Aug 6 - Following some recent bankruptcy restructurings, lenders are recovering amounts far below par on senior unsecured bonds, said an article published today by Standard & Poor's Global Fixed Income Research, titled "U.S. Recovery Study: Recent Post-Bankruptcy Recovery Levels Disappoint Senior Unsecured Bondholders." "Recoveries averaged 33% in 2010 and 2012 (through May)--significantly lower than the long-term average of 43%," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research. Several senior unsecured bond instruments associated with issuers that recently emerged from bankruptcy, such as General Maritime Corp. and The Great Atlantic & Pacific Tea Co. (A&P), have generated recoveries of less than 5% of the principal amount. The average recoveries for senior unsecured bonds have drifted lower since the easy credit years of 2003-2007, when they averaged 46%. The U.S. economy was expanding, market liquidity ran high, and exit financing was plentiful and easily available. The average declined slightly to 42% during the recessionary period of 2008-2009 before tumbling to 33% in 2010 through May 2012 due to several factors, such as the type of default, principal above the defaulted security, and debt cushion (debt outstanding below the defaulted security). (For more detailed analysis of recoveries across instrument types and time periods, see "Recovery Study (U.S.): Piecing Together The Performance Of Defaulted Instruments After The Recent Credit Cycle," published Dec. 1, 2011, on RatingsDirect on the Global Credit Portal.) Standard & Poor's Global Fixed Income Research does not believe that these declines constitute a trend--yet. "Although these recoveries are below average, they are within a historically normal range," said Ms. Vazza. "Furthermore, we expect that senior unsecured bond recoveries will revert closer to their historic average of 43% in the long term as the sample size increases." The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to email@example.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com.
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