Defaulted loans average 69% recovery, bonds 31%, Fitch says

New York, Feb. 13 - Defaulted leveraged loans averaged a 69% recovery rate in 2002 while bonds averaged 31%, according to Fitch Ratings.

The rating agency noted that the figures indicate that despite the "difficult" credit environment of 2002 - which saw $109.8 billion of bond defaults - "senior lenders continued to enjoy a high level of par protection relative to their bond counterparts in the event of default."

Fitch's analysis of recovery rates covers companies that defaulted during 2002 with high-yield bonds and actively traded leveraged loans in their capital structure. To calculate the recovery rate, Fitch took the price of defaulted issues one month after the default occurred, using a single term loan price for each issuer.

The 69% recovery rate for loans in 2002 was essentially unchanged from 68% for 2000-2001 while the 31% rate for bonds improved from 16% in the 2000-2001 period.

Fitch noted that 75% of loan recovery values fell in the range of 61% to 100% while 75% of bond recovery values were in the range 0% to 40%.

Median recovery rates were 74% for loans and 21% for bonds.

Telecom had the lowest recovery rates.

For 2002, telecom loans saw recovery rates of 55% while telecom bonds saw 15% recovery. Those figures compare with 61% and 12% for the period 2000-2001.

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