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S&P Global Ratings’ Track Record:  Standing the Test of Time

What are credit ratings?

Credit ratings express an opinion about the ability and willingness of an issuer to meet its financial obligations in full and on time. They also speak to the credit quality of an individual debt issue and the relative likelihood that the debt issue may default.

Corporations or governments often raise funds for projects—such as the construction of a factory, school, or highway or a green energy project—by issuing debt securities like bonds. Our credit ratings can help them communicate their creditworthiness—or the risk of investing in these securities—potentially expanding their universe of investors.

How S&P Global Ratings’ credit ratings perform

The charts below show the default rates experienced for each rating category.

For example:  The five-year cumulative default rate for corporate issuers rated AAA has been 0.35%, or fewer than four defaults for every 1,000 ratings.

The five-year cumulative default rate for AAA-rated structured finance issues has been 3.69%.

Global Corporates
Average Cumulative Default Rates by Rating, 1981–2018 (a)

10% 0% 20% 30% 40% 50% 60% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 20 15 16 17 18 19 CCC/CBBBBBBAAAAAA Time horizon (years) 0 10 20 30 40 50 60 0.35%

Source:  S&P Global Ratings, “Default, Transition, and Recovery:  2018 Annual Global Corporate Default Study and Rating Transitions,” April 9, 2019, Chart 4

Global Structured Finance
Average Cumulative Default Rates by Rating, 1976–2018 (a, b)

10% 0% 20% 30% 40% 50% 60% 70% 80% 90% 1 0 2 3 4 5 6 7 8 9 10 Time horizon (years) CCCCCBBBBBBAAAAAA 0 10 20 30 40 50 60 70 80 90 3.69% CC CCC B BB BBB A AA AAA

Source:  S&P Global Ratings, “Default, Transition, and Recovery:  2018 Annual Global Structured Finance Default Study and Rating Transitions,” March 28, 2019, Table 2

S&P Global Ratings’ data shows that lower-rated issuers and securities have generally exhibited higher default rates

Notes:
(a)

Average cumulative default rates are derived by calculating “conditional on survival” marginal default rates from experiences of each static pool and time horizon

(b)

Includes only one security per transaction that S&P Global Ratings originally rated ‘AAA’