Market Size and Investment Performance of Defaulted Bonds and Bank Loans: 1987-2002
47 Pages Posted: 5 Nov 2008
There are 4 versions of this paper
Market Size and Investment Performance of Defaulted Bonds and Bank Loans: 1987-2002
Market Size and Investment Performance of Defaulted Bonds and Bank Loans: 1987-2002
Market Size and Investment Performance of Defaulted Bonds and Bank Loans: 1987-2002
Market Size and Investment Performance of Defaulted Bonds and Bank Loans: 1987-2002
Date Written: February 2003
Abstract
The defaulted and distressed, public and private debt markets in the United States increased enormously to a record $942 billion (face value) at the end of 2002. The market value of this increasingly attractive alternative investment segment was approximately $512 billion. Defaulted securities performed below average in 2002; absolute returns, as measured by our various defaulted debt indexes, were - 6.0% on bonds, +3.0% on bank loans, and - 0.5% on the combined defaulted public bonds and private bank loans index. The Altman-NYU Salomon Center Index of Defaulted Bonds grew to a face value of $61.5 billion. The market-to-face value ratio of the Bond Index fell to 0.17 from 0.21 one year ago. The face value of our Defaulted Bank Loan Index was $37.7 billion and the market-to-face value ratio dropped to a record low level of 0.46 by the end of 2002. The recovery rate on defaulted bonds (price just after default) was very low at 25 cents on the dollar; likewise, the weighted average bank loan recovery rate in 2002 dropped to 52 cents on the dollar. With new defaulted bonds rising in 2002 to a record $96.9 billion (default rate of 12.8%) and the default outlook for 2003 high, but lower than for 2002, investment opportunities should abound in the distressed debt market. Indications are that distressed investors (both old and new entities) are successfully raising funds because investor expectations are buoyant.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
A Risk-Factor Model Foundation for Ratings-Based Bank Capital Rules
-
The Link between Default and Recovery Rates
By Edward I. Altman, Brooks Brady, ...
-
The Link between Default and Recovery Rates: Theory, Empirical Evidence and Implications
By Edward I. Altman, Brooks Brady, ...
-
The Link between Default and Recovery Rates: Theory, Empirical Evidence and Implications
By Edward I. Altman, Brooks Brady, ...
-
The Link between Default and Recovery Rates: Theory, Empirical Evidence and Implications
By Edward I. Altman, Brooks Brady, ...
-
The Link between Default and Recovery Rates: Theory, Empirical Evidence and Implications
By Edward I. Altman, Brooks Brady, ...
-
Understanding Aggregate Default Rates of High Yield Bonds
By Jean Helwege and Paul Kleiman