|
Archive@NYU >
Stern School of Business >
Salomon Center >
Credit & Debt Markets >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26756
|
| Title: | Market Size and Investment Performance of Defaulted Bonds and Bank
Loans: 1987-2002 |
| Authors: | Altman, Edward I.
Jha, Shubin |
| Issue Date: | Feb-2003 |
| Series/Report no.: | S-CDM-03-04 |
| Abstract: | The defaulted and distressed, public and private debt markets in the
United States increased enormously to a record $942 billion (face value)
at the end of 2002. The market value of this increasingly attractive
alternative investment segment was approximately $512 billion.
Defaulted securities performed below average in 2002; absolute returns,
as measured by our various defaulted debt indexes, were - 6.0% on bonds,
+3.0% on bank loans, and - 0.5% on the combined defaulted public bonds
and private bank loans index. The Altman-NYU Salomon Center Index of
Defaulted Bonds grew to a face value of $61.5 billion. The
market-to-face value ratio of the Bond Index fell to 0.17 from 0.21 one
year ago. The face value of our Defaulted Bank Loan Index was $37.7
billion and the market-to-face value ratio dropped to a record low level
of 0.46 by the end of 2002. The recovery rate on defaulted bonds
(price just after default) was very low at 25 cents on the dollar;
likewise, the weighted average bank loan recovery rate in 2002 dropped
to 52 cents on the dollar. With new defaulted bonds rising in 2002 to a
record $96.9 billion (default rate of 12.8%) and the default outlook for
2003 high, but lower than for 2002, investment opportunities should
abound in the distressed debt market. Indications are that distressed
investors (both old and new entities) are successfully raising funds
because investor expectations are buoyant. |
| URI: | http://hdl.handle.net/2451/26756 |
| Appears in Collections: | Credit & Debt Markets
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
