Report Sees Improvement in 2004 for Ultimate Recovery Values

NEW YORK Feb. 1, 2005--Standard & Poor's ultimate recovery values for the first
half of 2004 for U.S. corporate bonds and leveraged bank loans made solid
improvements in 2004, placing them above their 16-year average, according to
a report released today by Standard & Poor's Risk Solutions. One reason for the
improvement is that distressed company acquisitions continued to increase due
to improving economic and credit conditions (low interest rates and declining
default rates). The environment served to expand general market acceptance of
equity exchanged for debt due to higher distressed company collateral valuations for the cohort of companies that were acquired through distressed reorganizations.

In addition, further marketplace transparency is taking effect, aided by longer-term influences, including publicly available vendor pricing, streamlined documentation, expanded regulatory requirements (Basel II) and the continued growth of credit risk management vehicles such as credit derivatives and structured securitizations.

"Improvements in settlement instrument quality are also a factor; an increase in the quality of instruments received in exchange for the defaulted instrument is an important fundamental shift and is a key element in the future of ultimate recovery values," observed Kevin Kelhoffer, Director, Standard & Poor's Risk Solutions.

The Basel committee recommendations make clear that the Basel II framework
requires financial institutions to make additional investments in the areas of data and analytics, particularly for the study and proven performance of probability of default and loss given default. This means credit analysis will be the linchpin for lenders and market investors, increasing the need for more information to keep the liquidity wheels turning, supporting the continued market expansion.

The full report reviews the most recent default and recovery statistics along with an explanation of Standard & Poor's ultimate recovery calculations, an analysis of instruments received in reorganization events, the final outcomes of recently observed default events, and contemplation on where rates might be headed in 2005.

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