Escolar Documentos
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Default Monitor
Rahul Sharma
J.P. Morgan India Private Limited rahul.z.sharma@jpmorgan.com J.P. Morgan Securities LLC.
Bonds Loans
Dec-09
JPMorgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Dec-10
www.morganmarkets.com
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
10
8 5 3 5 4 4 4 5 3 3 3
Apr-10
Aug-10
Dec-09
Dec-10
Feb-10
Feb-11
Apr-11
Jun-10
Going forward, strong liquidity conditions over the past several years have clearly left few default candidates on the horizon. We expect the high-yield bond and loan default rates to remain below their 4.3% and 3.9% long-term averages in each of the next 3 years. Specifically, for high-yield bonds we forecast the default rate to be 1.0% in 2011, 1.5% in 2012, and 2.0% in 2013. For loans, we forecast 1.5% in 2011 and 2.0% in both 2012 and 2013.
High-yield bond and loan default rates to remain low for the next 3 years
14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 1998 1999 2000 2001 2002 2003 2004 2005
5.0% 4.1% 4.2% 1.7% 1.5%
12.8%
Long-term average default rate High-yield bonds: 4.3% Leveraged loans: 4.0%
10.3%
6.6%
2.3%
2.8%3.0% 0.9%
3.9% 2.3% 0.5% 0.2% 0.4% 1.8% 1.5% 1.5% 1.0% 2.0% 2% 2%
1.1% 1.0%
0.8%
2011E
2012E
The average high-yield bond price (excluding defaults) decreased to $101.59 from $103.33 month-over-month, while the median bond price also decreased, falling to $102.59 from $104.00. Amidst a volatile market, the size of the distressed bond market increased for the second straight month in May. Bonds that trade at or below 50% of par now total $4.9bn, up from $3.9bn last month and the highest total in the last eight months. However, this total still only accounts for a mere 0.48% of the total US high-yield bond market. Bonds trading at or below 70% of par increased to $17.6bn, or 1.7% of the market, from $12.6bn last month (1.2%). Another proxy for distressed debt, bonds with spreads greater than 1000bp, increased to $58.9bn, or 5.8% of the market, from $46.4 billion or 4.5% at the end of May. Meanwhile, for loans, the average bid price, according to S&P LCDs US Performing Loan Index decreased to $95.80 from $96.55 at the end of May. From a distressed perspective, 5.80% of the institutional loan market traded below $80 as of June 29, down from 6.03% at the end of May. Meanwhile, 1.34% of the institutional loan market traded below $60, up from 1.04% month over month.
2
2013E
2006
2007
2008
2009
2010
Jun-11
Oct-10
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
29-Jun-11 $4.9bn
Recovery rates for bonds are below historical averages thus far in 2011, while those for loans are slightly above historical averages. For all bonds, the average recovery is 33.4%, compared with 40.9% last year and the long-term average of 41.4%. Senior secured bonds recovered 49.4%, while senior unsecured bonds recovered 22.7%, compared with Moodys Investors Services long-term average of 50.8% and 36.7%, respectively. For first-lien loans, average recoveries are 70.1%, compared with 71.2% last year and Moodys long-term average of 65.8%. Credit trends remained positive in June, as the number of upgrades outpaced the number of downgrades for a 22nd consecutive month. In total, 31 companies were upgraded totaling $20.7bn, compared with 19 downgrades totaling $11.1bn. While the trend remained positive, this months volume of upgrades was the lowest since September of last year. Year to date, 229 upgrades total $301.9bn, and 142 downgrades total $132.2bn, which equates to an upgrade-to-downgrade ratio by issuer of 1.61:1 and by volume of 2.28:1. Meanwhile, there were four rising stars totaling $3.5bn and one fallen angel totaling $1.3bn in June. Year to date, 18 rising stars total $17.6bn and six fallen angels total $16.7bn.
Upgrades have outnumbered downgrades for 22 consecutive months
Number of upgrades and downgrades 120 100 80 60 40 20 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Jan-09 Feb-09 Mar-09 Apr-09 May-11 Jun-11 0
Upgrades Downgrades
2009: 212 upgrades and 481 downgrades 2010: 387 upgrades and 258 downgrades YTD: 229 upgrades and 142 downgrades
Note: Upgrades and downgrades are based on the number of issuers affected. Source: J.P. Morgan
Jan-11
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
Jan-02 10.24%
Jun-11 2.25%
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
11
Default volume
94.6 100 90 80 70 56.0 55.6 60 50 28.3 40 22.0 24.9 22.9 22.922.0 30 19.4 15.1 20 8.6 7.3 10.3 8.2 8.0 7.2 7.9 4.7 3.4 4.85.2 3.6 5.0 3.2 2.5 10 1.6 0.30.11.10.61.0 0
Number of defaults
160 140 120 100 80 60 40 20 0
8 10 23 17 18 28 23 27 33 86 49 51 62 31 20 16 37 26 47 18 138 116 87 61 29 21 18 70 42 21 6
($bn)
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Number 1 0 1
LTM default rates by dollar by issuer 0.80% 0.79% 0.81% 2.38% 2.25% 2.25%
2008
2000 1750 1500 1250 1000 750 500 250 0 Spread to worst
3 3 4 4
Note: Default rate is par-weighted. Sources: J.P. Morgan; Moodys Investors Service
2010
Jan-10
Jan-11
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
(contd)
Industry Retail Avg. rating 12 mo. prior B2 Rating at last issuance B1
Source: J.P. Morgan Note: Includes only US dollar-denominated debt from domestic high-yield issuers.
0.91% 0.79% 0.00% 1.32% 0.85% 19.96% 1.40% 3.60% 3.97% 7.87% 0.00% 10.19% 0.63% 0.00% 1.39% 2.98% 0.00% 0.00% 1.04% 2.51% 0.00% 2.25%
2008
36.69% 9.85% 25.02% 7.44% 7.48% 71.32% 1.43% 33.28% 1.94% 10.23% 0.00% 6.68% 1.30% 4.04% 19.08% 0.53% 2.17% 10.13% 1.67% 2.64% 0.00% 10.27%
2009
0.00% 0.00% 2.27% 0.00% 0.00% 8.36% 0.00% 1.49% 0.43% 0.81% 1.32% 0.73% 0.24% 0.61% 0.00% 2.72% 0.46% 0.00% 0.00% 0.00% 0.00% 0.80%
2010
0.00% 0.00% 2.29% 0.00% 0.00% 6.87% 0.00% 1.45% 1.93% 0.77% 1.03% 0.00% 0.23% 0.00% 0.44% 3.70% 0.85% 0.00% 0.00% 0.00% 0.00% 0.81%
LTM
10-yr Avg. 7.71% 1.63% 6.84% 1.99% 3.25% 10.61% 0.83% 9.78% 2.43% 2.58% 1.26% 2.48% 2.01% 3.89% 3.02% 2.68% 1.27% 2.35% 7.91% 6.26% 3.01% 3.89%
2009
2010
2.73
Source: J.P. Morgan Note: Based on fallen angel and default data from January 1995.
Source: J.P. Morgan Note: The average number of years to default is the number of years since a defaulted issuer last issued new debt in the primary market.
5.00
6.00
7.00
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
Nov-09 14.18%
Default rate
10.0%
Jun-11 1.01%
Dec-08
Dec-09
31
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Default volume
100 90 80 70 60 50 40 30 20 10 0
90.1
Number of defaults
100 90 80 70 60 50 40 30 20 10 0
93
60 33 9
($bn)
26
23
0.6
1.5
1.2
1.2
0.9
12
11
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
YTD
Number 0 0 1
LTM default rates by dollar by issuer 1.05% 1.02% 1.01% 1.71% 1.60% 1.51%
16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Default rate by volume
54 39 30 24
Note: Default rate is volume-weighted and spreads are based on an estimated three-year average life spread on the S&P/LSTA Performing Loans Index. Sources: J.P. Morgan; S&P LCD
YTD
Dec-10
5
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
Recovery rates
Senior unsecured bond issuer-weighted recovery rates
70
60 49 51 64 45 45 49 37 37 37 54 48 40 38 24 22 30 63
60 50 40 30 20 10 0
36
53
56 42
52
55 55
53 34 43 37 23
79
84 84 69 58 62
71 70
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Note: Recoveries in 2009 were 22.9 based on prices 30-days post default and were 43.0 based on year-end prices. Sources: Moodys Investors Service; J.P. Morgan
Note: Recoveries in 2009 were 49.7 based on prices 30-days post default and were 62.5 based on year-end prices. Sources: Moodys Investors Service; J.P. Morgan
Snr. Sub. 48.1 43.5 67.9 29.6 46.8 46.5 33.4 34.6 25.6 41.8 49.4 51.9 29.6 34.3 43.8 44.7 45.0 26.9 20.8 19.8 21.4 37.2 42.3 26.1 41.4 54.5 18.32 20.88 26.12 22.17 na 30.7
Sub. 30.0 41.1 44.3 39.7 41.4 46.9 33.8 26.4 19.1 24.4 38.0 44.1 38.0 41.5 22.6 33.1 18.2 35.6 31.9 15.9 24.5 12.3 94.0 51.3 56.1 na 10.25 5.38 4.75 na na 31.3
Notes: Recovery rates are issuer-weighted and based on price 30 days after default date. 2009 Adj. recoveries are based on year-end prices. Sources: Moodys Investors Service; J.P. Morgan
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
First-Lien Second-Lien 72.0 67.9 60.6 53.4 67.6 75.4 85.5 78.8 56.7 73.5 68.8 64.9 58.8 73.4 87.7 83.8 83.6 68.6 58.09 32.78 49.74 26.98 62.47 31.83 71.18 13.33 70.07 na 65.8 29.1
Notes: Recovery rates are issuer-weighted and based on price 30 days after default date. 2009 Adj. recoveries are based on ye prices. Sources: Moodys Investors Service; J.P. Morgan; S&P LCD; Markit
2011 Sr. Sec. Term All loans 70.07 Loan-only issuers 56.00 Loan & bond issuers 98.21
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
Distressed debt
Percent of the high-yield market 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Default rate 0.0%
29-Jun-11 0.48%
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Source: J.P. Morgan Note: Distressed debt is defined as bonds trading at or below 50% of par or accreted value.
Jan-10
Jan-11
Source: J.P. Morgan Note: Distressed debt is defined as bonds trading at or below 50% of par or accreted value.
Automotive Broadcasting Cable and Satellite Chemicals Consumer Products Diversified Media Energy Financial Food and Beverages Gaming Lodging Leisure Healthcare Housing Industrials Metals and Mining Paper and Packaging Retail Services Technology Telecommunications Transportation Utility Total
Source: J.P. Morgan
Source: J.P. Morgan Note: Distressed debt is defined as bonds trading at or below 50% of par or accreted value.
Distressed debt
Par Percent of par ($ bn) <= 25% 0.5 25% < par <= 50% 4.4 50% < par <= 70% 12.8 70% < par <= 100% 253.3 > 100% 748.2 Total 1,019.1
Percent of Par <= 25% 25% < par <= 50% 50% < par <= 70% 70% < par <= 100% > 100% Total
Source: J.P. Morgan Notes: Includes only US dollar-denominated high-yield securities, and excludes defaulted debt. Median market price = 102.59, down from 104.00 as of May 31, 2011.
Avg. Change in vol. price 1 mo. 6 mo. 12 mo. 15.3 -0.1 0.4 -1.0 40.7 1.0 1.6 -1.1 62.4 4.1 -3.1 -13.7 93.9 114.6 48.1 -122.6 105.7 -123.5 -3.5 262.7 101.59 -3.9 43.5 124.2
Source: J.P. Morgan Note: Upper-tier includes bonds rated Split-BBB and BB; Middle-tier includes bonds rated Split-BB and B; and Lower-tier includes bonds rated Split-B, CCC, D, and NR. 8
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
90.0% Percent of distressed loans 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%
29-Jun-11 5.80%
Distress Ratio
Default rate
16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Default rate
Feb-99
Feb-00
Feb-01
Feb-02
Feb-03
Feb-04
Feb-05
Feb-06
Feb-07
Feb-08
Feb-09
Feb-10
Sources: S&P LCD; J.P. Morgan Notes: Distressed debt is defined as bonds trading below $80. Data from May 2009 to present is based on all priced institutional term loans in our database, while the distressed ratio prior to that is the S&P LSTA Index Distress Ratio.
Sources: S&P LCD; J.P. Morgan Notes: Distressed debt is defined as bonds trading below $80. Data from May 2009 to present is based on all priced institutional term loans in our database, while the distressed ratio prior to that is the S&P LSTA Index Distress Ratio.
Distressed debt
Price $ < 60 60 <= $ < 70 70 <= $ < 80 80 <= $ < 90 90 <= $ < 100 $ >= 100 Total
Automotive Broadcasting Cable and Satellite Chemicals Consumer Products Diversified Media Energy Financial Food and Beverages Gaming Lodging Leisure Healthcare Housing Industrials Metals and Mining Paper and Packaging Retail Services Technology Telecommunications Transportation Utility Total
Source: J.P. Morgan Notes: Includes only US dollar-denominated, domestic institutional term loans, and excludes defaulted debt. Median market price = 99.00.
Avg. Change in vol. price 1 mo. 6 mo. 12 mo. 41.3 1.7 -0.1 -1.4 66.8 -1.8 -4.1 -3.9 76.0 -0.8 -6.1 -20.6 86.0 13.6 5.3 -71.1 97.8 53.8 120.5 104.8 100.6 -59.4 29.9 90.7 96.0 7.1 145.5 98.5
Source: J.P. Morgan Note: Includes only US dollar-denominated, domestic institutional term loans, and excludes defaulted debt.
Source: J.P. Morgan Notes: Includes only US dollar-denominated, domestic second-lien loans, and excludes defaulted debt. Median market price = 95.46.
Feb-11
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
Credit trends
Upgrade-to-downgrade ratio
Issuer
27-Jun-11 1.57
Upgrade-to-downgrade ratio
Par amount
2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
27-Jun-11 2.02
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
366
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Upgrades
600.0
547 496 392 376 470 481
Downgrades
500.0
387 258 229
Upgrades
425
446
Downgrades
352 268
507 419
259 223
237
230
194
214
238
212
242 148
216 132
142
80 69
98
109 127 97 95
73
119
YTD
2010
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Fallen angels
36 25 27 22 24
Rising stars
142 113
Fallen angels
30
25
27 15
66 29 11 10 40 16 13 37 38 31 3030
20
13
18
51 19
2009
56
25.0 16 0.0
1512 16 6 3
24
14
25 24
27
2010
150
13
33 28
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
10
2010
YTD
YTD
YTD
1817
Dec-10
302
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
94.6
($ bn)
54.4 32.9
22.0
28.3 3.4
8.0 7.6
7.6
15.3 2.3
8.6
22.9 18.5
7.3
3.2
7.9
1.6
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
19.4 0.5%
Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11
Note: Lower rated issuance includes bonds rated Split B or lower. Source: J.P. Morgan
40% 35% 30% 25% 20% 10% 15% 12.4% 5% 1995 1996
36.3% 26.0%
14.0% 10.7%
16.1% 7.6%
($ bn)
20.5%
2010
1.4%
32.6 18.5
31.1
13.7
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
YTD
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
59.9%
3.6%
Aggressive issuance from 2004 to 2007 accounts for 10.3% of 2007's year-end market size
5.0%
2.7% 1.8% 1.9% 0.9% 1.0% 0.1% 0.1% 0.5% 1.7% 1.3%
2.7% 1.3%
16.9%
9.0% 8.1%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
YTD
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
YTD
2010
YTD
0.8%
0%
0.0
YTD
32.9
11
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
(contd)
Aggressive issuance
48.8
7.0% 6.0% Percent of the market 5.0% 4.0% 3.0% 2.0% 1.0% 1995 1996 1997 0.0%
1.8% 2.7% 3.8%
5.7%
Wireline Telecommunications
($ bn)
5.0%
32.3 17.0 18.6 6.3 1.0 4.3 25.7 14.9 12.2 12.6 5.4 17.5 10.6
0.9
0.8%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
YTD
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: J.P. Morgan Note: Aggressive issuance includes lower rated securities, excluding refinancings, plus Wireline Telecommunications issuance.
Source: J.P. Morgan Note: Aggressive issuance includes lower rated securities, excluding refinancings, plus Wireline Telecommunications issuance.
38% 30%
44%
16%
15%16% 13% 5%
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD
New-issue volume
300.0 275.0 250.0 225.0 200.0 175.0 150.0 125.0 100.0 75.0 50.0 25.0 0.0
302
($ bn)
126 46 69 43 47 73
106 68
31 29
53
1 10
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD
12
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD
504 402 250 238 139 48 389 378 300 375 260 335 321 387 95 115
2010
YTD
18% 16%
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
321
183
149 148 71 53
181
155
180 170
106
38
1991
1992 1993
1994
1995 1996
1997
1998 1999
2000
2001 2002
2003
2004 2005
2006
2007 2008
2009
2010 YTD
74.1% 56.1% 63.7% 45.2% 39.9% 35.3% 29.2% 18.6% 18.6% 10.8%
9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
0.0% 1.8% 0.0% 0.0% 0.0% 0.2% 2.0% 1.8% 1.9% 2.9% 1.3% 6.2%
50.2%
40.0% 32.5%
29.4%
41.0% 35.3%
46.8%
26.8%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD
8.2%
80 60 40 20 0
1000 900 800 700 600 500 400 300 200 100 0
19.1%
2.1% 0.9%
Number of deals
2002
2003
2004
2005
2006
2007
2008
2009
2010
YTD
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
$7.2
Note: LBO issuance from 2005 through 2007 accounts for more than 50% of the institutional leveraged loan market, compared with 10% in the bond market. Sources: J.P. Morgan; S&P LCD
Note: Lower rated issuance includes loans rated Split B or CCC. Sources: J.P. Morgan; S&P LCD
$1.5
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
YTD
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
YTD
YTD
13
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
Number of issuers 337 Number of defaulted issuers 91 Default rate 27.0% by par amount Split BBB BB Split BB B Split B CCC Not rated by par amount
14
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
Appendix A
2011 high-yield defaults
Date 11-Jan-11 01-Feb-11 15-Feb-11 01-Mar-11 01-Apr-11 27-Jun-11 Issuer
Source: J.P. Morgan Notes: 1) Recovery rate is the weighted average price of all bonds in the capital structure 30 days after default. 2) * indicates a grace-period default
Constar International Sbarro Ahern Rentals Harry & David Perkins & Marie Callender's Nebraska Book
Paper and Packaging Food and Beverages Services Food and Beverages Food and Beverages Retail
Industry
Issuer
Source: J.P. Morgan Notes: 1) Recovery rate is the weighted average price of all bonds in the capital structure 30 days after default. 2) * indicates a grace-period default
Neenah Foundry Uno Restaurant Holdings Spheris Operating US Concrete Neff Rental Network Communications Truvo USA LLC FGIC Corp Penhall International Blockbuster Angiotech Pharmaceuticals* Loehman's Capital TerreStar Networks Wolverine Tube Ambac Financial Group Indianapolois Downs American Media Operations Local Insight Regatta Holdings Vertis Holdings Insight Health Services Great Atlantic & Pacific Tea Company
Debt ($ mn) 225.0 142.0 125.0 272.6 34.3 175.0 200.0 261.9 175.0 930.0 575.0 110.0 995.6 131.1 1,247.2 447.6 387.3 210.5 736.1 293.5 272.8
Metals and Mining Food and Beverages Healthcare Housing Services Diversified Media Diversified Media Financial Services Retail Healthcare Retail Cable and Satellite Industrials Financial Gaming Lodging and Leisure Diversified Media Diversified Media Diversified Media Healthcare Retail
Industry
Moodys rating at last issue B2 B3 Caa2 B3 Caa2 B2 Caa1 Aa2 Caa1 B1 B2 B3 NR NR Aa3 B3 NR B2 NR B2 B3
WA recov.
51.00 55.38 15.50 53.00 9.50 50.00 3.38 na 61.75 34.87 na 25.00 101.50 52.50 18.05 73.72 39.19 4.00 17.22 24.00 88.50
Transaction
Industry
15
Peter D. Acciavatti (1-212) 270-9633 peter.acciavatti@jpmorgan.com Tony Linares (1-212) 270-3285 tony.linares@jpmorgan.com
High Yield and Leveraged Loan Research Default Monitor June 30, 2011
Nelson Jantzen (1-212) 270-1169 nelson.r.jantzen@jpmorgan.com Alisa Meyers (1-212) 834-9151 alisa.meyers@jpmorgan.com
Appendix B
Date 19-Jan-11 25-Jan-11 01-Feb-11 16-Feb-11 26-Jun-11
Industry
Source: J.P. Morgan Notes: 1)Recovery rate is the weighted average price of all senior secured loans 30 days after default (second-liens are excluded), 2) * indicates a grace-period default
Debt ($ mn) 161.5 98.8 105.8 1,104.8 175.0 565.0 540.9 100.0 869.0 248.3 542.2 188.5 286.4 298.8 763.5 114.0 377.9 68.2 110.0 106.3 565.0 384.3 1,975.1 46.0 330.0 251.4 100.0 430.6 310.9 395.0 250.0
Industry
Source: J.P. Morgan Notes: 1)Recovery rate is the weighted average price of all senior secured loans 30 days after default (second-liens are excluded), 2) * indicates a grace-period default
Diversified Media Housing Broadcasting Gaming Lodging and Leisure Industrials Consumer Products Retail Healthcare Diversified Media Consumer Products Paper and Packaging Services Technology Paper and Packaging Gaming Lodging and Leisure Healthcare Services Diversified Media Consumer Products Services Consumer Products Consumer Products Utility Financial Healthcare Services Cable and Satellite Diversified Media Diversified Media Diversified Media Broadcasting
WA Recov. na 58.00 na na 15.00 23.67 17.00 na na 67.71 33.36 80.00 76.00 93.63 77.63 49.50 95.33 67.00 na 55.00 92.25 91.30 95.07 na na 92.50 na 99.35 35.50 93.00 41.00
Transaction
Services
Industry
16
JOYCE CHANG Head of Global Credit and Emerging Markets Research (212) 834-4203
AND
L E V E R A G E D L O A N S T R AT E G Y
PETER D. ACCIAVATTI
peter.acciavatti@jpmorgan.com . . . (212) 270-9633, tony.linares@jpmorgan.com . . . . . . (212) 270-3285 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . nelson.r.jantzen@jpmorgan.com . . . (212) 270-1169 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . alisa.meyers@jpmorgan.com . . . . . (212) 834-9151
AND
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