Leveraged loans are gaining increased visibility in European CDOs, but a lack of historical recovery data for European leveraged loans has made it difficult in the past to gauge accurate recovery values. Recent transactions are showing higher recovery rates than the indicative ranges previously published by Standard & Poor's, which has prompted the agency to begin the assessment of recovery rates using a loan-by-loan analysis.
"In Europe, these underlying assets do not carry public ratings, so we shadow rate the assets according to jurisdiction," said Juan Carlos Martorell, associate director at S&P. "There is little statistical data from which we can extrapolate levels of recovery. In some cases it may be worth doing a loan-by-loan analysis, especially if the managers think their assets may potentially have higher recovery rates."