MOODYS CORP
			Symbol			MCO

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Moody’s Analytics: Preferred Stock Default Recoveries Approach Those of Senior Unsecured Bonds

2009-11-05 13:34 ET - News Release

NEW YORK -- (Business Wire)

Recovery rates on preferred stocks that have omitted dividends surpass those on junior subordinated bonds by nearly 50% when the omission is not followed by a general bond default, a new Moody’s Analytics Risk Management Services study demonstrates. When the initial impairment is such a dividend omission, recovery rates on the preferred stock typically approach those on defaulted senior unsecured bonds.

The study also found that recovery rates on preferred shares varied considerably according to the nature of the initial impairment. As expected, the highest recoveries (35.9%) were observed for dividend omissions that were not followed by a subsequent broad bond default, while the lowest recoveries (15.9%) were realized for issuers whose preferred stock dividend impairment was part of an outright bond default.

Called “Preferred Stock Impairment and Recovery Rates, 1983-2008,” the study is a comprehensive assessment of defaults and recoveries among preferred and trust preferred stocks since 1983. Through an analysis of 471 impairments, the study illustrates the relationship between initial impairment events and their impact on recovery rates. The study also examines the migration of issuers’ ratings prior to dividend impairments.

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