Sold in 2011 and 2012, when bankers said they had “learned their lessons.”
The bond boiler room is back. Fitch reports that bonds from six of the 19 companies that defaulted in the first half of this year were sold in 2011 and 2012. Over a third of defaulting issuers sold their securities after bankers claimed to have “learned their lesson” from the financial crisis.
Issuers of secured bonds defaulted the most overall, representing 14 of the 19 companies. The 2011 and 2012 issuers were among that category. Several sectors saw multiple defaults in the first half: broadcasting and media; energy; gaming, lodging and restaurants; and healthcare and pharmaceuticals.
Investors managed to claw back an average recovery rate of 71.7% on the secured issues. The unsecured issues returned 59.9 percent. However, one or more defaulting issuers of secured bonds must have gotten nearly all their money back, since the median was 65.6%
According to Fitch, “The trailing 12 month U.S. high yield default rate rose modestly to 1.7% at the end of June from 1.6 percent at the end of March. It is projected to end July at 1.9 percent.”