High yield recoveries soared in H2 2009, finds Fitch

Fitch Ratings has calculated that the recovery rate on defaulted US high yield bonds nearly tripled in the second half of 2009 compared to the first half of the year.

In a recent report entitled US High Yield Default and Recovery Rates 2009 Review and Outlook, the rating agency says that the $118.6 billion of defaults, including distressed exchanges, that it recorded last year represent a record default rate of 13.7%. The weighted average recovery rate in the year as a whole was 34.1%. However, for first six months of the year the recovery rate was only 21.8%, while in the second half the average recovery was 59%.

The report adds that $488 billion of high yield bonds and loans will come due over the next three years, leading to a risk that many borrowers will be unable to refinance their debt, especially if economic growth remains sluggish.