Sovereigns U.S. Public Finance Int’l Public Finance ABS a CMBS a RMBS a Structured Credit a AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 B 1.08 0.00 0.00 0.00 0.98 0.58 0.58 0.00 CCC b 19.35 0.00 0.00 0.00 7.69 5.63 7.35 10.66 Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Speculative Grade 1.12 0.00 0.00 0.00 0.81 2.36 3.32 2.73 All 0.35 0.00 0.00 0.00 0.07 0.70 1.42 1.04 a Includes impairments defined as migration to ‘CC’, ‘C’ or ‘D’. b Includes ‘CCC’ to ‘C’ categories for corporates, sovereigns and public finance. Source: Fitch.
  • 2. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 2 September 24, 2014 Global Default Trends Related Criteria Distressed Debt Exchange (June 2014) 0.32 0.07 0.10 1.28 2.58 0.49 0.30 0.65 0.51 0.35 0.0 0.5 1.0 1.5 2.0 2.5 3.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Source: Fitch. Fitch Global Corporate Default Rates AAA 0.5% AA 4% A 25% BBB 39% BB 16% B 12% CCC to C 2% Source: Fitch. Fitch Global Corporate Rating Mix (As of June 30, 2014) 1.37 0.68 0.31 0.45 0.67 0.85 1.02 1.02 0.73 0.07 0.0 0.5 1.0 1.5 2.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Fitch Global ABS Default Rates Source: Fitch. AAA 53% AA 9% A 16% BBB 13% BB 5% B 4% CCC 0.5% Source: Fitch. Fitch Global ABS Rating Mix (As of June 30, 2014) 1.11 0.00 0.00 0.96 0.00 0.98 0.00 0.96 0.97 0.00 0.0 0.5 1.0 1.5 2.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) aOne default recorded in each year, 2005, 2008, 2010, 2012, 2013, consisting of Dominican Republic, Ecuador, Jamaica, Greece and Jamaica, respectively. Source: Fitch. Fitch Sovereign Default Ratesa AAA 12% AA 9% A 14% BBB 25% BB 17% B 21% CCC to C 2% Source: Fitch. Fitch Sovereign Rating Mix (As of June 30, 2014)
  • 3. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 3 September 24, 2014 Global Default Trends (Continued) 0.40 0.30 0.13 1.16 4.28 10.06 12.33 9.48 4.93 0.70 0 3 6 9 12 15 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Source: Fitch. Fitch Global CMBS Default Rates AAA 40% AA 7% A 13% BBB 12% BB 9% B 8% CCC 11% Source: Fitch. Fitch Global CMBS Rating Mix (As of June 30, 2014) 0.56 0.39 2.22 16.59 30.66 14.19 10.47 5.49 1.57 1.42 0 5 10 15 20 25 30 35 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Fitch Global RMBS Default Rates Source: Fitch. AAA 18% AA 12% A 15% BBB 14% BB 11% B 13% CCC 18% Source: Fitch. Fitch Global RMBS Rating Mix (As of June 30, 2014) 0.97 0.63 2.81 12.45 25.69 20.52 6.38 2.84 2.63 1.04 0 5 10 15 20 25 30 35 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) SC – Structured credit. Source: Fitch. Fitch Global SC Default Rates AAA 20% AA 11% A 15%BBB 18% BB 14% B 13% CCC 8% SC – Structured credit. Source: Fitch. Fitch Global SC Rating Mix (As of June 30, 2014)
  • 4. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 4 September 24, 2014 North America Default Trends 0.49 0.07 0.00 1.67 3.85 0.40 0.41 0.75 0.17 0.34 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) NA – North America. Source: Fitch. Fitch NA Corporate Default Rates AAA 0.4% AA 4% A 29% BBB 44% BB 13% B 7% CCC to C 2% NA – North America. Source: Fitch. Fitch NA Corporate Rating Mix (As of June 30, 2014) 0.04 0.00 0.06 0.03 0.03 0.03 0.03 0.03 0.09 0.00 0.0 0.5 1.0 1.5 2.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Source: Fitch. Fitch U.S. Public Finance Default Rates AAA 13% AA 50% A 25% BBB 8% BB 3% B 0.4% CCC to C 0.1% Source: Fitch. Fitch U.S. Public Finance Rating Mix (As of June 30, 2014) 1.57 0.77 0.35 0.42 0.43 0.90 1.06 1.17 0.88 0.04 0.0 0.5 1.0 1.5 2.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Fitch NA ABS Default Rates NA – North America. Source: Fitch. AAA 56% AA 8% A 16% BBB 12% BB 4% B 4% CCC 0.4% Fitch NA ABS Rating Mix (As of June 30, 2014) NA – North America. Source: Fitch.
  • 5. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 5 September 24, 2014 North America Default Trends (Continued) 0.46 0.35 0.16 1.32 4.01 10.93 13.22 9.93 4.43 0.61 0 3 6 9 12 15 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Fitch NA CMBS Default Rates NA – North America. Source: Fitch. AAA 43% AA 6% A 12% BBB 11% BB 9% B 8% CCC 11% Fitch NA CMBS Rating Mix (As of June 30, 2014) NA – North America. Source: Fitch. 0.60 0.42 2.40 17.88 33.73 16.16 12.08 6.46 1.77 1.66 0 5 10 15 20 25 30 35 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Fitch NA RMBS Default Rates NA – North America. Source: Fitch. AAA 13% AA 10% A 15% BBB 14% BB 12% B 15% CCC 21% Fitch NA RMBS Rating Mix (As of June 30, 2014) NA – North America. Source: Fitch. 1.64 0.99 4.13 15.85 32.94 33.04 8.82 4.09 3.84 0.50 0 5 10 15 20 25 30 35 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) NA – North America. SC – Structured credit. Source: Fitch. Fitch NA SC Default Rates AAA 28% AA 7% A 15% BBB 15% BB 13% B 13% CCC 9% NA – North America. SC – Structured credit. Source: Fitch. Fitch NA SC Rating Mix (As of June 30, 2014)
  • 6. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 6 September 24, 2014 Europe, Middle East and Africa Default Trends 0.00 0.00 0.00 0.00 2.48 0.61 0.95 0.36 0.00 0.33 0.0 0.5 1.0 1.5 2.0 2.5 3.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Source: Fitch. Fitch EMEA ABS Default Rates AAA 43% AA 22% A 19% BBB 11% BB 3% B 1% CCC 1% Source: Fitch. Fitch EMEA ABS Rating Mix (As of June 30, 2014) 0.00 0.00 0.23 1.00 1.98 0.34 0.33 0.34 0.56 0.32 0.0 0.5 1.0 1.5 2.0 2.5 3.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Source: Fitch. Fitch EMEA Corporate Default Rates AAA 1% AA 4% A 27% BBB 34% BB 15% B 16% CCC to C 3% Source: Fitch. Fitch EMEA Corporate Rating Mix (As of June 30, 2014) AAA 5% AA 23% A 12% BBB 39% BB 15% B 4% CCC to C 2% Source: Fitch. Fitch International Public Finance Rating Mix (As of June 30, 2014) 0.00 0.00 0.65 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0 0.5 1.0 1.5 2.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) aEMEA comprised 85% of international public finance ratings as of June 30, 2014. Source: Fitch. Fitch International Public Finance Default Ratesa
  • 7. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 7 September 24, 2014 Europe, Middle East and Africa Default Trends (Continued) 0.00 0.00 0.00 0.33 6.55 5.51 5.58 7.42 9.57 1.76 0 3 6 9 12 15 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Source: Fitch. Fitch EMEA CMBS Default Rates AAA 10% AA 14% A 15% BBB 24% BB 11% B 13% CCC 13% Source: Fitch. Fitch EMEA CMBS Rating Mix (As of June 30, 2014) 0.07 0.00 0.04 1.77 1.74 0.58 0.89 0.72 0.76 0.40 0.0 0.5 1.0 1.5 2.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Source: Fitch. Fitch EMEA RMBS Default Rates AAA 31% AA 22% A 15% BBB 14% BB 9% B 6% CCC 4% Source: Fitch. Fitch EMEA RMBS Rating Mix (As of June 30, 2014) 0.00 0.06 0.42 4.64 12.53 2.31 3.83 1.63 1.35 1.64 0 3 6 9 12 15 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) SC – Structured credit. Source: Fitch. Fitch EMEA SC Default Rates AAA 13% AA 14% A 15% BBB 21% BB 15% B 14% CCC 7% Fitch EMEA SC Rating Mix (As of June 30, 2014) SC – Structured credit. Source: Fitch.
  • 8. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 8 September 24, 2014 Asia Pacific Default Trends Latin America Default Trends 0.68 0.63 0.00 1.55 1.99 1.46 0.00 1.26 1.81 0.55 0.0 0.5 1.0 1.5 2.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Source: Fitch. Fitch Latin America Corporate Default Rates A 8% BBB 41% BB 29% B 22% CCC to C 0.3% Note: 'AAA' and 'AA' are 0%. Source: Fitch. Fitch Latin America Corporate Rating Mix (As of June 30, 2014) 0.00 0.00 0.00 0.84 1.61 1.94 4.28 1.47 0.31 0.00 0.0 1.0 2.0 3.0 4.0 5.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) Fitch APAC Structured Finance Default Rates APAC – Asia Pacific. Source: Fitch. AAA 58% AA 9% A 10% BBB 13% BB 8% B 2% CCC 0.3% Fitch APAC Structured Finance Rating Mix (As of June 30, 2014) APAC – Asia Pacific. Source: Fitch. 0.00 0.00 0.25 0.47 0.24 0.61 0.00 0.57 0.28 0.25 0.0 0.5 1.0 1.5 2.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD (%) APAC – Asia Pacific. Source: Fitch. Fitch APAC Corporate Default Rates AA 9% A 25% BBB 36% BB 18% B 11% CCC to C 0.2% APAC – Asia Pacific. Note: ʻAAA’ is 0%. Source: Fitch. Fitch APAC Corporate Rating Mix (As of June 30, 2014)
  • 9. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 9 September 24, 2014 Profile of First-Half 2014 Defaults Fitch-Rated Global Corporate IDR Defaults (January–June 2014) Issuer Sector Country Rating at BOY Alliance Bank JSC Banking and Finance Kazakhstan C Aralco S.A. — Industria e Comercio Industrials Brazil B Baghlan Group FZCO Industrials Azerbaijan B– Energy Future Competitive Holdings Industrials United States C Energy Future Holdings Corp. (formerly TXU Corp.) Industrials United States CC Energy Future Intermediate Holdings, Inc. Industrials United States CC PT Bakrie Telecom Tbk Industrials Indonesia C Sifco S.A. Industrials Brazil B– Solocal Group Industrials France B– Texas Competitive Electric Holdings Company LLC Industrials United States C BOY – Beginning of year. IDR – Issuer Default Rating. Source: Fitch. ABS 1% CMBS 12% RMBS 81% SC 6% SC – Structured credit. Source: Fitch. Fitch Structured Finance First-Half 2014 Impairments (By Sector) EMEA 12% NA 88% NA – North America. Source: Fitch. Fitch Structured Finance First-Half 2014 Impairments (By Region) Pre-2003 5% 2003 11% 2004 17% 2005 25% 2006 16% 2007 25% 2008 1% Source: Fitch. Fitch Structured Finance First-Half 2014 Impairments (By Vintage) B 5.6 B– 0.4 CCC 94.0 Source: Fitch. Fitch Structured Finance First-Half 2014 Impairments (By Rating at Beginning of Year)
  • 10. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 10 September 24, 2014 Annual Global Default Trends By Rating Category Fitch Global Corporate Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.63 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.68 0.23 0.00 0.00 0.00 0.00 0.00 BBB 0.25 0.00 0.00 0.44 0.32 0.00 0.10 0.00 0.00 0.00 BB 0.00 0.25 0.00 2.29 2.51 0.00 0.00 0.00 1.37 0.00 B 0.47 0.00 0.33 2.88 8.05 0.30 0.56 1.58 1.37 1.08 CCC to C 10.20 2.27 6.06 18.18 53.45 21.82 12.50 31.58 7.14 19.35 Investment Grade 0.10 0.00 0.00 0.57 0.24 0.00 0.05 0.00 0.00 0.00 Speculative Grade 1.06 0.30 0.41 3.23 8.89 1.67 0.91 2.15 1.66 1.12 All 0.32 0.07 0.10 1.28 2.58 0.49 0.30 0.65 0.51 0.35 Source: Fitch. Fitch Sovereign Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.56 0.00 CCC to C 33.33 0.00 0.00 100.00 0.00 50.00 0.00 100.00 0.00 0.00 Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Speculative Grade 2.94 0.00 0.00 2.27 0.00 2.50 0.00 2.50 2.50 0.00 All 1.11 0.00 0.00 0.96 0.00 0.98 0.00 0.96 0.97 0.00 Source: Fitch. Fitch Global ABS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.38 0.00 0.00 0.00 0.00 0.00 A 0.45 0.00 0.00 0.00 0.00 1.00 1.05 0.00 0.00 0.00 BBB 0.15 0.00 0.16 0.00 0.14 0.83 0.18 0.00 0.00 0.00 BB 3.50 0.77 0.00 1.64 1.59 4.24 2.48 6.58 0.00 0.00 B 20.00 10.94 0.00 7.89 13.64 9.09 9.62 10.67 12.50 0.98 CCC 51.85 38.10 27.78 37.93 52.00 29.17 41.18 36.36 30.43 7.69 Investment Grade 0.12 0.00 0.03 0.00 0.06 0.31 0.17 0.00 0.00 0.00 Speculative Grade 17.51 10.17 4.74 8.47 10.77 8.63 9.31 10.44 7.34 0.81 All 1.37 0.68 0.31 0.45 0.67 0.85 1.02 1.02 0.73 0.07 Source: Fitch. Fitch Global CMBS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.07 0.04 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.65 1.13 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.00 1.98 1.87 0.18 0.22 0.63 0.00 BBB 0.00 0.00 0.00 0.43 4.30 7.13 0.61 0.37 0.55 0.00 BB 0.00 0.00 0.00 2.38 11.61 14.08 3.62 3.23 2.89 0.00 B 1.30 1.68 0.85 7.63 16.44 27.79 41.93 14.81 6.20 0.58 CCC 19.67 13.46 11.11 30.61 50.00 47.15 46.82 52.43 30.71 5.63 Investment Grade 0.00 0.00 0.00 0.10 1.37 1.79 0.13 0.09 0.20 0.00 Speculative Grade 1.63 1.28 0.68 5.51 15.22 26.37 32.89 27.46 15.82 2.36 All 0.40 0.30 0.13 1.16 4.28 10.06 12.33 9.48 4.93 0.70 Source: Fitch.
  • 11. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 11 September 24, 2014 Annual Global Default Trends By Rating Category (Continued) Fitch Global RMBS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 5.17 9.58 0.19 0.24 0.00 0.00 0.00 AA 0.00 0.00 0.37 11.35 8.13 1.34 0.48 0.00 0.00 0.00 A 0.00 0.03 1.07 20.60 22.66 2.13 1.22 0.16 0.05 0.00 BBB 0.18 0.54 5.84 34.36 43.18 5.82 4.98 0.86 0.00 0.00 BB 1.70 1.73 13.47 50.73 75.41 15.74 12.07 3.22 0.00 0.00 B 8.46 3.66 18.43 71.65 88.28 27.28 28.33 9.29 0.73 0.58 CCC 59.30 46.99 19.39 75.24 96.87 59.52 56.32 33.67 8.44 7.35 Investment Grade 0.02 0.08 1.02 11.20 14.91 1.36 1.06 0.15 0.01 0.00 Speculative Grade 7.26 4.08 15.29 60.59 86.31 43.88 39.60 17.92 3.67 3.32 All 0.56 0.39 2.22 16.59 30.66 14.19 10.47 5.49 1.57 1.42 Source: Fitch. Fitch Global Structured Credit Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.26 2.52 3.43 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 1.60 5.56 12.40 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 2.31 10.03 31.78 0.27 0.00 0.00 0.00 0.00 BBB 0.14 0.00 5.22 13.47 29.50 4.02 0.36 0.00 0.00 0.00 BB 1.36 0.00 12.03 26.82 27.57 16.86 0.64 0.00 0.94 0.00 B 9.09 10.14 4.11 44.19 48.95 34.48 7.29 2.12 3.49 0.00 CCC 34.69 33.33 23.53 65.00 66.67 62.81 29.53 16.33 14.06 10.66 Investment Grade 0.03 0.00 1.88 6.96 17.80 1.21 0.10 0.00 0.00 0.00 Speculative Grade 7.09 5.26 10.65 38.35 44.77 40.26 12.92 5.92 5.84 2.73 All 0.97 0.63 2.81 12.45 25.69 20.52 6.38 2.84 2.63 1.04 Source: Fitch.
  • 12. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 12 September 24, 2014 Annual North America Default Trends By Rating Category Fitch North America Corporate Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.70 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.76 0.51 0.00 0.00 0.00 0.00 0.00 BBB 0.39 0.00 0.00 0.64 0.64 0.00 0.21 0.00 0.00 0.00 BB 0.00 0.54 0.00 2.76 2.60 0.00 0.00 0.00 0.00 0.00 B 1.33 0.00 0.00 4.61 11.35 0.00 0.00 1.50 0.00 0.00 CCC to C 14.81 0.00 0.00 20.00 71.43 17.24 12.90 24.14 7.14 17.39 Investment Grade 0.17 0.00 0.00 0.69 0.52 0.00 0.11 0.00 0.00 0.00 Speculative Grade 1.84 0.31 0.00 4.53 13.64 1.40 1.22 2.91 0.67 1.47 All 0.49 0.07 0.00 1.67 3.85 0.40 0.41 0.75 0.17 0.34 Source: Fitch. Fitch U.S. Public Finance Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BB 0.00 0.00 2.50 0.00 0.00 0.00 0.00 1.59 0.00 0.00 B 0.00 0.00 6.25 0.00 7.69 0.00 10.00 0.00 0.00 0.00 CCC to C 33.33 0.00 0.00 25.00 0.00 14.29 0.00 0.00 30.00 0.00 Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Speculative Grade 2.27 0.00 3.33 1.96 1.72 1.49 1.41 1.23 3.37 0.00 All 0.04 0.00 0.06 0.03 0.03 0.03 0.03 0.03 0.09 0.00 Source: Fitch. Fitch North America ABS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.45 0.00 0.00 0.00 0.00 0.00 A 0.53 0.00 0.00 0.00 0.00 1.25 1.41 0.00 0.00 0.00 BBB 0.17 0.00 0.18 0.00 0.00 0.94 0.20 0.00 0.00 0.00 BB 3.70 0.81 0.00 0.92 0.91 5.15 3.05 8.20 0.00 0.00 B 20.34 11.67 0.00 6.06 11.43 7.69 12.82 12.90 13.64 1.09 CCC 51.85 38.10 29.41 43.48 38.89 38.89 50.00 50.00 41.18 0.00 Investment Grade 0.14 0.00 0.03 0.00 0.04 0.36 0.19 0.00 0.00 0.00 Speculative Grade 18.15 10.67 5.15 7.88 7.36 9.74 10.42 12.63 9.09 0.52 All 1.57 0.77 0.35 0.42 0.43 0.90 1.06 1.17 0.88 0.04 Source: Fitch. Fitch North America CMBS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.05 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.57 1.55 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.00 2.11 2.45 0.00 0.00 0.27 0.00 BBB 0.00 0.00 0.00 0.35 2.90 8.68 0.39 0.24 0.45 0.00 BB 0.00 0.00 0.00 2.58 9.58 15.30 3.32 2.60 1.93 0.00 B 1.32 1.73 0.89 7.68 15.72 28.55 44.29 15.20 3.75 0.00 CCC 19.67 13.46 12.12 34.09 50.85 53.56 47.15 53.30 28.80 5.22 Investment Grade 0.00 0.00 0.00 0.08 1.01 2.12 0.06 0.04 0.12 0.00 Speculative Grade 1.71 1.36 0.74 5.85 14.01 27.55 34.34 28.40 14.58 2.11 All 0.46 0.35 0.16 1.32 4.01 10.93 13.22 9.93 4.43 0.61 Source: Fitch.
  • 13. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 13 September 24, 2014 Annual North America Default Trends By Rating Category (Continued) Fitch North America RMBS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 5.51 10.47 0.22 0.27 0.00 0.00 0.00 AA 0.00 0.00 0.41 12.58 9.70 1.69 0.63 0.00 0.00 0.00 A 0.00 0.03 1.19 23.26 27.42 2.81 1.57 0.20 0.06 0.00 BBB 0.20 0.60 6.48 39.22 51.26 7.19 6.14 1.11 0.00 0.00 BB 1.79 1.84 14.50 53.98 79.98 17.80 14.52 3.58 0.00 0.00 B 8.36 3.71 18.81 72.14 89.94 28.35 30.32 10.02 0.69 0.58 CCC 59.30 48.15 20.93 79.79 98.28 60.39 57.28 34.19 8.08 7.23 Investment Grade 0.03 0.09 1.10 12.15 16.77 1.62 1.27 0.19 0.02 0.00 Speculative Grade 7.43 4.27 16.16 63.07 89.11 45.73 42.18 19.06 3.65 3.41 All 0.60 0.42 2.40 17.88 33.73 16.16 12.08 6.46 1.77 1.66 Source: Fitch. Fitch North America Structured Credit Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.47 2.77 5.42 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 2.17 6.12 15.09 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 2.54 10.01 42.44 0.50 0.00 0.00 0.00 0.00 BBB 0.21 0.00 7.37 15.89 40.34 6.91 0.68 0.00 0.00 0.00 BB 1.89 0.00 16.42 33.06 33.96 27.20 1.20 0.00 1.68 0.00 B 10.87 12.20 5.17 46.25 55.56 51.17 11.64 3.27 4.27 0.00 CCC 43.59 42.86 28.00 67.83 63.83 79.28 29.86 17.47 15.56 4.23 Investment Grade 0.05 0.00 2.76 8.21 24.85 2.39 0.22 0.00 0.00 0.00 Speculative Grade 9.25 6.72 13.94 43.96 50.06 56.72 15.63 7.33 7.55 1.23 All 1.64 0.99 4.13 15.85 32.94 33.04 8.82 4.09 3.84 0.50 Source: Fitch.
  • 14. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 14 September 24, 2014 Annual Europe, Middle East and Africa Default Trends By Rating Category Fitch EMEA Corporate Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.76 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.92 0.00 0.00 0.00 0.00 0.00 0.00 BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BB 0.00 0.00 0.00 2.70 4.81 0.00 0.00 0.00 2.21 0.00 B 0.00 0.00 0.00 0.84 5.97 0.81 1.47 0.74 1.42 1.23 CCC to C 0.00 0.00 18.18 12.50 35.71 16.67 14.29 40.00 0.00 20.00 Investment Grade 0.00 0.00 0.00 0.60 0.00 0.00 0.00 0.00 0.00 0.00 Speculative Grade 0.00 0.00 0.91 2.10 7.14 1.32 1.26 1.11 1.74 0.93 All 0.00 0.00 0.23 1.00 1.98 0.34 0.33 0.34 0.56 0.32 Source: Fitch. Fitch International Public Finance Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 B 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 CCC to C 0.00 0.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Speculative Grade 0.00 0.00 5.26 0.00 0.00 0.00 0.00 0.00 0.00 0.00 All 0.00 0.00 0.65 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Source: Fitch. Fitch EMEA ABS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BBB 0.00 0.00 0.00 0.00 1.52 0.00 0.00 0.00 0.00 0.00 BB 0.00 0.00 0.00 0.00 8.33 0.00 0.00 0.00 0.00 0.00 B 0.00 0.00 0.00 0.00 20.00 13.33 0.00 0.00 0.00 0.00 CCC 0.00 0.00 0.00 0.00 85.71 0.00 25.00 12.50 0.00 20.00 Investment Grade 0.00 0.00 0.00 0.00 0.29 0.00 0.00 0.00 0.00 0.00 Speculative Grade 0.00 0.00 0.00 0.00 33.33 5.13 7.32 3.23 0.00 5.26 All 0.00 0.00 0.00 0.00 2.48 0.61 0.95 0.36 0.00 0.33 Source: Fitch. Fitch EMEA CMBS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.64 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 1.16 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.00 2.04 0.00 0.88 0.93 2.25 0.00 BBB 0.00 0.00 0.00 1.12 12.72 0.79 1.82 1.04 1.12 0.00 BB 0.00 0.00 0.00 1.67 33.85 8.33 5.97 8.20 9.80 0.00 B 0.00 0.00 0.00 0.00 41.67 16.90 10.61 14.29 19.30 4.55 CCC 0.00 0.00 0.00 0.00 40.00 32.10 32.43 43.08 47.27 10.00 Investment Grade 0.00 0.00 0.00 0.24 3.61 0.17 0.63 0.50 0.98 0.00 Speculative Grade 0.00 0.00 0.00 1.32 35.37 19.64 16.91 22.22 25.77 4.69 All 0.00 0.00 0.00 0.33 6.55 5.51 5.58 7.42 9.57 1.76 Source: Fitch.
  • 15. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 15 September 24, 2014 Annual Europe, Middle East and Africa Default Trends By Rating Category (Continued) Fitch EMEA RMBS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.29 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 1.15 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 1.12 0.00 0.00 0.00 0.00 0.00 0.00 BBB 0.00 0.00 0.00 1.43 0.19 0.00 0.00 0.00 0.00 0.00 BB 0.00 0.00 0.00 10.93 7.02 2.27 1.14 1.02 0.00 0.00 B 50.00 0.00 0.00 57.89 32.00 4.55 3.23 1.85 1.41 0.63 CCC 0.00 0.00 8.33 10.00 40.98 12.66 25.33 18.18 18.82 9.64 Investment Grade 0.00 0.00 0.00 0.80 0.04 0.00 0.00 0.00 0.00 0.00 Speculative Grade 2.38 0.00 0.65 14.86 18.79 5.30 6.98 4.72 4.30 2.05 All 0.07 0.00 0.04 1.77 1.74 0.58 0.89 0.72 0.76 0.40 Source: Fitch. Fitch EMEA Structured Credit Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 1.39 0.86 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.37 3.35 7.60 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 2.02 3.80 11.06 0.00 0.00 0.00 0.00 0.00 BBB 0.00 0.00 0.00 6.09 13.31 0.00 0.00 0.00 0.00 0.00 BB 0.00 0.00 0.00 10.42 16.77 0.63 0.00 0.00 0.00 0.00 B 0.00 0.00 0.00 31.91 31.82 4.27 1.44 0.78 2.70 0.00 CCC 0.00 9.09 11.11 41.18 78.18 13.97 29.57 14.29 10.71 20.00 Investment Grade 0.00 0.00 0.39 2.93 6.79 0.00 0.00 0.00 0.00 0.00 Speculative Grade 0.00 0.81 0.75 17.79 31.93 5.90 9.18 4.01 3.47 4.46 All 0.00 0.06 0.42 4.64 12.53 2.31 3.83 1.63 1.35 1.64 Source: Fitch.
  • 16. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 16 September 24, 2014 Annual Asia Pacific Default Trends By Rating Category Fitch Latin America Corporate Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BBB 0.00 0.00 0.00 1.43 0.00 0.00 0.00 0.00 0.00 0.00 BB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.22 0.00 B 0.00 0.00 0.00 1.85 5.88 0.00 0.00 2.47 4.00 2.50 CCC to C 14.29 11.11 0.00 20.00 12.50 27.27 0.00 100.00 33.33 0.00 Investment Grade 0.00 0.00 0.00 1.06 0.00 0.00 0.00 0.00 0.00 0.00 Speculative Grade 1.25 1.06 0.00 2.02 3.81 2.68 0.00 2.38 3.57 1.08 All 0.68 0.63 0.00 1.55 1.99 1.46 0.00 1.26 1.81 0.55 Source: Fitch. Annual Latin America Default Trends By Rating Category Fitch Asia Pacific Corporate Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BBB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BB 0.00 0.00 0.00 1.64 0.00 0.00 0.00 0.00 1.56 0.00 B 0.00 0.00 7.69 4.55 4.55 0.00 0.00 3.45 0.00 0.00 CCC 0.00 0.00 0.00 0.00 0.00 66.67 0.00 50.00 0.00 50.00 Investment Grade 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Speculative Grade 0.00 0.00 1.27 2.41 1.28 2.47 0.00 2.27 1.10 0.90 All 0.00 0.00 0.25 0.47 0.24 0.61 0.00 0.57 0.28 0.25 Source: Fitch. Fitch Asia Pacific Structured Finance Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013 June 2014 YTD AAA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 AA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 A 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 BBB 0.00 0.00 0.00 0.00 2.54 0.00 0.00 0.00 0.00 0.00 BB 0.00 0.00 0.00 3.45 9.09 2.00 2.04 0.00 0.00 0.00 B 0.00 0.00 0.00 16.67 15.79 16.67 13.04 0.00 0.00 0.00 CCC 0.00 0.00 0.00 50.00 0.00 20.83 73.33 56.25 33.33 0.00 Investment Grade 0.00 0.00 0.00 0.00 0.50 0.00 0.00 0.00 0.00 0.00 Speculative Grade 0.00 0.00 0.00 7.69 10.53 10.91 25.49 10.23 2.44 0.00 All 0.00 0.00 0.00 0.84 1.61 1.94 4.28 1.47 0.31 0.00 Source: Fitch.
  • 17. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 17 September 24, 2014 Methodology Corporates Fitch’s corporate default rates are calculated on an issuer basis, examining the long-term Issuer Default Ratings (IDRs), including Fitch global, publicly rated financial and nonfinancial corporate entities (including Fitch-rated parent companies and their subsidiaries, where the subsidiaries have outstanding debt or securities rated by Fitch). Fitch employs a static pool approach in calculating default rates. The static pools or, alternatively, cohorts are created by grouping issuer ratings that are active and outstanding at the beginning of the period under observation. Fitch defines a default as the failure of an obligor to make timely payment of principal and/or interest under contractual terms of any financial obligation, or the bankruptcy filing, administration, receivership, liquidation or other winding-up or cessation of the business of an obligor. Default also includes the distressed exchange of an obligation when both of the following apply: the restructuring imposes a material reduction in terms compared with the original contractual terms; the restructuring or exchange is conducted in order to avoid bankruptcy, similar insolvency or intervention proceedings or a traditional payment default. All public ratings are included in the static pool data until the ratings are withdrawn; they are then excluded from future static pools. However, for the purpose of calculating corporate default rates, Fitch tracks withdrawn ratings on a continual basis and includes defaults on withdrawn ratings for the cohorts in which the ratings were active and outstanding. Sovereigns Fitch’s sovereign default rates are also calculated on an issuer basis and include all global, publicly rated, sovereign long-term foreign-currency IDRs. Fitch employs a static pool approach in calculating sovereign default (same as above). Fitch defines a sovereign default as the failure to make timely payment of principal and/or interest on either a rated foreign-currency debt instrument or other material foreign-currency debt obligations, such as Paris or London Club liabilities, where the sovereign in question was rated by Fitch at the time of such a default or the distressed exchange of an obligation, where creditors are offered securities with diminished structural or economic terms compared with the existing obligation. International Public Finance Fitch’s international public finance default rates are calculated on an issuer basis and encompass all Fitch global, publicly rated, international public finance long-term foreign- currency IDRs. Fitch employs a static pool approach in calculating default rates (same as above). An international public finance default is defined as the failure of an obligor to make timely payment of principal and/or interest under contractual terms of any financial obligation, or the distressed exchange of an obligation, where creditors are offered securities with diminished structural or economic terms compared with the existing obligation.
  • 18. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 18 September 24, 2014 U.S. Public Finance Fitch employs a static pool approach in calculating U.S. public finance default rates and includes all Fitch publicly rated unenhanced long-term ratings. Fitch uses a security rating derived by consolidating identical ratings on all public, unenhanced-parity obligations. Default on a U.S. public finance security is defined as the failure to make a payment of principal and/or interest under the contractual terms of the rated obligation, or the bankruptcy filings, administration, receivership, liquidation or other winding-up or cessation of the business of an issuer/obligor. Default also includes the distressed exchange of an obligation when both of the following apply: the restructuring imposes a material reduction in terms compared with the original contractual terms; the restructuring or exchange is conducted in order to avoid bankruptcy, similar insolvency or intervention proceedings or a traditional payment default. Structured Finance All Fitch global public structured finance (ABS, CMBS, RMBS and structured credit) long-term, international debt ratings are included in the statistics discussed in this report. Default rates are based on rated tranches. A tranche is defined as a class of securities or certificates within the same rating category. Similarly rated tranches from the same deal at issuance are counted separately as discrete observations. Private ratings and insured issues, where the rating is dependent on a third-party credit enhancement provider, are excluded from the study. Interest- only bonds are also excluded. To calculate default rates, cohorts are created using ratings outstanding at the beginning of the observation period. Across structured finance, Fitch tracks default or near default (or alternatively, impairment). This includes all bonds downgraded to ‘CC’ or below where either a payment default has occurred or a default of some kind appears probable. It is important to observe that the default rates outlined in this study represent a distinct historical period and may not represent future rating default patterns. Default rates are influenced by a number of factors, including credit enhancement, macroeconomic variables, and credit conditions.
  • 19. Credit Market Research Fitch Ratings Global Cross-Asset Default Update 19 September 24, 2014 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCHWEBSITE. Copyright © 2014 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004.Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings, Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. 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