"Elle" <honda.lioness[at]gmail.com> wrote
- quote -

Table 6 near the end of
http://www.federalreserve.gov/pubs/i...68/ifdp668.pdf
has numbers that seem consistent with the above link. From
1983-1998, investors in bonds of U.S. non-financial
companies that defaulted recovered on average 42%. For U.S.
banks, the figure is 22%.

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I think the following study possesses some specifics, but I
am not yet sure I am reading it correctly:
http://www.moodys.com/cust/content/c...0004277132.pdf
Maybe see Exhibit 4 for starters, in particular the default
prices. Earlier it says the numbers are percent of face
value. Note the study does not include non-financial
companies. I would be interested to see if you read Exhibit
4 the way I am reading it. Some references appear at the end
that might be worth checking, too, like "Recovery Rates on
Defaulted Corporate Bonds and Preferred Stocks, 1982-2003,
December 2003 (80272)."

If forced to bet, I'd bet that the percent paid is highly
variable, since it depends on the bankrupt company's assets
after paying off certain higher rated debts, and the assets
remaining can be a large or small fraction of what is owed
bondholders.

Otherwise, I think the best one will turn up quickly is
commentary like that at
http://www.kiplinger.com/columns/ask...2002/q0204.htm

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In a typical corporate Chapter 11 bankruptcy, how many pennies on a dollar
does a typical corporate bondholder get? The answer could be a range
(e.g., 10% to 20%). I know the common shareholders typically get wiped
out, but it would be interesting to know how much better the bondholders
fare.

I assume any percentage answer to the question above is a percent of the
bond's face value. So if the bonds are trading prior to bankruptcy at 15%
of the face value, and the bondholders recover 20% of the face value, then
you effectively have a profit on the principal portion of the bond. (I'm
sure it rarely works out so well, but it was an example to facilitate the
conversation.)

Finally, how long is it typically before the bond holders see any money back
after Chapter 11 is declared, on average? I'm sure some bankruptcies go
three years before there is any settlement, but what is more typical?

--
Will

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