Bank loans achieved an ultimate recovery rate (value of instruments received at emergence) of only 72% in 2002, the lowest recorded level in Standard & Poor’s LossStats database, which tracks ultimate recovery values back to 1988. Ultimate recovery rates for loans were 73.6% in 2001 and averaged 81.6% for the entire 1988-2002 period, according to Standard & Poor’s. ‘That the recent bank debt recovery results cited above are only 8%-10% below the 15-year mean is a result of banks continuing to structure debt better by getting higher quality collateral, having more debt contractually subordinated to their position, adjusting covenants, and reducing commitment levels earlier in the process,’ said Roger Bos, an Associate with Risk Solutions, Standard & Poor’s risk management unit that administers and analyzes the database. The ultimate recovery rate for senior unsecured bonds was 28% for 2002 after a record low of 22.1% in 2001, both well below the 1988-2002 average of 46%.
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