Recovery Rates

Table 1: Recovery Rates by Industry: Defaulted Bonds by Three-Digit SIC Code 1971-1995
Table 2: Recovery Rates by Size of Exposure
Chart 1:  Rating Agency's Assumed vs Estimated Recovery Rates
Chart 2:  Recovery Rates - Time Series
Chart 3:  Dun & Bradstreets Liabilities/Failures (97 $'s)
Table 3:  Recovery Rates by Seniority and Original Bond Rating

 

Table 1: Recovery Rates

RECOVERY RATES BY INDUSTRY: DEFAULTED BONDS BY THREE-DIGIT SIC CODE 1971-1995

Industry

Recovery Rate Average ($)

Number of Observations

Public Utilities

70.5

56

Chemicals, petroleum, rubber, and plastic products

62.7

35

Machinery, instruments, and related products

48.7

36

Services-business and personal

46.2

14

Food and kindred products

45.3

18

Wholesale and retail trade

44.0

12

Diversified manufacturing

42.3

20

Casino, hotel, and recreation

40.2

21

Building material, metals, and fabricated products

38.8

68

Transportation and transportation equipment

38.4

52

Communication, broadcasting, movie production, printing, and publishing

37.1

65

Financial institutions

35.7

66

Construction and real estate

35.3

35

General merchandise stores

33.2

89

Mining and petroleum drilling

33.0

45

Textile and apparel products

31.7

31

Wood, paper, and leather products

29.8

11

Lodging, hospitals, and nursing facilities

26.5

22

TOTAL

41.0

696

source: Altman, Edward, and Kishore, Vellore, Financial Analysts Journal, Nov/Dec 1996, "Almost Everything You Wanted to Know About Recoveries on Defaulted Bonds

 

 

 

 

Table 2: Recovery Rates

RECOVERY RATE BY SIZE OF EXPOSURE

Size of Customer Debt at Default (A$)

Recovery Rate (%)

$0 to $50k

46

$50k to $100k

63

$100k to $500k

73

$500k to $2Million

73

$2Million to $10Million

67

Note: Few Personal Defaults were experienced where the exposure was greater than $2million during the period studied.

source: Eales, Robert, and Bosworth, Edmund, The Journal of Lending & Credit Risk Management, May, 1998, "Severity of Loss in the Event of Default in Small Business and Larger Consumer Loans".




 

 

 

 


Chart 1: Recovery Rates
recratesecchrt.gif (8652 bytes)

Sources: Fitch Investors, L.P., 3/17/97, "CBO/CLO Rating Criteria",Moody's Investors Service, 1/96, "Corporate Bond Defaults and Default Rates,1938-95, Moody's Investors Service, 2/98, "Historical Default Rates of Corporate Bond Issuers, 1920-97", Standard & Poor's CreditPro ™, 1998 Edition (version 2.0), Loan Pricing Corporation "Commercial Loan Migration and Defaults", Altman, Edward, and Kishore, Vellore, Nov/Dec 96,  Financial Analysts Journal, "Almost Everything You Wanted to Know About Recoveries on Defaulted Bonds", Standard & Poor's Structured Finance Ratings Asset-Backed Securities, "CBO/CLO Criteria Update: Market Innovations", Lehman Brothers.








Chart 2: Recovery Rates
recratetimechrt.gif (11446 bytes)
Source: Altman, Edward, and Kishore, Vellore, Nov/Dec, 1996, Financial Analysts Journal, "Almost Everything You Wanted To Know About Recoveries on Defaulted Bonds",   Carey, Mark, 3/18/98, Federal Reserve Board, "Credit Risk in Private Debt Portfolios",  Asarnow, Edward, and Edwards, David, 1995, "Measuring Loss on Defaulted Bank Loans: A 24-year study".

 

 

 


Chart 3: Recovery Rates
dnb dataliabfail$97chrt.gif (17661 bytes)
source: The Dun & Bradstreet Corporation, "Business Failure Record: A comparative statistical analysis of geographic and industry trends in business failures in the United States, Final:1996, Preliminary: 1997". (Bloomberg L.P. ?)




 

 

Table 3: Recovery Rates

Recovery Rates by Seniority and Original Bond Rating 1971-1995

Seniority

# Obs

Recovery Rate Average Price ($)

Senior Secured

Investment Grade

16

54.8

NonInvestment Grade

58

56.4

Senior Unsecured

Investment Grade

49

48.2

Noninvestment Grade

175

48.7

Senior Subordinated

Investment Grade

26

32.7

Noninvestment Grade

136

39.9

Subordinated

Investment Grade

63

31.9

Noninvestment Grade

136

31.7

Discount and Zero Coupon

Investment Grade

7

24.1

Noninvestment Grade

30

24.4

Total

696

41.0

source: Altman, Edward, and Kishore, Vellore, Financial Analysts Journal, Nov/Dec 1996, "Almost Everything You Wanted to Know About Recoveries on Defaulted Bonds".

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