how to find recovery loans change from actual and estimated budget
Answers
Recovery rates can vary widely, as they are affected by a number of factors, such as instrument type, corporate issues and macroeconomic conditions. The type of instrument and its seniority within the corporate capital structure are among the most important determinants of the recovery rate. The recovery rate is directly proportional to the instrument's seniority, which means that an instrument that is more senior in the capital structure will usually have a higher recovery rate than one that is lower down in the capital structure.
Corporate issues include the company's capital structure, its level of indebtedness and amount of equity. Debt instruments issued by a company with a lower level of debt in relation to its assets may have higher recovery rates than a company with substantially more debt.
Macroeconomic conditions include the stage of the economic cycle, liquidity conditions and the overall default rate. If a large number of companies are defaulting on their debt — as would be the case during a deep recession — the recovery rates may be lower than during normal economic times. For example, Standard & Poor's estimated that for all issuers that emerged from default during the challenging 2008–2010 period, the average recovery rate across all instruments was 49.5%, compared with the 51.1% average over the 1987–2007 period.