Debt investors are naturally paying more attention to recovery rates after default rates rose briskly across the globe in 2023 from historical lows reached in early 2022 (chart 1).

The U.S. speculative-grade default rate of 4.5% as of Dec. 31, 2023, was notably above the 10-year average of about 3.1%. For Europe, the speculative-grade default rate at year-end 2023 was 3.5%, also notably higher than the 10-year average of about 2.4%.

Meanwhile for emerging markets, the rate at year-end was 1.8%, somewhat lower than the 10-year average of about 2.1%. Preliminary default rates through February for the U.S. and Europe are already higher at about 4.7% and 4.1%, respectively, although we expect these levels to stabilize or decline by December.

Chart 1

While economic and interest rate expectations for 2024 have improved recently, investors still have concerns about how various factors may adversely affect recovery rates; including the impact of elevated interest rates on valuations; expectations for slowing and uneven economic growth; the rise in aggressive out-of-court restructurings, euphemistically referred to as liability management transactions (LMT); and ongoing geopolitical conflicts (Russia/Ukraine, Israel/Gaza/Middle East, trade).

Ultimately, we believe there are reasons to be concerned about future debt recovery rates (especially in the U.S., Canada, and Europe), but recovery prospects are not as bleak as some fear.

Recovery Pressure

High interest rates and capital costs may weigh on valuations and recovery

While we expect central bank rates to begin to decline in 2024, drops may be measured and rates may remain elevated for some time after rising sharply over the past two years (chart 2). High interest rates can threaten recovery rates because increased capital costs depress valuations (assuming the present value of future cash flow determines enterprise valuation). High capital costs may also hurt growth by reducing viable growth opportunities, which may get squeezed by lower internally generated cash flow (due to higher debt service costs), limited and expensive financing options, and higher investment hurdles.

Chart 2

We illustrate the inverse relationship between interest rates (capital costs) and valuation (chart 3), using the constant growth valuation model and assumptions outlined in our simplified example. A doubling of capital costs to 16% from 8% reduces the valuation 50% to $750 from $1,500 and the EBITDA multiple to 5x from 10x.

Chart 3

Slowing economic conditions may weigh on valuations and recovery rates

Another variable turbocharging valuations before, and immediately after, the onset of the COVID-19 pandemic was robust growth expectations. Near-zero benchmark rates and welcoming capital markets made it easy to borrow and leverage up to fund growth, internally and through acquisitions. This explains why purchase price EBITDA multiples were often well into the double-digit percents. The constant growth valuation model can help illustrate the impact. Using the same initial assumptions above, adding an assumed annual real growth rate of 4%, the valuation doubles to $3,000 ($120/{8%-4%}) and the EBITDA multiple doubles to 20x ($3,000/$150), all else equal.

Of course, the opposite is also true. If stiffening economic headwinds impair growth, profits, and cash generation, this will depress valuations. At the risk of belaboring the obvious, pressure on valuations from higher capital costs and economic weakness and uncertainty can damage creditor recovery prospects for companies that default and emerge in this environment.

Aggressive out-of-court restructurings or LMTs also threaten recovery rates

If high rates and slowing growth aren't concerning enough, investors are also troubled by increased aggressive out-of-court restructurings from distressed firms in recent years. These can substantially impair the recovery prospects (and credit quality) for creditors that do not participate.

Not long ago, the risk of aggressive out-of-court restructurings was primarily a concern for high yield investors with unsecured notes (or bonds) in distressed firms. These investors could face coercive tender offers to exchange their unsecured notes for new notes, typically at a notable discount to par. Failure to accept generally strips protective covenants for nonconsenting noteholders. Further, failure to get a sufficient noteholder consent might force the company to default, which could leave unsecured creditors with meager recoveries. Conversely, accepting the proposal often includes a junior lien position (which may help future recovery rates) and the possibility that a reduced debt burden may help the company avoid an otherwise inevitable default.

In recent years, however, investors in broadly syndicated first-lien loans have become exposed to aggressive restructurings that impair their credit quality and recovery prospects. This reflects more companies (often financial sponsor owned) that have exploited the weak loan documentation requirements that has proliferated in the institutional loan market the past half dozen years or so. In recent years, the two most common loan restructuring tactics have been collateral transfers (also known as drop-downs) and priming loan exchanges (also known as up-tiering). The impact of these restructurings on non-participating lenders is often severe (table 1).

Table 1

Nonetheless, these out-of-court restructurings have generally not solved the capital structure problems that forced these companies to restructure in the first place (table 1). Of the 27 loan restructurings by 24 companies since mid-2017 (with some undergoing multiple transactions), 11 subsequently filed for bankruptcy. Further, of the 13 firms that managed to avoid bankruptcy, only two avoided a subsequent default or are rated higher than 'CCC+'. Issuer ratings of 'CCC+' or lower connote our expectation that an eventual default is more likely than not. The two exceptions are PetSmart LLC, which we rate 'B+', and Renfro Corp., which managed to repay its loans in full when the company was subsequently acquired after completing two priming loan exchanges.

While aggressive out-of-court restructurings have been less common in Europe, two of the cases we noted are European-based multinationals. In addition, a few cases indicate European owners may be increasingly willing to take advantage of borrower-friendly loan documentation. In the recent restructuring of Keter Group B.V., the initial owner proposal reported to effectively leave nonconsenting lenders with a potentially unsecured loan at a lower margin than consenting lenders'. This would have been an example of a priming loan exchange had it been accepted.

Similarly, these types of transactions are not yet an issue in Latin American countries where we do recovery analysis (primarily Brazil and Mexico) or Asia (Australia, New Zealand, Singapore, and Hong Kong), but this bears watching.

Because these transactions often produce winners and losers from the same group of creditors, they are often referred to as "lender-on-lender violence." Fortunately, they remain relatively infrequent, although they are increasing and likely to persist since the weak protections that allowed them to proliferate remain widespread.

Impact On Recovery Ratings

How does the movement in interest rates, slowing economic growth, and LMTs affect recovery ratings under S&P Global Ratings' recovery methodology?

While elevated interest rates may constrain current valuations, the impact on valuation at default (and recovery ratings) is more complex. Historically, there has not been a clear indication that actual recovery rates fall during periods of rising interest rates (chart 4). This is likely due in part to macroeconomic factors. Interest rates typically rise during strong economic growth, which can boost recovery prospects.

Chart 4

For an individual company, higher fixed costs (as a result of higher interest rates) should lead to an earlier default at higher EBITDA as debt service costs rise. In theory, this would boost a company's valuation and creditor recovery rates. In reality, the theoretical bump in valuation at default is likely to be substantially offset by higher capital costs, mitigating the impact on recovery outcomes.

To address this dynamic in our recovery methodology, we derive fixed charges using long-term averages in benchmark interest rates that are paired with long-term stressed EBITDA multiples by sector to help estimate enterprise value given default. This approach helps mitigate the impact of inevitable fluctuations in interest rates on our recovery analysis and keeps recovery outcomes stable (absent the use of analytical judgement through the recovery adjustments aspect of our criteria). As such, our recovery ratings remained largely stable even amid the sharp decline in benchmark interest rates during the global financial downturn of 2007-2009 as well as the recent spike in interest rates.

Similarly, our recovery analysis starts by simulating a default scenario with enough operational stress to trigger a payment default, so swings in economic conditions (in the macroeconomy or for a particular sector) do not necessarily influence our recovery assumptions or outcomes. We acknowledge that recovery outcomes can be countercyclical with economic conditions when a company emerges from default, and have shown as much in some of our studies on actual recovery rates. We generally don't try to adjust our recovery outcomes for this since valuations and economic forecasts can be subjective and volatile. Rather, our recovery outcomes are intended to be reasonable (if imperfect) estimates of recovery rates given default in light of a company's asset quality, debt burden, and the relative creditor priorities that result from its debt and organizational structure.

While the recovery risk posed by out-of-court restructurings appears to be rising (at least in the U.S.), these restructurings are not predictable nor quantifiable at the issuer or debt instrument level (see the wide array of outcomes in table 1). Priming loan exchanges help illustrate the challenge of factoring this risk into our recovery analysis on a prospective basis since participating lenders may improve their recovery prospects while nonparticipating (and formerly equal) lenders have their recovery prospects impaired. Consequently, we only factor these transactions into our recovery ratings in our ratings surveillance after the transactions are complete.

Even so, investors are rightly concerned about these restructurings because some first-lien investors' recoveries may be diluted and possibly wiped out. This also means that recovery rates for select first-lien investments are likely to be lower and more volatile than our current estimates (as embedded in our recovery ratings).

Looking Back

Empirical data on estimated actual recovery rates by region and debt type

S&P Global Ratings collects data on defaults and recoveries globally and has published many reports analyzing post-default recovery rates over the years. Between 2008 and 2022, these studies cover more than 500 defaulted companies in the U.S. (including some Canadian companies) and 265 for Europe.

For recovery outcomes for first-lien debt from three of these studies (chart 5), they are divided into three five-year periods. We present the estimated recovery data from each study on an ultimate (at the end of the restructuring) and nominal (versus discounted) basis. Each uses slightly different methodologies for estimating actual recovery rates and covers a different mix of companies as described the Appendix.

One trend is that average first-lien recoveries in the U.S. are notably lower in the most recent five-year period under both U.S. studies, and in Europe over the last 10 years. These statistics suggest caution in relying on longer-term average recovery rates, although we recognize they can vary substantially depending on the defaulted companies and sectors in any given period as well as the economic conditions at the point of resolution.

Chart 5

Focusing on the U.S. studies, the first-lien recovery trends are remarkably similar, even though they cover different groups of companies and use different methods to estimate actual recovery rates. One underlying reason evident in each study is shrinking debt cushions over time. In the LossStats data, the percentage of U.S. companies with a first-lien debt cushion of less than 25% increased from 35% for 2008-2012 to 60% for 2018-2022. Similarly, in S&P Global Ratings' bankruptcy dataset for U.S. and Canadian companies, the share of companies with a debt cushion of less than 25% was roughly 23% in the first two five-year periods, but 38% in the most recent. The reduced debt cushions materially affected recovery rates. For 2018-2022, first-lien recovery rates for companies with debt cushions of less than 25% were 66% in the LossStats data and 58% in S&P Global Ratings' bankruptcy dataset. In contrast, recoveries for firms with larger debt cushions were much higher at 83% in the LossStats data and 81% in ours.

Also, U.S. and Europe first-lien recovery rates in the most recent five-year period are affected by the increasing dominance of covenant-lite term loan structures since 2018. As we've highlighted in other research, covenant-lite first-lien term loans have generally had meaningfully lower recovery rates than standard first-lien term loans since the global financial recession ("Settling For Less: Covenant-Lite Loans Have Lower Recoveries, Higher Event And Pricing Risks", published Oct. 13, 2020; and chart 4 in "U.S. Recovery Study: Loan Recoveries Persist Below Their Trend", published Dec. 15, 2023). Covenant-lite structures can impair first-lien recovery rates because companies generally need to deteriorate further before a default is triggered. Further, these structures provide companies with more flexibility to add incremental debt and engage in LMTs that may impair first-lien recoveries. Even so, it's important to note that the impact of aggressive loan restructurings may not be clear in aggregate recovery statistics due to the complexity and idiosyncratic nature of these transactions (see "Recovery Statistics May Not Reflect Whole Story").

For Europe, from 2008-2012, there were 695 first-lien instrument defaults with an average recovery of 75%. This dropped to 68% for 2013-2017, but was accompanied by a fall in defaulted instruments to just 181. Hence the drop-off in first-lien recovery rates for 2013-2022 is notable, but substantially lower default volumes over this time make it difficult to draw firm conclusions. For 2018-2022, the average first-lien recovery for Europe was steady at 69%, but this was again off the back of just 148 first-lien data points. Even so, overall first-lien recoveries in Europe have been consistently lower than in the U.S.

Senior unsecured debt recovery rates in the U.S. and Europe are generally meaningfully lower than those for senior secured debt and much more variable and idiosyncratic. A key reason is that senior unsecured recovery outcomes are substantially influenced by the relative magnitude of higher and lower priority claims in the debt structures of the defaulted companies in any given period. They also can be quite sensitive to economic conditions at the point of emergence. Debt structures in both geographies tend to be secured heavy, but this can vary meaningfully on a company and sector basis. Senior unsecured debt recovery rates can also be highly sensitive to the type of default.

In our U.S. LossStats dataset, average senior unsecured recovery rates between 2008 and 2022 were 48%, with a median of 40%. These figures are boosted by the inclusion of distressed exchanges. For senior unsecured debt that emerged following a distressed exchange, recoveries averaged 54%, 11 percentage points higher than the average recovery of senior unsecured debt following a bankruptcy. For our U.S. bankruptcy dataset, average recoveries were meaningfully lower at 29%, with a median of 15% and a high variance in outcomes.

For Europe, senior unsecured recovery rates for 2003-2022 were roughly 50% on an average and a median basis, but also had a standard deviation of about 37% (as a percent of par), indicating a wide dispersion of results. This primarily reflects out-of-court exchanges that dominate restructurings in the region.

Our last studies on empirical recovery rates in Brazil (for the 1998-2017 period) and Mexico (1999-2015) are somewhat dated, but they showed that first-lien debt instruments in Latin America had robust average nominal recovery rates at close to 95%. Senior unsecured debt was the primary debt class in the region's corporate sector, representing close to 60% of the total defaulted debt instruments. In addition, our analysis confirmed that senior unsecured debt instruments posted high average nominal recovery rates of close to 59% in Brazil and 69% in Mexico. Our analysis concluded that the strong first-lien and senior unsecured recovery rates in Brazil and Mexico largely reflect the limited priority and first-lien debt claims in corporate balance sheets.

More recently, Latin America rated issuers recorded a dozen defaults in 2023, 10 in Brazil where high interest rates and weak business conditions in the first half squeezed profits and cash flow. In most of these cases, nominal recovery rates of senior unsecured debts were close to 100%, given the predominance of distressed exchanges in the sample. In all those cases, the companies emerged fairly rapidly by exchanging unsecured notes for new bonds with longer maturities--and for the most part similar coupons. Strong recovery rates for distressed exchanges (relative to bankruptcy and nonbankruptcy restructurings) are consistent with the findings from our Brazilian recovery study. We also note that the estimated median recoveries of this sample, based on our recovery ratings at the time of default, suggested recoveries of about 45%, much closer to those in typical judicial recoveries in the past. We also acknowledge that several difficult debt restructurings occurred since the pandemic broke out, as it was the case for rated airlines in Latin America Avianca Group International, Latam Airlines Group S.A., and Grupo Aeromexico S.A.B. de C.V. They filed for bankruptcy under Chapter 11 in 2020, and emerged in 2022 with debt haircuts of 20%-55%.

We have not published a recovery study for Asia-Pacific given that defaults by rated entities have been limited and the availability of underlying recovery data is even more limited. This reflects in part the historical skew of the rated portfolio to investment-grade entities and the fact that we only conduct recovery analysis in Australia, New Zealand, Singapore, and Hong Kong. In Australia, for example, there were just 12 defaults from 2008-2022, encompassing a mix of bankruptcy, missed payments, and distressed exchanges.

Looking Forward

What S&P Global Ratings' recovery ratings say about recovery expectations by region and debt type

Our recovery ratings provide an overview of our expectations for ultimate recovery rates on a nominal basis by debt type. To facilitate apples-to-apples comparisons by region, we provide the data on an issue count basis for rated debt issued by speculative-grade corporate entities and excludes recovery data for the project finance, infrastructure, nonbank financial institutions, and oil and gas sectors (where debt structures and recovery expectations can be starkly different than for the broader corporate universe and to limit the impact of regional differences in sector mix).

Recovery expectations: first-lien debt

The relative side-by-side comparison of first-lien recovery expectations (chart 6) and the regional recovery statistics (table 2) show that regional recovery expectations are similar, although average recovery expectations in the U.S. and Canada are somewhat higher than in Europe, but lower than in Latin America and Asia-Pacific. While these differences are directionally consistent with the empirical recovery data outlined above (again acknowledging the absence of empirical data for Asia-Pacific), there are a few elements worth drilling into for more perspective.

Chart 6

Table 2

A review of a sample of the underlying recovery data provides insight into the regional differences in first-lien recovery ratings (table 3). The sample covers many relevant rated issuers, with regional coverage at year-end 2023 of roughly 80% in the U.S., Canada, and Europe; 45% in Latin America; and 70% in Asia-Pacific.

A key issue that the sample data highlights is that debt structures are meaningfully more top heavy in the U.S., Canada, and Europe than in Latin America, and moderately more top heavy than in Asia-Pacific. As you might expect (and consistent with the empirical recovery data covered earlier), first-lien recovery expectations are meaningfully higher (in all regions) when there is a junior debt cushion of at least 25%. These disparities in recovery expectations based on debt mix is persistent over the past six years in all four regions.

Table 3

The sample data also shows that debt structures in the U.S. and Canada and in Europe are now comparable and have become steadily more top heavy over the past six years. The shift in debt mix has been more significant in the U.S. and Canada with the percent of debt structures with a junior debt cushion of less than 25% increasing by roughly 16% versus about 6% for Europe.

For Latin America, while average and median first-lien recovery expectations are higher, these statistics are materially constrained by our classification of the Brazilian and Mexican insolvency regimes as Group B jurisdictions under our jurisdictional ranking assessment criteria. This reflects our view that the insolvency regimes in these countries are less creditor friendly and that recovery outcomes may be lower and less predictable. The Group B classification caps our recovery ratings on first-lien debt of companies expected to restructure in these countries at '2' (indicating recovery expectations of 70%-90%), and we only assign a '2' recovery rating in limited cases of strong collateral coverage indicating implied recovery would exceed 90%. This cap limits the rounded recovery percentage to 85%, while debt issues with '3' recovery ratings (50%-70%) for Group B countries have a maximum rounded recovery percentage of 65% even when the implied recovery is greater than 70% but less than 90%. As a result, the recovery data for Latin America in chart 5 and tables 2 and 3 are meaningfully restricted.

About 10% of our first-lien recovery ratings in Latin America are '1' (chart 6). This only reflects three issue ratings, which highlights the relatively few recovery ratings on first-lien debt in Latin America (29 in total or just 11% of our regional recovery ratings). All three debt issues relate to LatAm Airlines, which has previously restructured under Chapter 11 of the U.S. Bankruptcy Code. We would expect the same outcome in a subsequent default, so the Group B assessment does not apply.

For Asia-Pacific, roughly 44% of our issue ratings in the region are on entities rated 'BB-' or higher, more than double the roughly 20% mix for the other regions is an important factor supporting higher average and median first-lien recovery expectations. Higher-rated entities tend to be less leveraged and more likely to have a meaningful cushion of junior debt, both of which are correlated with higher recovery outcomes. There are just 43 rated first-lien debt instruments in Asia-Pacific, although this represents 67% of our recovery ratings in the region.

Our average recovery expectations for first-lien debt are notably lower than indicated by the empirical recovery data shown in the prior section, even compared to the lower recovery outcomes we cited in the more recent periods.

For the U.S. and Canada and for Europe this gap is roughly 10 percentage points. We believe the ongoing shift in debt structures becoming more top heavy in these geographies is a contributing factor that is not yet fully reflected in empirical recovery outcomes (especially compared with our U.S. and Canadian bankruptcy dataset). Another contributing factor may be that our recovery ratings are based on a simulated payment default whereas some of the empirical recovery results (our U.S. LossStats and European datasets) are boosted by higher recovery outcomes for distressed exchanges completed before operating results deteriorated enough to trigger a payment default.

For Latin America, the gap is significantly more pronounced at nearly 30 percentage points, although the data underlying our empirical comparisons is limited and dated, as noted. The dominant reason is our Group B jurisdiction assessment, which caps our recovery outcomes on first-lien debt. Including distressed exchanges is another contributing factor because recoveries are notably higher for this default type than for bankruptcy defaults. Further, preemptive distressed exchange restructurings often do not include such stress normally factored into our recovery ratings analysis.

For Asia-Pacific, the absence of available empirical data available and a modest number of ratings precludes us from drawing useful comparisons. However, the higher average and median first-lien recovery expectations for the region appears consistent with the high concentration of loans to issuers rated 'BB-' or higher and a somewhat lower concentration of debt structures without a junior debt cushion of at least 25%.

Recovery expectations: senior unsecured debt

The side-by-side comparisons (chart 7) and average and median statistics (table 4) show that recovery expectations are higher in Latin America than elsewhere. This is consistent with the empirical data, in which we attribute high average senior unsecured debt recovery rates of 59% in Brazil and 69% in Mexico to the simple debt structures in the region, predominantly senior unsecured debt and with a thin layer higher priority debt.

Chart 7

Table 4

A review of our sample of underlying recovery data (table 5) shows that simple, unsecured-heavy debt structures continue to prevail in Latin America, with unsecured debt representing at least 50% of total debt in 88% of our sample, compared with the mid-teen percents for other regions. Higher recovery expectations for unsecured debt in Latin America are also consistent with the predominance of ratings in the 'BB' category (BB+/BB-BB-), 79% of the dataset compared with the mid-60% area for the U.S., Canada, and Europe.

Table 5

Asia-Pacific has an even higher skew toward 'BB' category companies at 95% of our unsecured recovery ratings (all but one issue rating). Still, more top-heavy debt structures (table 3) and the limited number of unsecured-heavy debt structures (table 5) in the region moderate the average and median recovery expectations.

For Europe, our average recovery expectations of 47% for unsecured debt is about equal with the 50% empirical average cited above, while the median of 60% is about 10 percentage points higher.

For the U.S. and Canada, the average expectation of 37% and median of 40% are closer to the empirical results cited from our LossStats recovery study (48% and 40%, respectively) than our bankruptcy dataset results (29% and 15%, respectively).

One factor constraining our recovery expectations (and ratings) on senior unsecured debt in all regions is that company debt structures can change, especially on the path to default. While these changes are variable and unpredictable, there is a high chance they will impair unsecured debt recovery prospects. As such, we cap recovery ratings on unsecured debt issued by companies rated in the 'BB' category at '3'. The cap is intended to limit the down-notching of unsecured recovery and issue ratings if and when such changes happen. Ultimately, the cap appears to be helpful as it brings our recovery expectations closer to empirically observed recovery outcomes for senior unsecured debt. We have a less-restrictive cap of '2' for companies we rate 'B+' or lower given that they are somewhat closer to default, although this rarely limits recovery outcomes.

As noted, unsecured recovery outcomes tend to be highly variable and dependent on the underlying debt structures of individual companies. In particular, the amount of higher priority debt (secured debt and structurally senior debt) and lower priority debt (either structurally junior or contractually subordinated debt) significantly affects outcomes. Across all regions, unsecured debt with recovery ratings of '5' and '6' tend to be structurally subordinated notes since contractually subordinated debt is more rare and often not rated. Actual unsecured recoveries are also quite sensitive to economic conditions at the point of resolution. As a result, absent a consistent pattern in debt structures (as is the case in Latin America with a heavy tilt toward unsecured debt) or low leverage (as is the case with significant skews to companies in the 'BB' category and lower leverage in Latin America and Asia-Pacific), it is difficult to make more definitive conclusions on unsecured recovery prospects.

Recovery expectations: second-lien debt

There are also relatively few rated second-lien debt instruments, predominantly in the U.S. and Canada where 266 issues represent almost 9% of the rated secured debt for the region. Elsewhere, rated second-lien debt counts are scant at 18 in Europe and one in Asia-Pacific. They represent only about 2% of all secured ratings in these regions. Recovery expectations for most of these debt instruments are abysmal (chart 8), reflecting that they generally represent a thin layer of the junior-most debt in the capital structures of highly leveraged companies we rate 'B' or lower.

Chart 8

Table 6

The Final Verdict

Is the global forecast for debt recoveries in 2024 bleak?

Ultimately, no, it is not bleak. That said, there are reasons to be concerned that future recovery rates will be lower, especially in the U.S. and Europe.

For one, we tie the deterioration in estimated actual first-lien recoveries in recent periods in the U.S., Canada, and Europe to a meaningful rise in first-lien heavy debt structures. This trend reflects a notable increase in leverage and lower-rated corporations after the recession amid near-zero interest rates, heavy merger and acquisition activity, and a rise in rated firms that are private equity owned. It appears these changes are not yet fully reflected in historical recovery rates, so lower first-lien recoveries are likely to persist, and may worsen.

Further, event risk is rising with in selective defaults comprising most defaults in recent years. Weak debt documents and the dominance of covenant-lite term loan structures in the U.S., Canada, Europe, and Australia means that the risk of aggressive out-of-court restructurings remains. These threaten recovery prospects for first-lien and unsecured debtholders, but we do not prospectively capture them in our recovery ratings because these events are not predictable or quantifiable. Whether such restructurings (including easing liquidity pressure by adding options to payment-in-kind interest) allow companies to avoid defaults is debatable, indicated by high redefault rates. The companies that redefault are likely to have lower recovery outcomes.

Whether some of the more aggressive restructuring tactics spread from the U.S. to other geographies is something to watch. To date, these issues are not as prevalent in Europe and do not seem to have migrated to Latin America or Asia-Pacific.

Appendix

Related Research

• U.S. Recovery Study: Loan Recoveries Persist Below Their Trend, Dec. 15, 2023
• North American Debt Recoveries May Trend Down For Longer, Dec. 11, 2023
• European Corporate Recoveries 2003-2022, July 5, 2023
• Settling For Less: Covenant-Lite Loans Have Lower Recoveries, Higher Event And Pricing Risks, Oct. 13, 2020
• 20 Years Of Brazilian Corporate Defaults Show A Worsening Recovery Trend, May 11, 2018
• Update On Mexican Corporate Empirical And Recovery Rating Performance", July 12, 2016