Loan investors brace for lower recoveries

Buy-siders expect to recoup up to 30 percentage points less if borrowers default

loan recovery downwards money

Leveraged loan investors are expecting to recoup less capital when companies default, after more than a decade of low rates eroded creditor protections in loan documents.

The average amount recouped by investors if a lender defaulted – known as the recovery rate – has historically been around 65–70% of a loan’s principal in the US and 75–80% in Europe. Now, participants in both markets are expecting the figure to be as much as 30 percentage points lower.

Investors say that lax lending

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