This article presents transition matrix and default rate analysis for listed US non-financial firms rated by RapidRatings between 1/1/2001 and 12/31/2021. We present 1 and 3-year perspectives and the default rates associated with each risk category within each time window.
The universe for the analysis includes all listed non-financial firms that have qualified for the Russell 3000 index at any time during the 21-year period. This includes 4,229 entities, 500 of which defaulted during the period, and for which we issued a total of 211,832 ratings. ‘Default’ is defined as a missed principal or interest payment on a debt obligation or Chapter 11 filing in a US Bankruptcy Court.
Within this analysis, RapidRatings employs a static pool methodology commonly used in credit rating analysis. This methodology establishes pools of rated entities as of the start of each calendar year where the start and end rating for that calendar year (or subsequent calendar years for a 3-year view) is included in the analysis.
Tables 1 and 2 present the average long-term transition rates and default rates by rating category (20-point bands). The row represents the starting risk category, and the column represents the ending risk category.
Firms are more likely to remain stable in their risk category through the 1 or 3 year period than they are to shift category.
Table 2 shows the average for each 3-year period up to and including the most recent pool (2019-2021).