Bangkok--8 Dec--Standard & Poor's
As the number of U.S. defaults has climbed over the past few years--reaching a high of 264 in 2009--ultimate recovery rates have sunk. From 2008 to 2010, recovery rates averaged 45.6% across all instruments--5.5% lower than the 1987 to 2007 average, said an article published today by Standard & Poor's, titled "U.S. Recovery Study: Capital Structure, Cyclicality, And Distressed Exchanges Are Key To Recovery Performance."
Ultimate recovery rates are the values of securities when they emerge from default.
"Ultimate recovery rates vary widely around the average, largely as a result of their rank in the capital structure as well as their cyclicality," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research.
In addition, the abundance of distressed exchanges over the past several years has added a new dimension to our recovery data set. "Exchange offers accounted for almost one-third of defaults in the U.S. between 2008 and 2009, most of which were made on unsecured bonds," said Ms. Vazza. "And in the current cycle--2008 to 2010--distressed exchanges on unsecured bonds had an average recovery rate of 43%, compared with 24% for postbankruptcy exit values."
"We believe that ultimate recovery rates have rebounded after hitting a trough in the fourth quarter of 2008 and the first quarter of 2009," said Ms. Vazza. "However, we still expect recovery rates to vary widely, as they have historically. And we don't expect that recovery rates, on average, will return to the heyday of 2006 to 2007."
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Media Contact:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760
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