"Loans with weaker recovery prospects are bulging as a portion of current new issuance," said Standard & Poor's Managing Director William Chew. "This reflects several factors, including the recent proliferation of second liens, which had not been widely used to secure syndicated loans historically. In addition, the lower recovery ratings reflect increasing use of leverage on loans secured by little or no post-default asset value."
Standard & Poor's analysts and invited panelists will discuss these and other themes Thursday, Dec. 9, at a conference titled, "Recovery Ratings: Bank Loans and Beyond," to be held in New York.
The first year of Standard & Poor's recovery ratings illustrates other credit themes characteristic of the syndicated loan market at its current stage of hyper-liquidity. For example: All secured loans are far from equal in terms of recovery; At the outset, recovery ratings are showing little overall correlation with default ratings; and Some well-structured loans continue to follow the historical pattern.
Standard & Poor's recovery ratings are estimates of the range of loss or recovery that an investor can anticipate in the event of default by a borrower. While these recovery ratings are now concentrated chiefly in the U.S. market, Standard & Poor's has begun assigning them to secured loans in Canada and Europe, and anticipates extending these ratings to other loan and bond markets.
As the portfolio of recovery ratings grows, Standard & Poor's will identify and track the key credit trends that the portfolio traces in periodic reports. The report published today, titled "Recovery Ratings -- First Year Since Inception," is available on RatingsDirect, Standard & Poor's Web-based credit research and analysis system. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to research_request@standardandpoors.com. Members of the media may request a copy by contacting the media representative named.
