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Corporate Finance 2021 Year-End Review and 2022 Outlook

This commentary summarizes and reviews DBRS Morningstar’s Corporate Finance rating activity in 2021 to provide insight into major trends and their potential impact on rating activity in 2022, including a sector-by-sector overview. Going into 2021, DBRS Morningstar expected that its downgrade-to-upgrade ratio would moderate from 2020 but remain above the 15-year rolling historical average of approximately 3.00 times, based on continued uncertainty related to the Coronavirus Disease (COVID-19) pandemic, vaccine rollout/effectiveness, structural trends, and subsequent macroeconomic conditions. Although we were cautious and bracing for prolonged stress going into 2021, the second year of the pandemic was more positive than our original expectations, as vaccine approvals and rollouts, economic reopenings, continued massive fiscal and monetary support and stimulus, and the agility and adaptability of businesses had a more positive impact on credit risk profiles than we had expected.

“Going forward, the vast majority of trends currently being Stable reflects DBRS Morningstar’s view that companies are effectively evolving toward a post-pandemic normal,” said Anil Passi, Managing Director of Credit Ratings, Global Corporates at DBRS Morningstar. “Earnings profiles have displayed recovery or stabilization as a result of economic reopenings, increased mobility and economic activity, and business adaptation and innovation in the context of structural trends that emerged or accelerated through 2020 and 2021. Therefore, based on the current economic outlook, DBRS Morningstar is confident that business risk assessments and corresponding key credit metrics should remain steady and continue to turn Stable trends into confirmations in 2022.”