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 $2million during the period studied. |
|
source: Eales, Robert, and Bosworth, Edmund, The Journal of Lending & Credit Risk Management, May, 1998, "Severity of Loss in the Event of Default in Small Business and Larger Consumer Loans". |
Sources: Fitch Investors, L.P., 3/17/97, "CBO/CLO Rating Criteria",Moody's Investors Service, 1/96, "Corporate Bond Defaults and Default Rates,1938-95, Moody's Investors Service, 2/98, "Historical Default Rates of Corporate Bond Issuers, 1920-97", Standard & Poor's CreditPro , 1998 Edition (version 2.0), Loan Pricing Corporation "Commercial Loan Migration and Defaults", Altman, Edward, and Kishore, Vellore, Nov/Dec 96, Financial Analysts Journal, "Almost Everything You Wanted to Know About Recoveries on Defaulted Bonds", Standard & Poor's Structured Finance Ratings Asset-Backed Securities, "CBO/CLO Criteria Update: Market Innovations", Lehman Brothers.
Chart 2: Recovery Rates
Source: Altman, Edward, and Kishore, Vellore, Nov/Dec, 1996,
Financial Analysts Journal, "Almost Everything You Wanted To Know About Recoveries on
Defaulted Bonds", Carey, Mark, 3/18/98, Federal Reserve Board, "Credit
Risk in Private Debt Portfolios", Asarnow, Edward, and Edwards, David, 1995,
"Measuring Loss on Defaulted Bank Loans: A 24-year study".
Chart 3:
Recovery Rates
source: The
Dun & Bradstreet Corporation, "Business Failure Record: A comparative statistical
analysis of geographic and industry trends in business failures in the United States,
Final:1996, Preliminary: 1997". (Bloomberg L.P. ?)
Recovery Rates by Seniority and Original Bond Rating 1971-1995 | ||
Seniority |
# Obs |
Recovery Rate Average Price ($) |
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". |