Lenders recouped far less from U.S. companies that went bust during the pandemic than in previous economic downturns, a new report has revealed, reflecting loose underwriting standards and shifts in corporate debt structures, the Financial Times reported. The average recovery rate for the holders of bonds and loans was 45 cents on the dollar, rating agency Moody’s found, down from 59 cents in the 2008-09 financial crisis and below the historical average of more than 50 cents. Oil and gas group Gavilan Resources provided the lowest company-wide recovery during the pandemic at just 9 cents on the dollar. The Moody’s report outlines a marked shift in how much investors can expect to retrieve from companies they lend to should they renege on their obligations — the effects of a decade of rampant demand for corporate debt and of borrowers having the upper hand over lenders. Moody’s noted that the company-wide averages downplayed the severity of the situation for specific types of debt. Subordinated bondholders, which sit just one level above equity investors in terms of seniority in bankruptcy, received an average of just one cent for every dollar. This was a drop from 29 cents on the dollar from the financial crisis, and down from 23 cents during the dotcom bust. Senior unsecured bondholders, which sit on the next level up, received just 5 cents on the dollar on average, down from 49 cents during the financial crisis.
