Current Conditions in Global Credit Markets - NYU Stern School of ...

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70% Recovery Rate/Default Rate Association Dollar Weighted Average Recovery Rates to Dollar Weighted Average Default Rates (1982-2006) Recovery Rate/Default Rate Association Recovery Rate 65% Altman Defaulted Bonds Data Set (1982-2006) 1987 Dollar Weighted Average Recovery 2005 Rates to Dollar Weighted y = -2.3137x + Average 0.5029 Default Rates 60% 55% 50% 45% 40% 2006 R 2 = 0.5361 y = -0.1069Ln(x) + 0.0297 R 2 = 0.6287 2004 1993 y = 0.1457x -0.2801 1983 y = 30.255x 2 - 6.0594x + 0.5671 R 2 = 0.6531 1997 R 2 = 0.6151 1996 1992 1984 1985 2003 1988 1995 1994 1982 1989 35% 1998 1986 1991 30% 25% 1999 2000 2001 1990 2002 20% 0% 2% 4% 6% 8% 10% 12% 14% Source: E. Altman, et. al., “The Link Between Default and Recovery Rates”, NYU Salomon Center, S-03-4. 24
Source: Authors' Compilations from Various Dealer Quotes WEIGHTED AVERAGE (BY ISSUE) RECOVERY RATES ON DEFAULTED DEBT BY SENIORITY PER $100 FACE AMOUNT (1978 - 2006) Default Senior Secured Senior Unsecured Senior Subordinated Subordinated Discount and All Seniorities Year Zero Coupon No. % $ No. % $ No. % $ No. % $ No. % $ No. $ 2006 9 18% $90.60 26 52% $60.90 8 16% $50.24 1 2% $60.33 6 12% $78.31 50 $65.32 2005 67 54% $76.50 44 36% $45.88 7 6% $32.67 0 0% $0.00 5 4% $74.21 123 $61.10 2004 27 39% $63.67 33 48% $56.77 2 3% $37.44 0 0% $0.00 7 10% $43.06 69 $57.72 2003 57 28% $53.51 108 53% $45.40 29 14% $35.98 1 0% $38.00 8 4% $32.27 203 $45.58 2002 37 11% $52.81 254 75% $21.82 21 6% $32.79 0 0% $0.00 28 8% $26.47 340 $25.30 2001 9 3% $40.95 187 67% $28.84 48 17% $18.37 0 0% $0.00 37 13% $15.05 281 $25.62 2000 13 8% $39.58 47 29% $25.40 61 37% $25.96 26 16% $26.62 17 10% $23.61 164 $26.74 1999 14 11% $26.90 60 47% $42.54 40 31% $23.56 2 2% $13.88 11 9% $17.30 127 $27.90 1998 6 18% $70.38 21 62% $39.57 6 18% $17.54 0 0% 0.00 1 3% $17.00 34 $40.46 1997 4 16% $74.90 12 48% $70.94 6 24% $31.89 1 4% $60.00 2 8% $19.00 25 $57.61 1996 4 17% $59.08 4 17% $50.11 9 38% $48.99 4 17% $44.23 3 13% $11.99 24 $45.44 1995 5 15% $44.64 9 27% $50.50 17 52% $39.01 1 3% $20.00 1 3% $17.50 33 $41.77 1994 5 23% $48.66 8 36% $51.14 5 23% $19.81 3 14% $37.04 1 5% $5.00 22 $39.44 1993 2 6% $55.75 7 22% $33.38 10 31% $51.50 9 28% $28.38 4 13% $31.75 32 $38.83 1992 15 22% $59.85 8 12% $35.61 17 25% $58.20 22 33% $49.13 5 7% $19.82 67 $50.03 1991 4 3% $44.12 69 44% $55.84 37 24% $31.91 38 24% $24.30 9 6% $27.89 157 $40.67 1990 12 10% $32.18 31 27% $29.02 38 33% $25.01 24 21% $18.83 11 9% $15.63 116 $24.66 1989 9 12% $82.69 16 21% $53.70 21 28% $19.60 30 39% $23.95 76 $35.97 1988 13 21% $67.96 19 31% $41.99 10 16% $30.70 20 32% $35.27 62 $43.45 1987 4 13% $90.68 17 55% $72.02 6 19% $56.24 4 13% $35.25 31 $66.63 1986 8 14% $48.32 11 20% $37.72 7 13% $35.20 30 54% $33.39 56 $36.60 1985 2 7% $74.25 3 11% $34.81 7 26% $36.18 15 56% $41.45 27 $41.78 1984 4 29% $53.42 1 7% $50.50 2 14% $65.88 7 50% $44.68 14 $50.62 1983 1 13% $71.00 3 38% $67.72 4 50% $41.79 8 $55.17 1982 16 80% $39.31 4 20% $32.91 20 $38.03 1981 1 100% $72.00 1 $72.00 1980 2 50% $26.71 2 50% $16.63 4 $21.67 1979 1 100% $31.00 1 $31.00 1978 1 100% $60.00 1 $60.00 Total/Average 332 15% $59.65 1017 47% $36.85 414 19% $30.60 249 11% $31.17 156 7% $25.98 2,168 $37.16 Median $59.08 $45.40 $32.79 $31.00 $19.82 $41.77 Standard Dev $17.20 $13.97 $13.59 $17.77 25
Page 1 and 2: Current Conditions in Global Credit
Page 3 and 4: Changes in the Credit Environment:
Page 5 and 6: Factors Affecting the Transformatio
Page 7 and 8: Changes in the Credit Environment:
Page 9 and 10: Historical Default Rates Straight B
Page 11 and 12: New Issues Rated B- or Below as Per
Page 13 and 14: Historical Default Rates and Recess
Page 15 and 16: Leveraged Loan Market U.S. Distress
Page 17 and 18: Recent Large Bankruptcies U.S. Dist
Page 19 and 20: Private Equity Fundraising and Leve
Page 21 and 22: Leverage Continues to Increase Curr
Page 23: Default Rates and Losses a 1978 - 2
Page 27 and 28: Asset Class Returns (%) 2003 - 2006
Page 29 and 30: Distressed And Defaulted Debt as a
Page 31 and 32: SIZE OF THE US DEFAULTED AND DISTRE
Page 33 and 34: SIZE OF THE ALTMAN-NYU SALOMON CENT
Page 35 and 36: ALTMAN-NYU SALOMON CENTER DEFAULTED
Page 37 and 38: SIZE OF THE ALTMAN-NYU SALOMON CENT
Page 39 and 40: CORRELATION OF ALTMAN NYU-SALOMON C
Page 41 and 42: CORRELATION OF ALTMAN NYU-SALOMON C
Page 43 and 44: U.S. Distressed Debt Managers 2007
Page 45 and 46: U.S. Distressed Funds with European
Page 47 and 48: Investment Styles and Target Return
Page 49 and 50: Forecasting Defaults and the Defaul
Page 51 and 52: Mortality Rate Concept (Illustrativ
Page 53 and 54: Mortality Losses by Original Rating
Page 55 and 56: US Bond Rating Equivalent Based on

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