U.S. High Yield Default Loss Rate Below 1% in 2012

U.S. High Yield Default Loss Rate Below 1% in 2012

For the third consecutive year, the U.S. high yield default rate remained well below average, ending 2012 at 1.9% and up just modestly from 1.5% in 2011. The average recovery rate on the year’s defaults was 50.2% and the median recovery, 38.9%. Both measures slipped from 2011’s more robust 59.4% average and 47.9% median.

The market’s default loss rate was 0.9% in 2012. The paper and containers and utility sectors experienced the highest industry specific default loss rates of 5.3% and 4.9%, respectively.

Fitch Ratings finds that 44 of the 65 companies that completed DDEs from 2008 – 2012 have not had a subsequent event of default. The weighted average recovery rate on 2012 DDEs was 69.1% of par versus 46.5% excluding DDEs (bankruptcy / missed payments).

The long term average annual default rate through 2012 now stands at 4.6%. This average has fluctuated over 10 year investment horizons from 3.1% (1990 – 1999) to 6.7% (1994 – 2003).

The average recovery rate over the period 2000 - 2012 is 36.5% and the median rate 25%. Details by seniority and industry are available in Fitch Ratings' new report.