English, Article, Journal or magazine article edition: A Simple Approach to Estimate Recovery Rates with APR Violation from Debt Spreads Haluk Unal; Dilip Madan; Levent Guntay

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Bookmark: http://trove.nla.gov.au/version/190055
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • A Simple Approach to Estimate Recovery Rates with APR Violation from Debt Spreads
Author
  • Haluk Unal
  • Dilip Madan
  • Levent Guntay
Physical Description
  • preprint
Notes
  • This paper proposes a simple approach to estimate the implied recovery rates embedded in the prices of the debt securities of a firm that differ in priority at time of default. The approach allows for a complex capital structure setting assuming that the absolute priority rule (APR) can be violated. The paper demonstrates that a new statistic, the adjusted relative spread, captures recovery information in debt prices. Model implied recovery rates from corporate bond prices are observed to be consistent with the findings of Altman and Kishore (1996). Interest rates and firm tangible assets are shown to be significant determinants of recovery rates.
  • RePEc:wop:pennin:01-07
Language
  • English
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