Fitch Ratings Global Cross-Asset Default Update

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 [email protected]

Stephanie K. Mah +1 212 908-0884 [email protected]

Mariarosa Verde +1 212 908-0791 [email protected]

Group Credit Officers John Hatton +44 20 3530-1061 [email protected]

Stuart Jennings +44 20 3530-1142 [email protected]

Thomas McCormick +1 212 908-0235 [email protected]

James Moss +1 312 368-3213 [email protected]

Fitch Global Default Rates by Major Sector: First-Half 2014 (%) Corporates Sovereigns

U.S. Public Finance

Int’l Public Finance ABSa CMBSa RMBSa

Structured Credita

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 CCCb 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 aIncludes impairments defined as migration to ‘CC’, ‘C’ or ‘D’. bIncludes ‘CCC’ to ‘C’ categories for corporates, sovereigns and public finance. Source: Fitch.

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Fitch Ratings Global Cross-Asset Default Update 2 September 24, 2014

Global Default Trends

Related Criteria Distressed Debt Exchange (June 2014)

0.320.07 0.10

1.28

2.58

0.49 0.300.65 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 June2014YTD

(%)

Source: Fitch.

Fitch Global Corporate Default RatesAAA0.5%

AA4%

A25%

BBB39%

BB16%

B12%

CCC to C2%

Source: Fitch.

Fitch Global Corporate Rating Mix(As of June 30, 2014)

1.37

0.680.31 0.45

0.670.85 1.02 1.02

0.73

0.070.0

0.5

1.0

1.5

2.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

Fitch Global ABS Default Rates

Source: Fitch.

AAA53%

AA9%

A16%

BBB13%

BB5%

B4%

CCC0.5%

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

0.000.0

0.5

1.0

1.5

2.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

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

AAA12%

AA9%

A14%

BBB25%

BB17%

B21%

CCC to C2%

Source: Fitch.

Fitch Sovereign Rating Mix(As of June 30, 2014)





Global Default Trends (Continued)

0.40 0.30 0.131.16

4.28

10.0612.33

9.48

4.93

0.700

3

6

9

12

15

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

Source: Fitch.

Fitch Global CMBS Default Rates

AAA40%

AA7%

A13%

BBB12%

BB9%

B8%

CCC11%

Source: Fitch.

Fitch Global CMBS Rating Mix(As of June 30, 2014)

0.56 0.392.22

16.59

30.66

14.1910.47

5.491.57 1.42

05

101520253035

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

Fitch Global RMBS Default Rates

Source: Fitch.

AAA18%

AA12%

A15%BBB

14%

BB11%

B13%

CCC18%

Source: Fitch.

Fitch Global RMBS Rating Mix(As of June 30, 2014)

0.97 0.632.81

12.45

25.6920.52

6.382.84 2.63 1.04

05

101520253035

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

SC – Structured credit.Source: Fitch.

Fitch Global SC Default Rates

AAA20%

AA11%

A15%BBB

18%

BB14%

B13%

CCC8%


Fitch Global SC Rating Mix(As of June 30, 2014)



North America Default Trends

0.490.07 0.00

1.67

3.85

0.40 0.410.75

0.17 0.34

0.00.51.01.52.02.53.03.54.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

NA – North America.Source: Fitch.

Fitch NA Corporate Default RatesAAA0.4%

AA4%

A29%

BBB44%

BB13%

B7%

CCC to C2%


Fitch NA Corporate Rating Mix(As of June 30, 2014)

0.040.00

0.060.03 0.03 0.03 0.03 0.03

0.090.000.0

0.5

1.0

1.5

2.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

Source: Fitch.

Fitch U.S. Public Finance Default Rates

AAA13%

AA50%

A25%

BBB8%

BB3%

B0.4%

CCC to C0.1%

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 1.170.88

0.040.0

0.5

1.0

1.5

2.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

Fitch NA ABS Default Rates


AAA56%

AA8%

A16%

BBB12%

BB4%

B4% CCC

0.4%

Fitch NA ABS Rating Mix(As of June 30, 2014)




North America Default Trends (Continued)

0.46 0.35 0.161.32

4.01

10.9313.22

9.93

4.43

0.610

3

6

9

12

15

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

Fitch NA CMBS Default Rates


AAA43%

AA6%

A12%

BBB11%

BB9%

B8%

CCC11%

Fitch NA CMBS Rating Mix(As of June 30, 2014)


0.60 0.422.40

17.88

33.73

16.1612.08

6.461.77 1.66

05

101520253035

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

Fitch NA RMBS Default Rates


AAA13%

AA10%

A15%

BBB14%

BB12%

B15%

CCC21%

Fitch NA RMBS Rating Mix(As of June 30, 2014)


1.64 0.994.13

15.85

32.94 33.04

8.824.09 3.84

0.5005

101520253035

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

NA – North America. SC – Structured credit.Source: Fitch.

Fitch NA SC Default Rates

AAA28%

AA7%

A15%

BBB15%

BB13%

B13%

CCC9%

NA – North America. SC – Structured credit.Source: Fitch.

Fitch NA SC Rating Mix(As of June 30, 2014)



Europe, Middle East and Africa Default Trends

0.00 0.00 0.00 0.00

2.48

0.610.95

0.360.00

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 June2014YTD

(%)

Source: Fitch.

Fitch EMEA ABS Default Rates

AAA43%

AA22%

A19%

BBB11%

BB3%

B1%

CCC1%

Source: Fitch.

Fitch EMEA ABS Rating Mix(As of June 30, 2014)

0.00 0.000.23

1.00

1.98

0.34 0.33 0.340.56

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 June2014YTD

(%)

Source: Fitch.

Fitch EMEA Corporate Default RatesAAA1% AA

4%

A27%

BBB34%

BB15%

B16%

CCC to C3%

Source: Fitch.

Fitch EMEA Corporate Rating Mix(As of June 30, 2014)

AAA5%

AA23%

A12%

BBB39%

BB15%

B4%

CCC to C2%

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 0.000.0

0.5

1.0

1.5

2.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

aEMEA comprised 85% of international public finance ratings as of June 30, 2014.Source: Fitch.

Fitch International Public Finance Default Ratesa



Europe, Middle East and Africa Default Trends (Continued)

0.00 0.00 0.00 0.33

6.55 5.51 5.587.42

9.57

1.76

0

3

6

9

12

15

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

Source: Fitch.

Fitch EMEA CMBS Default Rates

AAA10%

AA14%

A15%

BBB24%

BB11%

B13%

CCC13%

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 June2014YTD

(%)

Source: Fitch.

Fitch EMEA RMBS Default Rates

AAA31%

AA22%

A15%

BBB14%

BB9%

B6%

CCC4%

Source: Fitch.

Fitch EMEA RMBS Rating Mix(As of June 30, 2014)

0.00 0.06 0.42

4.64

12.53

2.313.83

1.63 1.35 1.64

0

3

6

9

12

15

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)


Fitch EMEA SC Default Rates

AAA13%

AA14%

A15%

BBB21%

BB15%

B14%

CCC7%

Fitch EMEA SC Rating Mix(As of June 30, 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 June2014YTD

(%)

Source: Fitch.

Fitch Latin America Corporate Default Rates

A8%

BBB41%

BB29%

B22%

CCC to C0.3%

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

0.841.61

1.94

4.28

1.47

0.310.000.0

1.0

2.0

3.0

4.0

5.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 June2014YTD

(%)

Fitch APAC Structured Finance Default Rates

APAC – Asia Pacific.Source: Fitch.

AAA58%

AA9%

A10%

BBB13%

BB8%

B2%

CCC0.3%

Fitch APAC Structured Finance Rating Mix(As of June 30, 2014)


0.00 0.00

0.250.47

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 June2014YTD

(%)


Fitch APAC Corporate Default Rates

AA9%

A25%

BBB36%

BB18%

B11%

CCC to C0.2%

APAC – Asia Pacific. Note: ʻAAA’ is 0%.Source: Fitch.

Fitch APAC Corporate Rating Mix(As of June 30, 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.

ABS1% CMBS

12%

RMBS81%

SC6%


Fitch Structured Finance First-Half 2014 Impairments(By Sector)

EMEA12%

NA88%

NA – North America. Source: Fitch.

Fitch Structured Finance First-Half 2014 Impairments(By Region)

Pre-20035%

200311%

200417%

200525%

200616%

200725%

20081%

Source: Fitch.

Fitch Structured Finance First-Half 2014 Impairments(By Vintage)

B5.6 B–

0.4

CCC94.0

Source: Fitch.

Fitch Structured Finance First-Half 2014 Impairments(By Rating at Beginning of Year)



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



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


Source: Fitch.

Fitch Global CMBS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013

June 2014 YTD



Source: Fitch.



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



Source: Fitch.

Fitch Global Structured Credit Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013

June 2014 YTD



Source: Fitch.



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



Source: Fitch.

Fitch U.S. Public Finance Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013

June 2014 YTD



Source: Fitch.

Fitch North America ABS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013

June 2014 YTD



Source: Fitch.

Fitch North America CMBS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013

June 2014 YTD



Source: Fitch.



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



Source: Fitch.

Fitch North America Structured Credit Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013

June 2014 YTD



Source: Fitch.



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



Source: Fitch.

Fitch International Public Finance Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013

June 2014 YTD



Source: Fitch.

Fitch EMEA ABS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013

June 2014 YTD



Source: Fitch.

Fitch EMEA CMBS Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013

June 2014 YTD



Source: Fitch.



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



Source: Fitch.

Fitch EMEA Structured Credit Default Rates (%) 2005 2006 2007 2008 2009 2010 2011 2012 2013

June 2014 YTD



Source: Fitch.



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


Source: Fitch.



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.



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.



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Fitch Ratings Global Cross-Asset Default Update

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Transcript of Fitch Ratings Global Cross-Asset Default Update