Market Size and Investment Performance of Defaulted Bonds and Bank Loans: 1987-2002

Abstract

This report presents results and discussion of the investment performance of those bonds and bank loans that have defaulted on their scheduled payments to creditors and continue trading in the public market while the issuing firm attempts a financial reorganization. Monthly total return measures are compiled based on the Altman-NYU Salomon Center Indexes of Defaulted Bonds and Defaulted banks Loans, as well as an index that combines bonds and loans. These returns are compared to the total returns of common stocks and high yield corporate bonds. Returns are based on our market-weighted indexes and presented for the past year (1998) as well as for the last twelve years (for bonds) and three years for bank loans. We also continue to estimate the size of the distressed and defaulted debt markets in the United States.