Default does not always mean bondholders lose everything. The amount recovered depends on the bond's ranking, the value of the issuer's assets, the legal process and the outcome of negotiations.
Factors that influence recovery
- Seniority and security: secured creditors generally recover more than unsecured ones, and subordinated holders least.
- Industry: asset-heavy businesses may have more to recover than service companies.
- Jurisdiction: insolvency laws and courts differ widely between countries.
- For sovereigns: the size of the haircut agreed in the restructuring and any new bonds received.
Historical studies by rating agencies show average recoveries for senior unsecured corporate bonds in a broad range around 30–50% of face value, but individual outcomes range from almost nothing to full recovery.
General information only, not investment advice.