hy default insights
TRANSCRIPT
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Credit Market Research
www.fitchratings.com May 28, 2014
Corporates / U.S.
Fitch U.S. High Yield Default Insight Spotlight on LBO Defaults Special Report
EFH-Inspired LBO Focus: A long-simmering bankruptcy filing from Energy Future Holdings (EFH) propelled both the U.S. high yield and leveraged loan trailing 12-month default rates to multi-year highs of 2.8% and 3.9% in April. EFHs filing is notable both for its size and status as the largest leveraged buyout (LBO) default to date. However, it is one of 10 LBO-related company defaults so far in 2014 compared with 11 for all of 2013. Excluding EFH, this years batch of failed LBOs has affected $6.5 billion in bonds and institutional loans. The Texas giant towers over its peers at $35.8 billion and pushes the tally of LBO associated loan and bond defaults to 29% of total defaults from 2007 to the present.
$120 Billion Boom Tab: LBO transactions surged in the years prior to the financial crisis, with 20042007 dedicated high yield and leveraged loan issuance approaching half a trillion dollars, according to Thomson Reuters LPC and Bank of America data. LBO defaults from that period have to date affected $55.3 billion in bonds and $64.5 billion in institutional leveraged loans. Of the aggregate $120 billion, 63% consists of loans and bonds sold 20042007, and the remainder is predominantly original LBO debt that was refinanced 20082014.
Refinancing Reprieve for Some: Most LBO restructuring activity occurred in 20082009, but as with EFH, refinancing offered some troubled issuers a longer lifeline. For example, Momentive Performance Materials Inc., a 2006 LBO, also filed in April. The specialty chemicals company refinanced the majority of its 2006 loans into bonds 20102012 before defaulting this year on $2.9 billion.
No Discernable Recovery Bias: LBOs have produced loan and bond price-based recovery outcomes similar to non-LBOs. The average 30-day postdefault recovery price on LBO bonds 20072014 was 47% of par versus a non-LBO rate of 45%. Similarly, across institutional first-lien leveraged loans, the 30-day postdefault LBO price was 61% versus 63% across non-LBOs. In addition for a group of 95 companies with price data at emergence from bankruptcy, recovery outcomes on first-lien LBO/non-LBO loans were comparable at 74% of par.
On the Radar: April defaults included EFH, Momentive Performance, James River Coal and Guitar Center, bringing the year to date high yield default tally to 15 issuers on $22.4 billion in bonds versus an issuer count of 13 and dollar value of $5.9 billion in the first four months of 2013. May defaults have thus far included Allen Systems Group Inc. and River Rock Entertainment Inc. At midmonth, approximately $43 billion in bonds were trading at 90% of par or less a relatively modest 3.8% of the $1.1 trillion in bonds with price data. On the other end of the spectrum, however, close to a trillion in bonds traded above par, including 73% of outstanding bonds rated CCC or lower.
Priced for Perfection: The insatiable demand for yield product in a persistently low interest rate environment continues to drive investors into speculative grade loans and bonds. The supply/demand imbalance has allowed issuers to extend maturities and lower their borrowing costs and this in turn has put downward pressure on the default rate. However, with $403 billion in B or lower rated bonds in circulation, the absolute level of credit risk in the market remains significant. The B or lower pool stood at $354 billion at year-end 2009, contracted modestly in 2010 and 2011, and has since grown steadily larger from $329 billion at the end of 2011 to its current size.
Related Research Leveraged Finance Annual Manual (April 2014) Calmer Macro Environment Fails to Move the Needle on Investor Attachment to Low Interest Rates Fitch Ratings/Fixed Income Forum Survey (April 2014) Fitch Fundamentals Index 1Q14 (April 2014) Fitch U.S. Leveraged Loan Default Insight Loan Market Gathers Momentum (March 2014) Fitch U.S. High Yield Default Insight 2014 Outlook (December 2013) Fitch U.S. High Yield Default Insight The Impact of Industry Selection on Default Risk (March 2013)
Analysts Mariarosa Verde +1 212 908-0791 [email protected]
Eric Rosenthal +1 212 908-0286 [email protected]
U.S. Corporates Mike Simonton +1 312 368-3138 [email protected]
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Credit Market Research
Fitch U.S. High Yield Default Insight 2 May 28, 2014
LBO Default Focus
LBO Recovery Focus
High Yield 30-Day Postdefault Price-Based Recovery Rates (%) LBO Non-LBO 2007 33.1 67.8 2008 11.0 49.0 2009 23.5 35.9 2010 48.8 57.1 2011 42.1 67.6 2012 46.5 55.2 2013 70.0 61.2 April 2014 YTD 68.5 11.1 20072014 47.2 44.9 Note: Based on market prices. Source: Fitch Ratings, Advantage Data.
Institutional Leveraged Loan 30-Day Postdefault Price-Based Recovery Rates
First Lien Second Lien
(%) LBO Non-LBO LBO Non-LBO 2007 88.8 41.3 2008 36.6 65.2 9.4 21.2 2009 42.0 59.4 18.9 34.6 2010 81.2 76.7 15.8 8.7 2011 57.9 62.5 24.6 10.9 2012 63.9 67.0 8.5 56.9 2013 77.5 60.4 40.0 April 2014 YTD 76.1 56.8 20072014 60.6 62.8 15.1 32.4 Note: Based on market prices. Source: Fitch Ratings, Thomson Reuters LPC.
0
20
40
60
80
100
120
2007 2008 2009 2010 2011 2012 2013 2014YTD
($ Bil.)LBO Non-LBO
Source: Fitch U.S. High Yield Default Index.
High Yield Bond Defaults
0
20
40
60
80
2007 2008 2009 2010 2011 2012 2013 2014YTD
($ Bil.) LBO Non-LBO
Source: Fitch U.S. Leveraged Loan Default Index.
Institutional Leveraged Loan Defaults
LBO Other15%
LBO EFH7%
Non-LBO78%
High Yield Bond Defaults: 2007April 2014($264 Billion)
Source: Fitch U.S. High Yield Default Index.
LBO Other29%
LBO EFH12%
Non-LBO59%
Institutional Leveraged Loan Defaults: 2007April 2014($161 Billion)
Source: Fitch U.S. Leveraged Loan Default Index.
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Credit Market Research
Fitch U.S. High Yield Default Insight 3 May 28, 2014
Top 10 High Yield LBO Defaults: 2007 April 2014
($ Bil.) LBO Year Default Year(s)
Energy Future Holdings 16.6 2007 2012, 2013, 2014 NewPage Corp. 3.2 2005 2009, 2011 Freescale Semiconductor Inc. 3.0 2006 2009 Momentive Performance Materials Inc. 2.9 2006 2009, 2014 Capmark Financial Group 2.3 2005 2009 Station Casino Inc. 2.3 2007 2009 Smurfit-Stone Container Corp. 2.3 2006 2009 Cengage Learning Acquisitions Inc. 1.9 2007 2013 Nortek Inc. 1.8 2004 2009 Tribune Co. 1.3 2007 2008
Source: Fitch U.S. High Yield Default Index.
Top 10 Leveraged Loan LBO Defaults: 2007 April 2014
($ Bil.) LBO Year Default Year(s)
Energy Future Holdings 19.2 2007 2014 Tribune Co. 6.5 2007 2008 Chrysler Financial LLC 6.0 2007 2009 Cengage Learning Acquisitions Inc. 3.9 2007 2013 Metro-Goldwyn-Mayer 3.8 2005 2009 NewPage Corp. 1.6 2005 2011 Hawker Beechcraft Acquisition Co. 1.5 2007 2012 Reader's Digest 1.3 2007 2009 Smurfit-Stone Container Corp. 1.3 2006 2009 Masonite International Corp. 1.2 2005 2008
Source: Fitch U.S. Leveraged Loan Default Index.
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Credit Market Research
Fitch U.S. High Yield Default Insight 4 May 28, 2014
Default Watch
Distribution of Defaults by Source
Par Value ($ Bil.) (%) Issuers (%) Issues (%)
2013 Chapter 11 Filing 10.0 53.9 15 41.7 24 42.9 Missed Payment 4.8 26.1 13 36.1 19 33.9 Distressed Exchange 3.7 20.0 8 22.2 13 23.2 Total 18.5 100.0 36 100.0 56 100.0
April 2014 YTD Chapter 11 Filing 21.3 95.0 10 66.7 29 85.3
Distressed Exchange 0.7 3.0 3 20.0 3 8.8 Missed Payment 0.5 2.1 2 13.3 2 5.9 Total 22.4 100.0 15 100.0 34 100.0
YTD Year to date. Source: Fitch U.S. High Yield Default Index.
Related Criteria Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage (August 2013)
Exhibits Index Default Watch ........................................ 4 Historical Default and Recovery ............ 9 Credit Availability Indicators ................ 21 Issuance Trends and Vintage Default Rates ...................................... 22 High Yield Market Profile ..................... 24
02468
10121416
(%)
Source: Fitch U.S. High Yield Default Index.
Fitch U.S. High Yield Trailing 12-Month Default Rate
0
10
20
30
40
50
60
05,000
10,00015,00020,00025,00030,00035,00040,00045,000
($ Mil.) Default Volume ($ Mil.) Issuer Count
Source: Fitch U.S. High Yield Default Index.
Fitch U.S. High Yield Default Index Quarterly Issuer and Volume Trends
(No.)
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Credit Market Research
Fitch U.S. High Yield Default Insight 5 May 28, 2014
Industry Default Rates (%)
Average Annual
April 2014 Industry 19802013 2010 2011 2012 2013 YTD Automotive 6.4 0.5 0.8 3.1 Banking and Finance 6.3 1.5 0.5 3.3 Broadcasting and Media 4.9 5.5 0.3 2.0 6.7 Building and Materials 4.0 2.2 1.3 4.7 Cable 4.4 Chemicals 2.5 1.0 11.4 Computers and Electronics 2.4 0.3 0.3 Consumer Products 2.9 4.7 Energy 2.1 1.1 2.6 1.2 2.8 0.3 Food, Beverage, and Tobacco 3.2 1.5 1.2 0.7 Gaming, Lodging, and Restaurants 4.1 1.3 1.7 2.8 1.1 Healthcare and Pharmaceutical 1.9 1.8 0.5 1.3 Industrial/Manufacturing 2.7 0.8 0.7 Insurance 4.3 Leisure and Entertainment 5.0 10.0 0.9 Metals and Mining 3.2 1.2 0.3 0.6 0.8 0.5 Paper and Containers 4.8 1.0 10.3 7.7 0.9 Real Estate 1.8 Retail 3.6 3.0 2.0 1.0 1.5 Services and Miscellaneous 1.8 0.3 0.8 0.5 0.4 Supermarkets and Drug Stores 4.7 3.1 Telecommunication 7.8 1.2 0.6 0.3 0.6 0.6 Textiles and Furniture 6.0 Transportation 5.9 1.7 7.4 4.4 Utilities, Power, and Gas 5.6 5.9 10.5 2.3 30.1 Total Index 4.3 1.3 1.5 1.9 1.5 1.7 Source: Fitch U.S. High Yield Default Index.
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Credit Market Research
Fitch U.S. High Yield Default Insight 6 May 28, 2014
01020304050607080
8090 >90100 >100
(%)
'CCC' or Lower Par Value Price Distribution
12/31/13 5/15/14
Source: Fitch U.S. High Yield Default Index, Bloomberg, Advantage Data.
0
20
40
60
80
100
8090 >90100 >100
(%)
High Yield Bond Market Price Distribution
Note: Based on $1.11 trillion in high yield bonds with price data. Prices as of May 15.Source: Fitch U.S. High Yield Default Index, Bloomberg, Advantage Data.
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Credit Market Research
Fitch U.S. High Yield Default Insight 7 May 28, 2014
List of U.S. High Yield Bond Defaults on Trailing 12-Month Basis Month Issuer
Par Value ($ Mil.) Default Date Default Source Industry
May 2013 Lupatech Finance Ltd 275.0 05/10/13 Missed Payment Metals and Mining
Urbi Desarrollos Urbanos 950.0 05/19/13 Missed Payment Building and Materials
Physiotherapy Associates Holdings Inc. 210.0 05/31/13 Missed Payment Healthcare and Pharmaceutical
Subtotal 1,435.0
June 2013 Exide Technologies 675.0 06/10/13 Chapter 11 Filing Automotive
Oncure Holdings Inc. 210.0 06/14/13 Chapter 11 Filing Healthcare and Pharmaceutical
AGY Holding Corp. 172.0 06/15/13 Missed Payment Industrial/Manufacturing
Subtotal 1,057.0
July 2013 Cengage Learning Acquisitions Inc. 1,847.7 07/02/13 Chapter 11 Filing Broadcasting and Media
Cengage Learning Holdco 73.8 07/02/13 Chapter 11 Filing Broadcasting and Media
Desarrolladora Homex SA 900.0 07/11/13 Missed Payment Building and Materials
Maxcom Telecomunicaciones 199.5 07/15/13 Missed Payment Telecommunication
Corporacion GEO SAB de CV 704.2 07/30/13 Missed Payment Building and Materials
Subtotal 3,725.2
August 2013 Rural Metro Corp. 308.0 08/04/13 Chapter 11 Filing Services and Miscellaneous
Subtotal 308.0
September 2013 Green Field Energy Services 250.0 09/04/13 Missed Payment Energy
Lone Pine Resources 195.0 09/15/13 Missed Payment Energy
FriendFinder Network 533.2 09/17/13 Chapter 11 Filing Leisure and Entertainment
Subtotal 978.2
October 2013 American Media Inc. 94.3 10/02/13 Distressed Exchange Broadcasting and Media
Winsway Coking Coal Holdings 151.2 10/10/13 Distressed Exchange Metals and Mining
Savient Pharmaceuticals 170.9 10/14/13 Chapter 11 Filing Healthcare and Pharmaceutical
OGX Petroleo e Gas Participaes SA 3,626.0 10/30/13 Chapter 11 Filing Energy
Subtotal 4,042.4
November 2013 No Default Activity
December 2013 Affinion Group Holdings 292.8 12/09/13 Distressed Exchange Broadcasting and Media
Affinion Group Inc. 352.9 12/09/13 Distressed Exchange Broadcasting and Media
Milagro Oil & Gas 250.0 12/16/13 Missed Payment Energy
China Forestry Holdings 180.0 12/17/13 Missed Payment Paper and Containers
Subtotal 1,075.7
January 2014 No Default Activity
February 2014 Brookstone Co. 125.6 02/15/14 Missed Payment Retail
Oceanografia SA de CV 335.0 02/15/14 Missed Payment Energy
Subtotal 460.6
March 2014 Sorenson Communications Inc. 735.0 03/03/14 Chapter 11 Filing Telecommunication
Aralco Finance SA 250.0 03/05/14 Chapter 11 Filing Food, Beverage, and Tobacco
Travelport LLC 135.0 03/05/14 Distressed Exchange Leisure and Entertainment
MModal Inc. 250.0 03/20/14 Chapter 11 Filing Services and Miscellaneous
Global Geophysical Services Inc. 250.0 03/25/14 Chapter 11 Filing Energy
Subtotal 1,620.0
April 2014a Guitar Center Holdings 434.9 04/03/14 Distressed Exchange Retail Guitar Center Inc. 100.0 04/03/14 Distressed Exchange Retail James River Coal Co. 270.0 04/07/14 Chapter 11 Filing Metals and Mining Momentive Performance Materials Inc. 2,892.6 04/13/14 Chapter 11 Filing Chemicals Energy Future Competitive Holdings Co. 34.6 04/29/14 Chapter 11 Filing Utilities, Power, and Gas Energy Future Holdings Corp. 677.5 04/29/14 Chapter 11 Filing Utilities, Power, and Gas Energy Future Intermediate Holding Co. 7,707.4 04/29/14 Chapter 11 Filing Utilities, Power, and Gas Texas Competitive Electric Holdings Co. 8,195.6 04/29/14 Chapter 11 Filing Utilities, Power, and Gas Subtotal 20,312.6 aDefaults in the pipeline as of May 15 include Allen Systems Group and River Rock Entertainment. Source: Fitch U.S. High Yield Default Index.
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Credit Market Research
Fitch U.S. High Yield Default Insight 8 May 28, 2014
Recovery Rates by Seniority (%) Weighted Avg. Recovery Rate Median Recovery Ratea No. of Issues 2013
Senior Secured 65.7 71.1 26 Senior Unsecured 30.0 27.1 25 Senior Subordinated 67.0 45.6 3 Total Defaulted Issues 47.7 54.4 54
April 2014 YTD Senior Secured 89.4 90.6 15
Senior Unsecured 33.6 14.6 14 Senior Subordinatedb 48.4 65.8 2 Total Defaulted Issues 67.2 56.4 31 aSimilar seniorities per issuer collapsed into one observation. bSenior subordinated issue has one distressed debt exchange issue. Prices as of May 15. Source: Fitch U.S. High Yield Default Index, Advantage Data.
Recovery Rates by Industry Industry Weighted Avg. Recovery Rate (%) No. of Issues 2013
Utilities, Power, and Gas 112.7 3 Computers and Electronics 105.4 1 Leisure and Entertainment 81.5 6 Food, Beverage, and Tobacco 77.1 1 Telecommunication 68.8 3 Healthcare and Pharmaceutical 61.6 4 Automotive 59.8 1 Industrial/Manufacturing 54.1 1 Broadcasting and Media 50.0 10 Paper and Containers 38.1 1 Metals and Mining 29.5 2 Services and Miscellaneous 27.6 2 Energy 25.1 8 Gaming, Lodging, and Restaurants 24.2 2 Building and Materials 23.7 9 Total Defaulted Issues 47.7 54
April 2014 YTD Leisure and Entertainment 102.1 1
Telecommunication 90.6 1 Chemicals 85.6 4 Utilities, Power, and Gas 67.1 18 Retail 50.9 1 Energy 33.0 3 Services and Miscellaneous 14.6 1 Metals and Mining 11.1 1 Food, Beverage, and Tobacco 9.6 1 Total Defaulted Issues 67.2 31 Note: Prices as of May 15. Source: Fitch U.S. High Yield Default Index, Advantage Data.
66.1
57.062.8
51.2
64.8
26.4
51.5
73.4
60.6
38.0
27.1
53.9
68.675.9
25.0
58.9
47.453.9
29.636.2
61.2 57.2
27.6
74.4
50.9
59.3
8 9
33
19
14
8
17
10
18
18
8 8
23
0
5
10
15
20
25
30
35
0
10
20
30
40
50
60
70
80
2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14
(%)Weighted Avg. Recovery Rate Median Recovery Rate No. of Issues (Right Axis)
aSimilar seniorities collapsed into one observation. Note: Prices as of May 15.Source: Fitch U.S. High Yield Default Index, Advantage Data.
Trends in Recovery Rates
(No. of Issues)
a
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Credit Market Research
Fitch U.S. High Yield Default Insight 9 May 28, 2014
Historical Default and Recovery
0
1
2
3
4
5
BB Default Rate Cyclicalitya
aDefault rates based on market composites.Source: Fitch Ratings.
(%)
Benign Environment Avg. Default RateAnnual Default RateAvg. Annual Default RateStress Environment Avg. Default Rate
0
2
4
6
8
10
12
14
B Default Rate Cyclicalitya
aDefault rates based on market composites.Source: Fitch Ratings.
(%)
Benign Environment Avg. Default RateAnnual Default RateAvg. Annual Default RateStress Environment Avg. Default Rate
0
10
20
30
40
50
CCC Default Rate Cyclicalitya
aDefault rates based on market composites.Source: Fitch Ratings.
(%)
Benign Environment Avg. Default RateAnnual Default RateAvg. Annual Default RateStress Environment Avg. Default Rate
243
452
665
338256
691
322233
835786
340
548642
515
0100200300400500600700800900
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
($ Mil.)
Source: Fitch U.S. High Yield Default Index.
Average Par Value of Bond Defaults Per Issuer 20002013
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Credit Market Research
Fitch U.S. High Yield Default Insight 10 May 28, 2014
02468
1012141618(%)
Annual Default Rates 19802013
Source: Fitch U.S. High Yield Default Index.
012345678
(%)
Source: Fitch U.S. High Yield Default Index.
Average Annual High Yield Default Rate Over 10-Year Holding Periods
0 1 2 3 4 5 6 7 8
Real EstateHealthcare and Pharmaceutical
EnergyComputers and Electronics
ChemicalsIndustrial/Manufacturing
Consumer ProductsFood, Beverage, and Tobacco
Metals and MiningRetail
Building and MaterialsGaming, Lodging, and Restaurants
InsuranceCable
Supermarkets and Drug StoresPaper and Containers
Broadcasting and MediaLeisure and Entertainment
Utilities, Power, and GasTransportation
Textiles and FurnitureBanking and Finance
AutomotiveTelecommunication
Average Annual Industry Default Rates 19802013
Source: Fitch U.S. High Yield Default Index.
(%)
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Credit Market Research
Fitch U.S. High Yield Default Insight 11 May 28, 2014
U.S. High Yield Market and Industry Default Rates
0
5
10
15
20
25
Gaming, Lodging, and RestaurantsTotal Market
Gaming, Lodging, and Restaurants
Source: Fitch U.S. High Yield Default Index.
(%)
0
5
10
15
20
Food, Beverage, and TobaccoTotal Market
Food, Beverage, and Tobacco
Source: Fitch U.S. High Yield Default Index.
(%)
0
5
10
15
20
Healthcare and PharmaceuticalTotal Market
Healthcare and Pharmaceutical
Source: Fitch U.S. High Yield Default Index.
(%)
0
5
10
15
20
25
Building and MaterialsTotal Market
Building and Materials
Source: Fitch U.S. High Yield Default Index.
(%)
05
10152025303540
CableTotal Market
Cable
Source: Fitch U.S. High Yield Default Index.
(%)
0
5
10
15
20
ChemicalsTotal Market
Chemicals
Source: Fitch U.S. High Yield Default Index.
(%)
0
5
10
15
20
Computers and ElectronicsTotal Market
Computers and Electronics
Source: Fitch U.S. High Yield Default Index.
(%)
0
5
10
15
20
Consumer ProductsTotal Market
Consumer Products
Source: Fitch U.S. High Yield Default Index.
(%)
05
1015202530354045
EnergyTotal Market
Energy
Source: Fitch U.S. High Yield Default Index.
(%)
05
1015202530354045
AutomotiveTotal Market
Automotive
Source: Fitch U.S. High Yield Default Index.
(%)
0
5
10
15
20
25
30
Banking and FinanceTotal Market
Banking and Finance
Source: Fitch U.S. High Yield Default Index.
(%)
05
101520253035
Broadcasting and MediaTotal Market
Broadcasting and Media
Source: Fitch U.S. High Yield Default Index.
(%)
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Credit Market Research
Fitch U.S. High Yield Default Insight 12 May 28, 2014
U.S. High Yield Market and Industry Default Rates (Continued)
05
1015202530
RetailTotal Market
Retail
Source: Fitch U.S. High Yield Default Index.
(%)
05
101520253035
Supermarkets and Drug StoresTotal Market
Supermarkets and Drug Stores
Source: Fitch U.S. High Yield Default Index.
(%)
05
1015202530354045
TelecommunicationTotal Market
Telecommunication
Source: Fitch U.S. High Yield Default Index.
(%)
0
5
10
15
20
Industrial/ManufacturingTotal Market
Industrial/Manufacturing
Source: Fitch U.S. High Yield Default Index.
(%)
05
10152025303540
InsuranceTotal Market
Insurance
Source: Fitch U.S. High Yield Default Index.
(%)
0
5
10
15
20
25
Leisure and EntertainmentTotal Market
Leisure and Entertainment
Source: Fitch U.S. High Yield Default Index.
(%)
05
1015202530
Textiles and FurnitureTotal Market
Textiles and Furniture
Source: Fitch U.S. High Yield Default Index.
(%)
0
5
10
15
20
25
TransportationTotal Market
Transportation
Source: Fitch U.S. High Yield Default Index.
(%)
05
101520253035
Utilities, Power, and GasTotal Market
Utilities, Power, and Gas
Source: Fitch U.S. High Yield Default Index.
(%)
0
5
10
15
20
25
30
Metals and MiningTotal Market
Metals and Mining
Source: Fitch U.S. High Yield Default Index.
(%)
05
1015202530
Real EstateTotal Market
Real Estate
Source: Fitch U.S. High Yield Default Index.
(%)
05
1015202530
Paper and ContainersTotal Market
Paper and Containers
Source: Fitch U.S. High Yield Default Index.
(%)
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Credit Market Research
Fitch U.S. High Yield Default Insight 13 May 28, 2014
U.S. High Yield Default Index: Top Five Defaulting Sectors 2011 $ % 2012 $ % 2013 $ % Paper and Containers 3.23 10.3 Utilities, Power, and Gas 6.42 10.5 Leisure and Entertainment 1.54 10.0 Transportation 2.21 7.4 Paper and Containers 1.80 7.7 Broadcasting and Media 3.40 6.7 Utilities, Power, and Gas 3.57 5.9 Consumer Products 1.00 4.7 Building and Materials 2.55 4.7 Energy 3.22 2.6 Transportation 1.29 4.4 Automotive 0.68 3.1 Retail 0.65 2.0 Banking and Finance 4.04 3.3 Energy 4.99 2.8 Total Market 15.90 1.5 Total Market 20.53 1.9 Total Market 18.53 1.5
2008 $ % 2009 $ % 2010 $ %
Banking and Finance 29.91 29.2 Automotive 13.46 44.2 Broadcasting and Media 1.97 5.5
Leisure and Entertainment 1.47 16.9 Cable 12.63 36.4 Supermarkets and Drug Stores 0.26 3.1
Gaming, Lodging, and Restaurants 6.10 14.5 Broadcasting and Media 14.18 32.2 Retail 1.18 3.0
Broadcasting and Media 4.36 9.9 Paper and Containers 8.52 25.9 Building and Materials 0.76 2.2
Building and Materials 2.53 8.6 Banking and Finance 26.71 24.3 Healthcare and Pharmaceutical 1.06 1.8
Total Market 52.63 6.8 Total Market 118.63 13.7 Total Market 11.89 1.3
2005 $ % 2006 $ % 2007 $ %
Transportation 5.17 24.2 Automotive 2.55 6.5 Leisure and Entertainment 0.53 5.4
Utilities, Power, and Gas 10.25 14.9 Paper and Containers 0.97 3.3 Automotive 0.73 2.1
Automotive 3.32 10.5 Insurance 0.16 2.8 Consumer Products 0.16 1.8
Industrial/Manufacturing 1.72 6.9 Transportation 0.39 2.7 Retail 0.33 1.6
Textiles and Furniture 0.30 3.6 Textiles and Furniture 0.13 1.7 Broadcasting and Media 0.63 1.6
Total Market 22.80 3.1 Total Market 5.79 0.8 Total Market 3.50 0.5
2002 $ % 2003 $ % 2004 $ % Telecommunication 59.60 43.5 Insurance 0.89 15.6 Gaming, Lodging, and Restaurants 2.27 5.8 Insurance 2.96 35.2 Textiles and Furniture 1.35 14.2 Metals and Mining 1.00 5.5 Cable 16.47 34.4 Healthcare and Pharmaceutical 3.88 12.3 Textiles and Furniture 0.26 3.0 Metals and Mining 2.95 20.2 Telecommunication 8.91 11.0 Broadcasting and Media 0.80 2.9 Utilities, Power, and Gas 6.47 14.0 Utilities, Power, and Gas 5.94 9.8 Telecommunication 1.63 2.2 Total Market 109.80 16.4 Total Market 33.79 5.0 Total Market 9.97 1.5
1999 $ % 2000 $ % 2001 $ % Textiles and Furniture 1.03 11.4 Transportation 3.24 18.1 Utilities, Power, and Gas 15.00 34.2 Food, Beverage, and Tobacco 1.54 10.6 Building and Materials 2.44 16.2 Automotive 3.79 28.3 Healthcare and Pharmaceutical 2.46 9.9 Food, Beverage, and Tobacco 2.13 15.6 Telecommunication 28.24 23.9 Energy 3.64 9.7 Insurance 0.62 15.0 Banking and Finance 9.87 21.8 Transportation 1.31 8.3 Leisure and Entertainment 1.49 14.4 Leisure and Entertainment 1.55 17.8 Total Market 22.47 4.3 Total Market 27.90 5.1 Total Market 78.18 12.9
1996 $ % 1997 $ % 1998 $ % Textiles and Furniture 0.59 12.3 Gaming, Lodging, and Restaurants 1.42 9.5 Supermarkets and Drug Stores 2.79 25.7 Banking and Finance 0.70 9.9 Building and Materials 0.50 8.9 Insurance 0.30 8.4 Building and Materials 0.30 6.1 Textiles and Furniture 0.31 5.3 Retail 0.36 3.6 Broadcasting and Media 0.60 5.5 Food, Beverage, and Tobacco 0.40 5.1 Real Estate 0.20 3.3 Leisure and Entertainment 0.29 4.9 Real Estate 0.17 3.6 Metals and Mining 0.39 2.5 Total Market 3.36 1.4 Total Market 4.05 1.5 Total Market 7.50 1.9
1993 $ % 1994 $ % 1995 $ % Computers and Electronics 0.65 7.3 Supermarkets and Drug Stores 2.14 17.7 Insurance 0.70 21.3 Energy 0.60 3.4 Leisure and Entertainment 0.14 3.5 Textiles and Furniture 0.45 11.0 Telecommunication 0.08 2.6 Retail 0.16 2.6 Broadcasting and Media 0.49 5.8 Consumer Products 0.10 2.1 Transportation 0.30 1.5 Banking and Finance 0.34 5.0 Broadcasting and Media 0.15 1.5 Cable 0.16 1.1 Food, Beverage, and Tobacco 0.30 4.2 Total Market 1.93 0.8 Total Market 3.14 1.4 Total Market 3.65 1.7
Continued on next page. Source: Fitch U.S. High Yield Default Index.
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Credit Market Research
Fitch U.S. High Yield Default Insight 14 May 28, 2014
U.S. High Yield Default Index: Top Five Defaulting Sectors (Continued)
1990 $ % 1991 $ % 1992 $ % Supermarkets and Drug Stores 1.86 31.2 Telecommunication 0.92 37.3 Retail 1.39 11.5
Retail 2.94 28.6 Building and Materials 2.21 23.6 Chemicals 0.46 7.7
Textiles and Furniture 2.27 27.7 Retail 2.53 21.9 Leisure and Entertainment 0.16 6.2
Real Estate 0.88 25.7 Transportation 1.66 21.8 Metals and Mining 0.30 4.2
Transportation 1.45 15.8 Leisure and Entertainment 0.59 21.2 Industrial/Manufacturing 0.14 2.8
Total Market 17.06 8.7 Total Market 17.13 8.1 Total Market 4.10 1.8 1987 $ % 1988 $ % 1989 $ % Energy 4.06 44.9 Supermarkets and Drug Stores 0.88 19.0 Banking and Finance 3.68 26.8 Leisure and Entertainment 0.29 11.8 Leisure and Entertainment 0.19 7.6 Building and Materials 1.27 14.8 Healthcare and Pharmaceutical 0.28 10.2 Banking and Finance 0.86 7.3 Gaming, Lodging, and Restaurants 1.11 10.3 Building and Materials 0.24 5.3 Healthcare and Pharmaceutical 0.15 4.2 Supermarkets and Drug Stores 0.27 5.1 Insurance 0.05 2.0 Services and Miscellaneous 0.35 2.5 Real Estate 0.16 4.5 Total Market 5.15 4.4 Total Market 3.06 2.0 Total Market 7.93 4.4 1984 $ % 1985 $ % 1986 $ % Energy 0.16 5.1 Energy 0.94 14.9 Metals and Mining 1.44 29.5 Industrial/Manufacturing 0.07 4.2 Insurance 0.07 6.5 Transportation 0.24 7.2 Broadcasting and Media 0.11 2.9 Gaming, Lodging, and Restaurants 0.08 5.0 Energy 0.50 5.5 Automotive 0.03 2.6 Building and Materials 0.10 4.8 Services and Miscellaneous 0.13 2.1 Services and Miscellaneous 0.01 0.4 Metals and Mining 0.17 4.1 Industrial/Manufacturing 0.07 1.8 Total Market 0.37 1.0 Total Market 1.48 2.7 Total Market 2.50 3.0 1981 $ % 1982 $ % 1983 $ % Telecommunication 0.02 31.3 Paper and Containers 0.01 26.8 Food, Beverage, and Tobacco 0.05 4.3 Real Estate 0.01 5.2 Computers and Electronics 0.07 12.0 Energy 0.06 2.4 Automotive 0.00 0.0 Transportation 0.13 11.7 Leisure and Entertainment 0.02 2.2 Banking and Finance 0.00 0.0 Telecommunication 0.03 11.6 Transportation 0.02 1.6 Broadcasting and Media 0.00 0.0 Building and Materials 0.10 10.3 Industrial/Manufacturing 0.01 1.1 Total Market 0.03 0.2 Total Market 0.43 2.0 Total Market 0.17 0.6
Source: Fitch U.S. High Yield Default Index.
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Credit Market Research
Fitch U.S. High Yield Default Insight 15 May 28, 2014
Industry Default Rates 20002013 (%) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
20002013 Average
Automotive 4.4 28.3 4.2 0.8 10.5 6.5 2.1 2.2 44.2 0.5 0.8 3.1 8.3 Banking and Finance 3.2 21.8 5.1 1.8 0.2 1.1 0.3 29.2 24.3 1.5 0.5 3.3 6.6 Broadcasting and Media 0.3 4.1 7.9 1.6 2.9 0.5 1.2 1.6 9.9 32.2 5.5 0.3 2.0 6.7 6.1 Building and Materials 16.2 4.3 3.7 0.6 0.6 8.6 8.9 2.2 1.3 4.7 3.5 Cable 1.2 34.4 1.2 36.4 6.6 Chemicals 2.0 10.5 4.7 4.7 1.5 2.4 18.0 1.0 2.9 Computers and Electronics 4.8 3.1 7.6 0.4 1.3 0.0 16.2 0.3 0.3 2.2 Consumer Products 9.6 12.5 3.2 1.8 1.3 1.8 16.8 4.7 3.1 Energy 1.1 0.3 2.4 2.8 0.6 1.9 2.4 1.1 2.6 1.2 2.8 1.6 Food, Beverage, and Tobacco 15.6 12.4 5.3 9.3 1.4 0.8 1.6 6.0 3.0 1.5 1.2 3.4 Gaming, Lodging, and Restaurants 2.4 3.2 2.1 1.7 5.8 0.4 14.5 22.4 1.3 1.7 2.8 1.1 4.5 Healthcare and Pharmaceutical 6.8 3.4 12.3 0.6 0.6 1.3 0.3 1.8 0.5 1.3 1.6 Industrial/Manufacturing 2.7 8.4 5.2 5.5 1.8 6.9 0.7 2.4 8.7 0.8 0.7 3.1 Insurance 15.0 35.2 15.6 2.8 4.2 Leisure and Entertainment 14.4 17.8 1.2 5.4 16.9 15.4 10.0 5.4 Metals and Mining 6.7 16.4 20.2 9.6 5.5 1.3 3.6 1.2 0.3 0.6 0.8 3.3 Paper and Containers 3.2 10.9 8.2 0.6 1.1 0.8 3.3 0.9 6.5 25.9 1.0 10.3 7.7 0.9 6.0 Real Estate 1.6 12.0 1.4 Retail 3.4 5.6 11.8 2.5 0.6 0.7 1.6 3.3 0.6 3.0 2.0 1.0 2.3 Services and Miscellaneous 5.1 2.8 2.2 0.5 1.9 0.1 0.6 1.4 5.1 0.3 0.8 0.5 1.4 Supermarkets and Drug Stores 13.8 3.6 2.3 1.1 3.3 0.3 4.5 3.1 2.0 Telecommunication 5.1 23.9 43.5 11.0 2.2 0.1 1.2 6.2 1.2 0.6 0.3 0.6 8.9 Textiles and Furniture 9.5 12.2 13.2 14.2 3.0 3.6 1.7 11.7 5.4 Transportation 18.1 5.7 13.2 8.8 1.4 24.2 2.7 8.5 1.7 7.4 4.4 7.1 Utilities, Power, and Gas 34.2 14.0 9.8 0.2 14.9 0.2 5.9 10.5 2.3 6.8 Total Market 5.1 12.9 16.4 5.0 1.5 3.1 0.8 0.5 6.8 13.7 1.3 1.5 1.9 1.5 4.7 Source: Fitch U.S. High Yield Default Index, Bloomberg.
Industry Recovery Rates 20002013 (%) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
20002013 Average
Automotive 11.9 12.0 16.9 81.6 53.2 59.2 73.1 9.1 15.3 24.6 59.8 27.0 Banking and Finance 15.1 77.5 27.0 25.6 73.9 94.6 57.2 63.8 43.2 34.2 56.6 60.4 Broadcasting and Media 33.0 22.3 33.9 31.0 46.7 96.9 67.4 33.3 12.7 35.1 53.1 50.0 28.3 Building and Materials 27.6 33.3 20.9 35.6 26.0 25.6 51.2 53.8 37.1 23.7 33.5 Cable 53.4 41.1 30.8 43.1 42.0 Chemicals 12.8 29.4 19.0 41.2 52.4 9.6 25.0 47.4 28.6 Computers and Electronics 13.5 13.5 14.5 62.1 69.4 25.4 9.6 105.4 25.3 Consumer Products 16.4 24.7 13.3 43.6 39.6 15.3 30.6 74.0 35.5 Energy 53.9 8.0 49.0 59.2 71.7 28.8 43.0 61.3 76.2 26.5 25.1 45.0 Food, Beverage, and Tobacco 22.3 30.9 29.8 17.3 20.1 12.6 75.8 24.9 6.0 77.1 27.5 Gaming, Lodging, and Restaurants 28.5 15.8 76.7 79.2 86.9 101.4 28.5 19.2 69.0 49.3 81.6 24.2 37.0 Healthcare and Pharmaceutical 17.0 18.6 55.3 63.0 60.0 70.0 0.1 52.6 32.1 61.6 45.7 Industrial/Manufacturing 19.7 16.2 31.9 26.9 74.2 69.9 66.9 7.8 21.8 62.1 54.1 37.8 Insurance 27.0 9.4 10.5 44.6 13.2 Leisure and Entertainment 17.1 11.0 59.8 98.7 39.8 32.0 81.5 41.9 Metals and Mining 13.1 11.6 35.9 33.5 44.0 61.3 51.8 49.5 46.0 29.5 30.3 Paper and Containers 29.4 8.6 64.4 39.8 51.6 48.4 55.1 53.6 61.1 17.8 86.9 42.9 30.7 38.1 33.6 Real Estate 9.3 61.1 55.0 Retail 22.4 7.4 48.2 44.7 24.6 37.1 1.1 44.6 58.5 18.6 37.9 Services and Miscellaneous 14.5 22.0 8.8 22.6 79.9 116.1 21.5 6.2 98.6 73.1 27.6 27.5 Supermarkets and Drug Stores 49.0 21.9 48.6 58.6 55.6 65.0 97.5 89.5 58.9 Telecommunication 32.8 11.5 13.5 34.0 53.8 9.0 10.9 20.3 100.6 78.1 70.1 68.8 17.7 Textiles and Furniture 15.0 11.3 27.6 23.5 33.9 42.2 68.6 15.6 22.4 Transportation 32.7 30.6 18.5 39.8 20.6 29.3 70.2 43.8 80.6 66.6 23.0 35.6 Utilities, Power, and Gas 60.1 30.0 72.9 71.1 17.6 64.9 53.1 112.7 61.7 Total Market 24.9 29.8 22.5 44.4 62.1 57.6 64.3 66.4 45.8 34.1 56.7 59.4 50.2 47.7 36.9 Source: Fitch U.S. High Yield Default Index, Bloomberg, Advantage Data.
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Credit Market Research
Fitch U.S. High Yield Default Insight 16 May 28, 2014
Industry Recovery Rates by Seniority 20002013
Par Weighted Average Medians
(%) Senior
Secured Senior
Unsecured Senior
Subordinated All Senior
Secured Senior
Unsecured Senior
Subordinated All Automotive 58.9 26.9 20.0 27.0 59.8 38.1 12.2 24.6 Banking and Finance 48.9 64.1 18.8 60.4 27.5 29.6 15.0 27.9 Broadcasting and Media 38.7 23.9 24.6 28.3 43.8 40.9 22.3 34.6 Building and Materials 68.7 27.9 29.5 33.5 38.0 26.8 19.7 26.7 Cable 39.4 42.2 63.2 42.0 49.7 36.8 67.5 37.0 Chemicals 33.2 31.4 20.8 28.6 23.9 26.4 22.7 24.6 Computers and Electronics 28.7 26.3 21.4 25.3 23.4 14.6 17.0 17.3 Consumer Products 73.7 26.6 19.0 35.5 55.9 26.1 14.4 21.6 Energy 58.5 34.7 68.9 45.0 66.3 44.6 49.6 53.1 Food, Beverage, and Tobacco 70.8 27.5 13.6 27.5 69.4 18.5 10.0 19.3 Gaming, Lodging, and Restaurants 54.0 28.5 33.7 37.0 55.3 27.9 21.1 32.8 Healthcare and Pharmaceutical 57.6 57.5 26.2 45.7 44.3 59.1 26.6 36.6 Industrial/Manufacturing 61.5 39.3 22.4 37.8 58.1 21.6 24.6 24.8 Insurance 10.8 25.6 13.2 10.4 10.6 10.5 Leisure and Entertainment 44.8 61.8 21.1 41.9 34.3 59.8 17.3 20.1 Metals and Mining 29.3 32.3 22.0 30.3 28.4 32.6 16.6 27.3 Paper and Containers 57.1 22.2 37.8 33.6 54.6 16.6 37.2 38.9 Real Estate 84.6 57.0 9.3 55.0 84.6 56.1 11.3 56.1 Retail 50.8 37.0 21.7 37.9 52.1 14.6 17.3 20.7 Services and Miscellaneous 45.7 29.5 18.4 27.5 66.5 22.0 19.4 21.0 Supermarkets and Drug Stores 93.1 47.9 53.8 58.9 94.3 52.1 29.6 54.4 Telecommunication 60.8 15.4 33.6 17.7 56.0 13.5 17.9 14.5 Textiles and Furniture 57.0 22.6 20.7 22.4 57.0 20.7 16.9 20.2 Transportation 68.1 26.6 27.7 35.6 69.6 27.4 36.6 30.0 Utilities, Power, and Gas 89.2 50.3 8.7 61.7 89.1 52.4 11.5 66.0 All 57.5 34.1 25.3 36.9 53.9 24.6 19.6 26.1 Source: Fitch U.S. High Yield Default Index, Bloomberg, Advantage Data.
Industry Recovery Rates Observations Counts 20002013
Senior Secured Count Senior Unsecured Count Senior Subordinated Count All
Automotive 3 46 21 70 Banking and Finance 7 169 11 187 Broadcasting and Media 25 46 32 103 Building and Materials 5 48 18 71 Cable 5 62 3 70 Chemicals 7 25 16 48 Computers and Electronics 10 17 14 41 Consumer Products 5 12 9 26 Energy 20 31 4 55 Food, Beverage, and Tobacco 8 18 18 44 Gaming, Lodging, and Restaurants 30 40 17 87 Healthcare and Pharmaceutical 6 13 19 38 Industrial/Manufacturing 10 22 27 59 Insurance 0 14 3 17 Leisure and Entertainment 5 16 13 34 Metals and Mining 17 39 7 63 Paper and Containers 18 46 10 74 Real Estate 1 5 2 8 Retail 5 59 8 72 Services and Miscellaneous 5 25 14 44 Supermarkets and Drug Stores 2 7 7 16 Telecommunication 12 246 24 282 Textiles and Furniture 1 17 16 34 Transportation 20 84 13 117 Utilities, Power, and Gas 47 102 3 152 All 274 1,209 329 1,812 Source: Fitch U.S. High Yield Default Index, Bloomberg, Advantage Data.
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Credit Market Research
Fitch U.S. High Yield Default Insight 17 May 28, 2014
Recovery Rates by Seniority Bonds (%)
Weighted Avg. Recovery Rate
Straight Avg. Recovery Rate
Median Recovery Ratea
Number of Issues with Price Data
2000 Senior Secured 50.5 53.9 47.5 19
Senior Unsecured 18.4 22.5 13.3 74 Senior Subordinated 27.1 23.6 20.0 64 Total Defaulted Issues 24.9 28.0 20.0 157 2001
Senior Secured 60.3 35.8 22.4 34 Senior Unsecured 27.8 20.2 12.8 234 Senior Subordinated 16.7 20.3 16.6 71 Total Defaulted Issues 29.8 21.8 15.8 339 2002
Senior Secured 44.9 46.6 41.3 22 Senior Unsecured 21.2 28.9 20.5 267 Senior Subordinated 24.3 25.7 19.5 30 Total Defaulted Issues 22.5 30.8 21.9 319 2003
Senior Secured 69.8 56.2 63.2 13 Senior Unsecured 47.0 42.8 39.7 104 Senior Subordinated 29.4 30.9 26.6 32 Total Defaulted Issues 44.4 40.5 36.6 149 2004
Senior Secured 89.2 72.2 73.7 8 Senior Unsecured 52.8 50.6 47.6 32 Senior Subordinated 55.1 50.2 54.2 9 Total Defaulted Issues 62.1 54.4 51.6 49 2005
Senior Secured 89.1 87.0 84.5 27 Senior Unsecured 41.2 54.1 57.8 42 Senior Subordinated 12.4 29.9 19.3 6 Total Defaulted Issues 57.6 58.7 61.3 75 2006
Senior Secured 93.4 95.5 96.9 5 Senior Unsecured 67.5 51.1 60.0 18 Senior Subordinated 35.7 42.9 26.0 9 Total Defaulted Issues 64.3 55.1 60.0 32 2007
Senior Secured 81.8 82.9 93.9 5 Senior Unsecured 63.4 63.4 74.6 10 Senior Subordinated 56.7 50.1 44.4 8 Total Defaulted Issues 66.4 64.3 69.1 23 2008
Senior Secured 32.3 38.8 29.5 27 Senior Unsecured 54.4 31.0 25.1 70 Senior Subordinated 23.8 19.1 7.3 25 Total Defaulted Issues 45.8 29.7 19.6 122 2009
Senior Secured 36.8 37.2 25.4 38 Senior Unsecured 36.0 33.5 31.0 258 Senior Subordinated 19.2 24.9 14.9 48 Total Defaulted Issues 34.1 31.9 24.9 344 2010
Senior Secured 64.3 60.0 55.3 15 Senior Unsecured 69.3 63.5 81.6 10 Senior Subordinated 28.3 26.8 16.9 11 Total Defaulted Issues 56.7 51.2 50.0 36 aSimilar seniorities per issuer collapsed into one observation. Continued on next page. Source: Fitch U.S. High Yield Default Index, Advantage Data.
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Credit Market Research
Fitch U.S. High Yield Default Insight 18 May 28, 2014
Recovery Rates by Seniority Bonds (Continued) (%)
Weighted Avg. Recovery Rate
Straight Avg. Recovery Rate
Median Recovery Ratea
Number of Issues with Price Data
2011 Senior Secured 68.4 73.4 74.7 19
Senior Unsecured 50.0 32.7 22.0 32 Senior Subordinated 29.4 30.7 23.1 4 Total Defaulted Issues 59.4 47.8 47.9 55 2012
Senior Secured 64.7 59.1 62.0 16 Senior Unsecured 42.8 37.6 36.2 33 Senior Subordinated 38.3 33.4 26.6 9 Total Defaulted Issues 50.2 44.8 38.9 58 2013
Senior Secured 65.7 67.8 71.1 26 Senior Unsecured 30.0 40.1 27.1 25 Senior Subordinated 67.0 49.5 45.6 3 Total Defaulted Issues 47.7 56.2 54.4 54 20002013
Senior Secured 57.5 54.5 53.9 274 Senior Unsecured 34.1 32.9 24.6 1,209 Senior Subordinated 25.3 26.4 19.6 329 Total Defaulted Issues 36.9 35.4 26.1 1,812 aSimilar seniorities per issuer collapsed into one observation. Source: Fitch U.S. High Yield Default Index, Advantage Data.
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Credit Market Research
Fitch U.S. High Yield Default Insight 19 May 28, 2014
Recovery Outcomes by Seniority and Economic Conditions
0
5
10
15
20
25
Distribution of Bond Recoveries: 20002013
Source: Fitch Ratings, Advantage Data.
(%)Average 35.4%, Median 26.1%
05
1015202530
Distribution of Senior Secured Bond Recoveries: 20002013
Source: Fitch Ratings, Advantage Data.
(%)Average 54.5%, Median 53.9%
05
1015202530
Distribution of Senior Unsecured Bond Recoveries: 20002013
Source: Fitch Ratings, Advantage Data.
(%)Average 32.9%, Median 24.6%
010203040506070
Distribution of Bond Recoveries: 20102013
Source: Fitch Ratings, Advantage Data.
(%)
Average 50.1%, Median 49.1%
05
1015202530
Distribution of Bond Recoveries: 20082009
Source: Fitch Ratings, Advantage Data.
(%)
Average 31.3%, Median 23.6%
05
1015202530
Distribution of Bond Recoveries: 20002002
Source: Fitch Ratings, Advantage Data.
(%)Average 26.5%, Median 19.3%
05
1015202530
Distribution of Bond Recoveries: 20032007
Source: Fitch Ratings, Advantage Data.
(%)Average 49.8%, Median 47.5%
0
10
20
30
40
Distribution of Subordinated Bond Recoveries: 20002013
Source: Fitch Ratings, Advantage Data.
(%)Average 26.4%, Median 19.6%
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Credit Market Research
Fitch U.S. High Yield Default Insight 20 May 28, 2014
Defaults Versus Macroeconomic Trends
(5)
0
5
10
15
20High Yield Default Rate Real GDP Growth
High Yield Default Rate Versus GDP Growth
Source: Fitch U.S. High Yield Default Index, Bureau of Economic Analysis.
(%)
(20)(15)(10)
(5)05
1015202530
Corporate Profit Growth
Source: Bureau of Economic Analysis.
(%)
(2)(1)0123456
Consumer Spending
Source: Bureau of Economic Analysis.
(%)
(4)
(2)
0
2
4
6
Government Spending
.Source: Bureau of Economic Analysis.
(%)
(30)(25)(20)(15)(10)
(5)05
101520
Fixed Residential Investment
Source: Bureau of Economic Analysis.
(%)
(20)(15)(10)
(5)05
1015
Fixed Nonresidential Investment
Source: Bureau of Economic Analysis.
(%)
(5)
0
5
10
15
20
Consumer Credit
Source: Federal Reserve.
(%)
0123456789
10
Unemployment
Source: Bureau of Labor Statistics.
(%)
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Credit Market Research
Fitch U.S. High Yield Default Insight 21 May 28, 2014
Credit Availability Indicators
0500
1,0001,5002,0002,5003,0003,5004,000(bps)
BB B CCC
Source: Bank of America Merrill Lynch.
Corporate Spreads
0102030405060708090(%)
U.S. High Yield Distress Ratio
Note: High yield distress is defined as spreads > 1,000bps. Source: Bank of America Merrill Lynch.
(40)(20)
020406080
100(%)
Source: Federal Reserve.
Federal Reserve Senior Loan Officer Survey Percentage of Banks Tightening Standards on C&I Loans
(5,000)(4,000)(3,000)(2,000)(1,000)
01,0002,0003,0004,000($ Mil.)
High Yield Bond and Bank Loan Mutual Fund FlowsHigh Yield Bonds Bank Loans
Source: Lipper FMI.
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Credit Market Research
Fitch U.S. High Yield Default Insight 22 May 28, 2014
Issuance Trends and Vintage Default Rates
265329
480 501612
689
294 239376
566664
1,135
409 372
121 173 182 153 142 144 52 156282
220307 302
111 920
200
400
600
800
1,000
1,200
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 April2013
April2014
($ Bil.) Leveraged Loans High Yield Bonds
Source: Fitch Ratings, Thomson Reuters LPC, Bloomberg.
High Yield Bond and Loan Issuance
56.0 57.2
28.7 31.0 30.6 29.5 33.738.8 35.7 40.2 32.5
47.457.2
43.5
30.3 30.1 52.844.0
51.444.3
32.3
54.4 51.2 43.7 51.1 36.0 29.7 35.8
13.7 12.8 18.6 25.1 18.0 26.1 34.06.8 13.1 16.1 16.4 16.7 13.0 20.7
0
20
40
60
80
100
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 April2013
April2014
(%)BB B CCCC or NR
NR Not rated. Source: Fitch Ratings, Bloomberg.
Rating Mix of High Yield Bond New Issuance
22 22 22 14 14 17
3340 41
4940
10 1723 20 24
29
28 2841
16 12 10
1112
1717
17
26 2124 26 20 16
50 50 37 70 73 73 56 48 42 33 43 64 61 53 54 56 55
0
20
40
60
80
100
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 April2014
(%) M&A/LBO Capex/General Corporate Refinancing
M&A Merger and acquisition. Source: Bank of America Merrill Lynch.
Global High Yield Use of Proceeds by Volume (1998April 2014)
0
10
20
30
40
50
30.4% 48.3% 50.0% 25.4% 14.3% 6.7% 10.5% 13.7% 14.9% 22.6% 19.8% 33.3% 5.4% 5.5% 5.2% 3.3% 0.5%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
High Yield Default Rates by Vintage
Note: Cumulative vintage default rates are shown above the year.Source: Fitch U.S. High Yield Default Index.
(%)
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Credit Market Research
Fitch U.S. High Yield Default Insight 23 May 28, 2014
U.S. High Yield Bond New Issuance by Industry ($ Bil.)
Industry 2013 % of Total
April 2013 % of Total
April 2014 % of Total
Automotive 11.6 3.8 4.0 3.6 3.6 3.9 Banking and Finance 25.4 8.4 7.0 6.3 11.8 12.8 Broadcasting and Media 9.6 3.2 2.6 2.3 5.6 6.1 Building and Materials 12.7 4.2 5.3 4.8 5.2 5.7 Cable 8.5 2.8 4.7 4.2 1.6 1.7 Chemicals 8.8 2.9 7.3 6.5 0.1 0.1 Computers and Electronics 17.3 5.7 2.9 2.6 4.1 4.4 Consumer Products 2.7 0.9 1.6 1.4 0.4 0.4 Energy 47.2 15.6 20.0 18.0 16.7 18.2 Food, Beverage, and Tobacco 13.8 4.6 8.4 7.6 0.9 1.0 Gaming, Lodging, and Restaurants 15.2 5.1 3.8 3.4 1.4 1.5 Healthcare and Pharmaceutical 18.6 6.2 2.1 1.9 13.3 14.4 Industrial/Manufacturing 6.8 2.3 4.2 3.8 3.6 4.0 Insurance 1.5 0.5 0.3 0.3 0.0 0.0 Leisure and Entertainment 3.4 1.1 1.4 1.3 2.1 2.3 Metals and Mining 6.6 2.2 2.5 2.2 4.9 5.3 Paper and Containers 3.6 1.2 2.3 2.1 0.3 0.3 Real Estate 8.8 2.9 3.8 3.4 2.8 3.0 Retail 11.8 3.9 3.2 2.9 2.5 2.8 Services and Miscellaneous 16.8 5.6 7.7 7.0 4.0 4.4 Supermarkets & Drug Stores 2.7 0.9 0.0 0.0 0.0 0.0 Telecommunication 35.2 11.6 11.2 10.1 1.0 1.1 Textiles and Furniture 1.7 0.6 0.3 0.3 0.0 0.0 Transportation 7.1 2.4 2.7 2.4 3.3 3.6 Utilities, Power, and Gas 4.7 1.6 1.6 1.4 2.9 3.1 Total Issuance 301.8 100.0 110.9 100.0 92.0 100.0 Source: Fitch U.S. High Yield Default Index, Bloomberg.
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Credit Market Research
Fitch U.S. High Yield Default Insight 24 May 28, 2014
High Yield Market Profile
Size and Rating Mix April 2014 Amount Outstanding ($ Bil.)
No. of Issuers Rating
% Par Value
Weighted Average Coupon
Median Coupon
1,291.8 1,388 BB 43.6 6.28 6.50
B 37.8 7.64 7.63
CCCC or NR 18.6 9.10 9.00
All 100.0 7.32 7.38
NR Not rated. Source: Fitch U.S. High Yield Default Index, Bloomberg.
High Yield Industry Composition April 2014
Industry
Amount Outstanding
($ Bil.)
% of Market
Volume
% of Sector
Volume Rated 'BB'
% of Sector
Volume Rated 'B'
% of Sector Volume
Rated 'CCC' or NR
Weighted Average Coupon
Median Coupon
Automotive 26.6 2.1 32.4 57.1 10.6 7.12 7.75 Banking and Finance 146.9 11.4 78.0 18.6 3.4 6.48 6.25 Broadcasting and Media 57.4 4.4 32.3 37.1 30.6 7.77 7.63 Building and Materials 59.0 4.6 40.9 46.1 13.0 7.22 7.00 Cable 36.4 2.8 73.3 21.0 5.7 6.68 7.06 Chemicals 22.8 1.8 43.2 35.9 20.9 6.78 7.75 Computers and Electronics 58.5 4.5 18.4 39.1 42.4 8.09 7.69 Consumer Products 24.4 1.9 12.8 56.8 30.5 7.33 6.88 Energy 200.1 15.5 46.3 38.8 14.9 7.23 7.13 Food, Beverage, and Tobacco 35.6 2.8 39.8 45.9 14.3 7.24 7.50 Gaming, Lodging, and Restaurants 56.0 4.3 16.6 44.4 39.1 8.18 8.31 Healthcare and Pharmaceutical 94.1 7.3 35.5 53.4 11.1 6.88 7.00 Industrial/Manufacturing 31.1 2.4 64.5 23.7 11.8 6.69 7.38 Insurance 6.1 0.5 81.8 7.8 10.4 7.25 7.48 Leisure and Entertainment 14.2 1.1 10.6 73.1 16.2 7.53 7.38 Metals and Mining 61.9 4.8 47.7 29.3 23.0 7.63 7.81 Paper and Containers 15.7 1.2 43.9 27.2 28.9 8.15 8.50 Real Estate 30.5 2.4 49.3 41.9 8.8 7.71 7.13 Retail 44.4 3.4 40.0 21.3 38.6 7.35 7.61 Services and Miscellaneous 59.8 4.6 25.2 34.9 39.9 7.96 8.00 Supermarkets and Drug Stores 8.7 0.7 7.5 47.2 45.3 7.94 7.88 Telecommunication 123.8 9.6 39.9 47.1 13.1 7.63 7.50 Textiles and Furniture 6.3 0.5 47.6 26.0 26.4 7.13 6.88 Transportation 32.9 2.5 40.1 39.9 20.0 7.48 7.44 Utilities, Power, and Gas 38.7 3.0 60.7 32.5 6.8 7.16 7.50 Total 1,291.8 100.0 43.6 37.8 18.6 7.32 7.38 Source: Fitch U.S. High Yield Default Index, Bloomberg.
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Credit Market Research
Fitch U.S. High Yield Default Insight 25 May 28, 2014
Concentration of Bonds Rated B or Lower by Industry (% of Sector Outstanding)
Industry 2009 2010 2011 2012 2013 April 2014 Automotive 74.3 19.9 11.9 15.6 17.7 16.1 Banking and Finance 58.6 17.2 15.6 14.4 10.9 10.6 Broadcasting and Media 66.5 47.1 41.1 38.1 30.8 37.5 Building and Materials 28.3 29.8 26.9 23.1 19.7 20.2 Cable 5.6 11.2 13.6 17.8 16.9 15.6 Chemicals 33.4 25.4 28.9 42.3 34.0 27.8 Computers and Electronics 71.3 66.7 55.1 50.8 53.1 53.2 Consumer Products 75.1 45.8 41.8 39.6 36.8 34.1 Energy 19.2 19.8 21.0 23.6 29.8 34.4 Food, Beverage, and Tobacco 36.0 30.1 40.9 30.2 25.2 24.8 Gaming, Lodging, and Restaurants 59.3 57.8 58.4 49.3 51.9 52.6 Healthcare and Pharmaceutical 49.0 39.7 35.1 32.2 28.8 36.2 Industrial/Manufacturing 29.6 27.3 26.9 17.3 14.7 17.1 Insurance 10.9 11.9 14.3 19.2 5.8 18.2 Leisure and Entertainment 50.3 53.4 55.3 46.5 44.3 41.2 Metals and Mining 22.9 23.4 17.7 32.9 42.3 38.3 Paper and Containers 37.7 31.9 36.1 33.6 41.3 45.5 Real Estate 47.5 28.0 19.7 19.6 17.4 18.5 Retail 39.6 30.9 40.2 39.9 53.0 51.2 Services and Miscellaneous 49.4 53.1 59.2 61.0 58.3 55.0 Supermarkets and Drug Stores 52.5 44.3 42.8 57.9 71.3 75.2 Telecommunication 33.1 31.9 32.0 34.3 22.1 21.4 Textiles and Furniture 28.8 19.3 16.8 21.1 15.8 30.8 Transportation 33.9 31.6 30.4 37.1 35.0 38.4 Utilities, Power, and Gas 33.1 36.2 34.4 33.4 35.5 13.0 Total 41.6 32.1 31.2 32.2 31.0 31.2 Source: Fitch U.S. High Yield Default Index, Bloomberg.
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Credit Market Research
Fitch U.S. High Yield Default Insight 26 May 28, 2014
High Yield Maturity Schedule by Rating: 20142017 ($ Bil.)
Eight Months of 2014 2015 2016 2017
Rating ($) % of Total
Outstanding ($) % of Total
Outstanding ($) % of Total
Outstanding ($) % of Total
Outstanding BB 11.6 2.1 21.0 3.7 29.9 5.3 35.6 6.3 B 1.8 0.4 10.2 2.1 15.0 3.1 44.5 9.1 CCCC 1.0 0.5 5.8 2.6 9.1 4.1 18.0 8.1 NR 0.4 2.3 0.3 1.8 1.9 10.3 4.1 22.6 Total 14.9 1.2 37.3 2.9 55.9 4.3 102.2 7.9 Source: Fitch U.S. High Yield Default Index, Bloomberg.
High Yield Maturity Schedule by Industry: 20142017 ($ Bil.)
Eight Months of 2014 2015 2016 2017
Industry ($) % of Total
Outstanding ($) % of Total
Outstanding ($) % of Total
Outstanding ($) % of Total
Outstanding Automotive 0.2 0.6 0.2 0.7 0.0 0.0 0.2 0.8 Banking and Finance 6.7 4.5 12.8 8.7 10.6 7.2 17.1 11.6 Broadcasting and Media 1.0 1.7 1.5 2.5 1.3 2.3 2.9 5.0 Building and Materials 0.5 0.8 3.1 5.3 4.6 7.8 5.4 9.2 Cable 1.0 2.7 0.8 2.1 1.6 4.3 2.8 7.7 Chemicals 0.0 0.0 0.4 1.7 1.1 4.7 0.2 1.1 Computers and Electronics 0.0 0.0 1.3 2.2 0.8 1.4 1.9 3.3 Consumer Products 0.0 0.0 0.1 0.3 1.2 4.8 0.7 2.9 Energy 1.7 0.8 2.9 1.4 3.2 1.6 14.6 7.3 Food, Beverage, and Tobacco 0.7 1.9 0.0 0.0 2.1 6.0 2.6 7.4 Gaming, Lodging, and Restaurants 0.3 0.5 1.7 3.0 2.5 4.5 4.1 7.3 Healthcare and Pharmaceutical 0.2 0.2 1.9 2.1 1.7 1.9 4.8 5.1 Industrial/Manufacturing 0.2 0.5 1.0 3.2 3.1 9.9 3.6 11.4 Insurance 0.0 0.0 0.1 2.2 0.0 0.0 0.0 0.0 Leisure and Entertainment 0.0 0.0 0.0 0.0 1.3 9.5 0.4 3.0 Metals and Mining 0.0 0.0 2.1 3.3 1.6 2.5 7.3 11.8 Paper and Containers 0.0 0.0 0.0 0.2 0.9 5.8 1.7 10.6 Real Estate 1.0 3.4 2.8 9.0 2.1 7.0 2.8 9.1 Retail 0.2 0.5 0.2 0.5 1.0 2.3 3.6 8.2 Services and Miscellaneous 0.3 0.6 2.1 3.4 2.2 3.7 6.6 11.1 Supermarkets and Drug Stores 0.0 0.0 0.3 3.3 0.6 7.2 0.5 5.3 Telecommunication 0.4 0.3 0.7 0.6 6.1 4.9 14.0 11.3 Textiles and Furniture 0.3 3.9 0.1 2.0 0.2 3.0 0.2 3.2 Transportation 0.0 0.0 1.1 3.3 2.5 7.5 2.7 8.1 Utilities, Power, and Gas 0.5 1.2 0.4 0.9 3.4 8.8 1.6 4.0 Total 14.9 1.2 37.3 2.9 55.9 4.3 102.2 7.9 Source: Fitch U.S. High Yield Default Index, Bloomberg.
0200400600800
1,0001,2001,400($ Bil.)
Source: Fitch U.S. High Yield Default Index, Bloomberg.
U.S. High Yield Market Growth 1990April 2014
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Credit Market Research
Fitch U.S. High Yield Default Insight 27 May 28, 2014
High Yield Industry Composition: 2000April 2014 (%) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
April 2014
Automotive 1.6 2.2 1.8 2.4 2.6 4.3 5.2 4.7 4.3 3.5 1.8 2.1 2.0 1.8 2.0 Banking and Finance 6.9 7.5 4.0 3.6 3.5 9.6 14.0 13.1 13.1 12.7 15.1 14.3 11.0 10.1 11.2 Broadcasting and Media 5.2 4.9 4.4 4.4 4.0 3.8 4.6 5.4 5.7 5.1 3.8 3.7 4.1 4.2 4.1 Building and Materials 2.7 2.7 2.5 2.7 2.9 3.0 3.0 2.9 3.8 4.0 3.6 3.7 4.1 4.5 4.5 Cable 7.0 6.5 7.2 4.1 4.7 4.2 4.1 3.9 3.7 4.0 2.6 2.4 2.7 2.9 2.8 Chemicals 2.7 3.2 3.3 4.0 4.3 3.6 3.0 2.4 1.9 1.8 2.2 2.2 1.7 1.8 2.0 Computers and Electronics 3.8 3.0 3.1 3.7 4.4 4.6 4.6 4.8 5.1 4.9 4.4 4.5 4.6 4.8 4.6 Consumer Products 1.7 1.4 1.2 1.3 1.2 1.2 1.3 1.1 0.9 0.8 1.1 1.6 1.9 1.9 1.8 Energy 5.9 4.9 6.7 10.5 10.9 9.5 9.3 9.2 9.1 9.2 10.5 11.8 13.7 14.8 15.0 Food, Beverage, and Tobacco 2.5 1.9 1.9 2.7 2.8 2.4 2.4 2.4 2.1 2.0 2.1 2.0 2.2 2.6 2.8 Gaming, Lodging, and Restaurants 4.4 4.3 4.9 5.7 5.7 4.7 4.9 5.2 5.4 5.3 4.7 4.5 4.6 4.5 4.3 Healthcare and Pharmaceutical 4.1 3.6 3.5 4.7 4.5 4.4 4.6 5.2 5.5 5.5 6.1 6.3 6.9 7.1 7.1 Industrial/Manufacturing 3.2 3.7 3.5 3.7 3.6 3.4 2.8 2.8 2.5 2.3 2.2 2.1 2.1 2.2 2.3 Insurance 0.7 0.9 1.3 0.8 0.8 0.8 0.7 0.9 1.0 1.5 1.7 1.2 0.7 0.5 0.4 Leisure and Entertainment 1.9 1.4 1.2 1.6 1.7 1.3 1.3 1.3 1.1 1.0 1.1 1.2 1.3 1.3 1.1 Metals and Mining 3.2 2.6 2.2 2.3 2.7 2.9 2.8 2.8 3.0 3.2 3.1 3.0 3.9 4.2 4.4 Paper and Containers 2.8 2.6 3.1 4.1 4.4 4.0 4.0 3.8 3.6 3.8 3.5 3.0 2.1 1.6 1.3 Real Estate 1.3 1.1 1.2 1.4 1.4 1.2 1.4 2.1 2.7 2.9 2.6 3.0 3.0 2.4 2.2 Retail 2.6 2.8 3.3 2.8 2.5 2.5 2.5 2.7 3.1 3.7 4.0 3.0 2.9 3.4 3.5 Services and Miscellaneous 6.7 5.9 6.1 6.2 5.0 3.9 4.4 5.0 4.7 4.5 4.7 4.8 4.9 5.1 4.9 Supermarkets and Drug Stores 1.4 1.1 1.1 1.3 1.4 1.3 1.5 1.8 1.5 1.3 1.2 1.0 1.0 0.8 0.7 Telecommunication 18.5 19.6 20.5 12.1 11.1 9.9 8.3 7.5 8.1 9.1 9.0 9.3 9.8 10.0 9.9 Textiles and Furniture 1.5 1.4 1.3 1.4 1.3 1.2 1.0 0.8 0.6 0.8 0.9 0.8 0.7 0.5 0.5 Transportation 3.3 3.6 3.7 3.3 3.0 2.9 1.9 1.8 1.4 1.7 2.4 2.9 2.6 2.4 2.5 Utilities, Power, and Gas 4.2 7.3 6.9 9.0 9.6 9.4 6.4 6.4 6.0 5.5 5.6 5.8 5.6 4.7 4.3 Total Market 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Note: Based on average outstandings per period. Source: Fitch U.S. High Yield Default Index, Bloomberg.
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Credit Market Research
Fitch U.S. High Yield Default Insight 28 May 28, 2014
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