Recoveries

2003 Recovery Rates (from Standard & Poor data)

The U.S. ultimate recovery rates for corporate bonds and bank loans in 2003 showed no improvement from the heavy default cycle of 1998-2002. The ultimate recovery rate averages are reflected in tables 1 and 2.

Table 1 1998-2002 Ultimate Recovery Rate Averages

Instrument Type	Discounted Ultimate Recovery (%)	Standard Deviation (%)	Observations
Bank debt	74.1	32.4	331
Senior secured bonds	45.8	36.5	42
Senior unsecured bonds	36.8	35.1	198
Senior subordinated bonds	21.3	30.8	116
Subordinated Bonds	15.0	24.7	55
Junior Subordinated Bonds	2.5	4.1	4

Source: Standard & Poor’s LossStats Database.

Table 2 2003 Ultimate Recovery Rate Averages

Instrument Type	Discounted Ultimate Recovery (%)	Standard Deviation (%)	Observations
Bank debt	72.3	32.5	136
Senior unsecured bonds	28.7	27.7	102
Senior subordinated bonds	20.5	34.4	50

Source: Standard & Poor’s LossStats Database

The largest debt categories included in table 2 reflect changes in the marketplace. The issuance of senior secured bonds has virtually ceased over the past few years while bank loans have become more liquid and available.
The quality of instruments received in settlement remains a key influence on recovery rates, and the 2003 rates reflect a continued consequence of the weaker structural quality trend of recent years.