GLOBAL CORPORATE FINANCE

FEBRUARY 28, 2011

SPECIAL COMMENT Corporate Default and Recovery Rates,

1920-2010

Table of Contents: Summary

SUMMARY 1
INTRODUCTION 2 This report comprises Moody's twenty-fourth annual default study in which we update
DEFAULTS SLOWED DOWN statistics on the default, loss, and rating transition experience of corporate bond and loan
CONSIDERABLY IN 2010 2 issuers for 2010, as well as for the historical period since 1920. This study covers financial
DEFAULT RATE OUTLOOK FOR 2011 7 institutions, non-financial corporates, and regulated utilities which have long-term debt
RATING ACCURACY METRICS 9
ratings. Briefly, we find that:
MOODYS RELATED RESEARCH 12
DATA TABLES AND CHARTS 13 57 Moodys-rated corporate issuers defaulted on a total of $25.1 billion of bonds and
GUIDE TO DATA TABLES AND CHARTS 60
$14.0 billion of loans in 2010. Including issuers whose ratings were withdrawn prior to
METHODOLOGY AND DATA SOURCES 61
January 1, 2010 or newly rated in 2010, 61 corporate issuers defaulted on $26.1 billion
of bonds and $15.0 billion of loans.
Analyst Contacts:
2010s defaults were found in a variety of industries led by the Capital Industries and the
NEW YORK 1.212.553.1653 Consumer Industries sectors, which saw thirteen and ten defaults, respectively. Across
regions, defaults remained concentrated in North America with 45 issuers defaulting on
Sharon Ou 1.212.553.4403
Assistant Vice President - Analyst $23.4 billion of debt. In comparison, eight Moodys-rated corporate issuers defaulted
[email protected] on $9.0 billion of debt in Europe. The remaining defaulters were Latin-American and
David Chiu 1.212.533.1718 Asian issuers.
Associate Analyst
[email protected]
Moodys global speculative-grade default rate ended 2010 at 3.2%, noticeably down
Albert Metz 1.212.553.4867
from 2009s year-end level of 13.1%. The default rate for all Moodys-rated corporate
Managing Director - Credit Policy Research issuers fell to 1.3% at the end of 2010 from 5.4% at year-end 2009. Both results
[email protected] correspond quite closely with our one-year-ago forecasts of 3.3% and 1.4%, respectively.
Measured on a dollar volume basis, Moodys global speculative-grade bond default rate
ended 2010 at 1.6%, down from 16.8% at the end of 2009. Among all Moodys-rated
issuers, the volume-weighted default rate dropped from 2.8% in 2009 to 0.3% in 2010.
Moodys global speculative-grade default rate forecasting model now predicts that the
speculative-grade default rate will decline gradually to 1.4% by the fourth quarter of
2011, a level significantly below the long term average of 5% since 1983.
The quarterly downgrade-to-upgrade ratio declined to 1.1% in the second quarter of
2010, the lowest quarterly level in the past three years. The ratio finished the fourth
quarter at 1.2%.
Measured by post-default trading prices, the average recovery rate for senior unsecured
bonds rose to 49.5% in 2010 from 37.1% in 2009.
 GLOBAL CORPORATE FINANCE

Introduction

Moodys credit ratings facilitate the efficient functioning of capital markets by providing independent
opinions on the creditworthiness of debt obligations issued by corporate issuers around the world. One of
the primary purposes of Moodys corporate default study is to communicate the historical performance of
Moodys ratings as predictors of default and loss severity for corporate issuers. In addition to providing
useful data for investors and regulators, Moodys default studies also contribute to the transparency of the
rating process and directly address the meaning of Moodys long-term debt ratings scale.

In this study, we first summarize corporate default experience and credit trends in 2010 and then discuss
Moodys forecast for speculative-grade corporate default rates in 2011. 1 This is followed by a review of
2010 rating accuracy metrics and the historical statistics on corporate defaults, ratings transitions, ratings
performance metrics, and recovery rates. Finally, this report also includes several detailed sections describing
the methodologies used to generate the statistics as well as a guide to their reading and interpretation.

Defaults Slowed Down Considerably in 2010

2010 was a good year for the high yield debt market with respect to above-average returns and below-
average defaults. Indeed, defaults dropped significantly last year mainly due to ample liquidity which
helped some lowly rated companies avoid default. World-wide, only 57 Moodys-rated corporate
issuers defaulted on a total of $39.1 billion of debt in 2010, 2 the lowest record in the past three years.
In comparison, 265 companies defaulted on a total of $330.0 billion of debt in 2009 while 103
defaults were registered in 2008, affecting $280.9 billion of debt. From a geographic standpoint,
defaults remained concentrated in North America with 45 issuers defaulting in 2010. Meanwhile,
only eight defaults were recorded in Europe, the second largest region for defaults. On a volume basis,
defaulted debt totaled $23.4 billion in North America compared to $9.0 billion in Europe. Exhibit 1
presents annual default counts and defaulted debt volumes for the period of 1970-2010.

EXHIBIT 1
Default Count and Volume Off Their Unprecedented Levels
Volume ($Bil, Left Axis) Count (Right Axis)
$350 300

$300 250
$250
200
$200
150
$150
100
$100

$50 50

$0 0
1990

2010
1994

1998

2007
1977

1980

1996
1984

1988

1993

1999
1986
1983

1989

1992

1995

2001
1982

1985
1971

1997
1987

1991

2000

2004

2008
1981
1970

1974

1978

2006
2003

2009
1976
1973

1979

2002

2005
1972

1975

1
The analysis of default and rating transitions in this report is limited to Moodys-rated financial and non-financial corporate issuers, including utility companies.
Consistent with prior year studies, this reports default and transition rate statistics only cover issuers that have Moodys-rated bonds and/or loans and default refers to
debt default as defined on page 61. Unless otherwise specified, ratings in this report are issuer level, senior unsecured equivalent ratings which are derived from Moodys
Senior Rating Algorithm. For more details, please see the Methodology and Data Sources section at the end of this report.
2
Including companies whose ratings were withdrawn prior to January 1, 2010 or were newly rated sometime in 2010, a total of 61 companies defaulted in 2010 with
$41.1 billion of debt impacted.

2 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

Similar to what we observed in 2008 and 2009, distressed exchanges still played an active role in 2010,
accounting for 42% of total initial defaults. To put this in context, distressed exchanges only
accounted for approximately 11% of initial defaults on average from 1970 to 2007. Several factors
accelerated the pace of distressed exchanges in this cycle including the inability of some speculative-
grade issuers to access the debt markets and the unattractiveness of bankruptcy given a lack of DIP and
exit financing. Between 2008 and 2010, the share of distressed exchanges increased from 23% to 42%
while the share of bankruptcy filings fell from 45% to 21% (see Exhibit 2).

EXHIBIT 2
Distressed Exchanges Remained Active
Distressed Exchange Bankruptcy Payment Default
60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%
1970-2007 2008 2009 2010

Of the 57 defaults in 2010, almost 23% were by issuers in the Capital Industries sector, 3 among which
defaults were most notable in the Capital Equipment industry. Issuers in the Consumer Industries
sector accounted for the next highest share of 2010 defaults with 18%. Measured by default volume,
however, the Energy & Environment sector topped the list by contributing 17% of defaulted volume,
followed by the Transportation, the Consumer Industries, the Banking, and the Media & Publishing
sectors, each accounting for 12% of total default volume in 2010. Exhibit 3 shows the distribution of
2010 defaults by broad industries.

EXHIBIT 3
2010 Defaults by Broad Industry
Panel A Percent of Issuer Counts Panel B Percent of Dollar Volume
Non-Bank Media & Non-Bank Media &
Finance Publishing Finance Publishing
Energy & 11% 12%
Environment 7% 9% Retail &
14% Distribution
Retail &
7%
Distribution
9% Energy &
Environment Technology
17% 7%
Technology
9%
Consumer Transportation
12%
Industries Transportation Consumer
18%
2% Industries
Capital 12%
Utilities Utilities
Industries Capital
Banking 2% 1%
23% Industries Banking
7% 11% 12%

3
Capital industries sector includes automotive, capital equipment, chemicals, plastics & rubber, construction & building, containers, packaging, & glass, forest products
& paper, metals & mining, and business service industries. Consumer industries sector includes beverage, food, & tobacco, durable & non-durable consumer goods,
healthcare & pharmaceuticals, hotel, gaming, & leisure, and consumer service industries.

3 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

Although the Capital Industries sector accounted for 23% of defaults last year, it was not the sector
with the highest rate of default. That distinction belongs to the Media & Publishing industry, which
had a 3.6% default rate in 2010 (see Exhibit 4).

EXHIBIT 4
Default Rate Highest in the Media & Publishing Sector
Broad Industry Default Rates*
Banking 0.5%
Capital Industries 1.6%
Consumer Industries 1.9%
Energy & Environment 2.3%
Non-Bank Finance 0.8%
Media & Publishing 3.6%
Retail & Distribution 3.3%
Technology 1.3%
Transportation 0.9%
Utilities 0.2%
* Issuer-weighted

As a result of the rapid decrease in defaults, the trailing twelve-month issuer-weighted default rate for
all Moodys-rated issuers fell sharply to 1.3% in 2010 from 5.4% in 2009. Among speculative-grade
issuers, the default rate dropped to 3.2% from 13.1% (see Exhibit 5). Measured on a dollar volume
basis, Moodys speculative-grade corporate bond default rate declined more dramatically to 1.6% in
2010 from 16.8% in 2009. And the volume-weighted default rate for all Moodys-rated issuers ended
2010 at 0.3%, down from 2009s 2.8%.

EXHIBIT 5
Global Speculative-Grade Default Rate Declined Sharply in 2010
18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

Consistent with gradually recovering credit quality and decreasing numbers of defaults, the quarterly
downgrade-to-upgrade ratio for corporate issuers fell in 2010 resulting from both reduced numbers of
downgrades and increased numbers of upgrades. The most noticeable improvement in credit quality
was found in the second quarter of the year when the downgrade-to-upgrade ratio declined from 1.8

4 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

to 1.1. 4 The ratio then stabilized in the following two quarters and ended the year at 1.2, indicating
that the number of rating downgrades was slightly higher than upgrades. For historical perspective,
Exhibit 6 draws the quarterly downgrade-to-upgrade ratio for Moodys-rated corporate issuers since
1980.

EXHIBIT 6
Downgrade-to-Upgrade Ratio Back to Normal
30.0

25.0

20.0

15.0

10.0

5.0

Mar-97
Mar-87

Mar-10
Mar-07
Mar-91
Mar-81

Mar-01
Mar-90

Mar-94

Mar-98
Mar-96
Mar-80

Mar-84

Mar-88

Mar-93

Mar-99
Mar-00

Mar-04

Mar-08
Mar-86
Mar-83

Mar-89

Mar-92

Mar-95

Mar-06
Mar-03

Mar-09
Mar-82

Mar-85

Mar-02

Mar-05
Quarter End

Historically, as shown by Moodys research, default rates and recovery rates are negatively correlated.
In 2010, with default rates decreasing sharply, the inverse relationship between default rates and
recovery rates was confirmed again as recovery rates for first lien loans and most bonds were noticeably
higher than the comparable numbers in 2009 and the long-run historical averages as shown in
Exhibit 7.

EXHIBIT 7
Average Corporate Debt Recovery Rates Measured by Post-Default Trading Prices
Issuer-weighted Value-weighted

Lien Position 2010 2009 1982-2010 2010 2009 1982-2010

1st Lien Bank Loan 70.9% 53.6% 65.8% 72.3% 56.3% 59.6%
2nd Lien Bank Loan 18.2% 16.0% 29.1% 18.4% 20.8% 27.9%
Sr. Unsecured Bank Loan n.a. 32.6% 47.8% n.a. 37.9% 39.9%
Sr. Secured Bond 62.5% 37.5% 50.8% 54.7% 29.6% 49.1%
Sr. Unsecured Bond 49.5% 37.1% 36.7% 63.8% 35.5% 37.4%
Sr. Subordinated Bond 33.5% 22.4% 30.7% 39.4% 18.0% 25.3%
Subordinated Bond* 33.7% 45.3% 31.3% 32.2% 25.1% 24.2%
Jr. Subordinated Bond n.a. n.a. 24.7% n.a. n.a. 17.1%
* The recovery rate for 2010's subordinated bonds were based on four observations.

Among various default events, recovery rates generally tend to be higher on distressed exchanges as
opposed to other types of default. As shown in Exhibit 8, this phenomenon held true in 2010 as

4
We only include rating actions which result from a change in credit quality. Rating changes stemming from methodology changes (e.g. JDA, LGD) are not counted.

5 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

recovery rates were higher for distressed exchanges across all debt types. For example, the average
senior unsecured bond recovery rate was 62.2% for distressed exchanges, compared to 40.7% for
bankruptcy and payment defaults. The table also shows that the gap in recovery rates was smaller in
first lien loans but larger for bonds. This stems from the fact that a majority of distressed exchanges
only involve junior debt in the capital structure. As distressed exchanges accounted for a significant
share of all defaults in 2010, they also contributed to the relatively high numbers reported in
Exhibit 7.

EXHIBIT 8
2010 Recovery Rates: Distressed Exchanges vs. Non-Distressed Exchanges
Lien Position Distressed Exchange Defaults Bankruptcies & Payment Defaults
1st Lien Bank Loan 74.8% 70.2%
2nd Lien Bank Loan 24.5% 15.7%
Sr. Secured Bond 87.2% 57.5%
Sr. Unsecured Bond 62.2% 40.7%
Sr. Subordinated Bond 60.0% 30.2%
Subordinated Bond 33.7% n.a.

The recovery data discussed above are based on debt trading prices 30 days after the default date. An
alternative recovery measure is based on ultimate recoveries, or the value creditors realize at the
resolution of a default event. For example, for issuers filing for bankruptcy, the ultimate recovery is
the present value of the cash and/or securities that the creditors actually receive when the issuer exits
bankruptcy, typically 1-2 years following the initial default date. 5

In Exhibit 9, we present data on ultimate recovery rates for North American companies included in
Moodys Ultimate Recovery Database (URD). 6 In 2010, the URD has been expanded to include the
ultimate resolutions for more than 950 default events. The average firm-wide recovery rate 7 for the
49 default resolutions in 2010 was 62.5% compared to 56.2% for the 74 default resolutions in 2009.
Recent higher recovery rates can be attributed to the greater amount of distressed exchanges used as a
method of debt reduction. As shown in Exhibit 9, 2010s recovery rates across debt classes were
broadly similar to those in 2009 as well as their historical averages. For example, loans recovered
78.6% in 2010 as compared to 77.1% in 2009 while senior unsecured bonds recovered 51.0% in
2010 versus 48.3% in 2009.

5
For details, see Moodys Special Comment Moodys Ultimate Recovery Database, April 2007.
6
The analysis on ultimate recovery is provided by David Keisman and Randy Lampert. The data is from Moodys Ultimate Recovery Database which includes robust
detailed recovery information for over 4,500 loans and bonds from more than 950 North American non-financial corporate defaulters since 1987.
7
For a given issuer, the firm-wide recovery rate is the weighted-average recovery rate across all of the issuers debts where the weights are the size of the debts. Or in other
words, it is the enterprise value of the issuer divided by the firms total debts at the time of resolution.

6 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 9
Average Corporate Debt Recovery Rates Measured by Ultimate Recoveries, 1987-2010
Emergence Year Default Year 8

Lien Position 2010 2009 1987-2010 2010 2009 1987-2010

Loans 78.6% 77.1% 80.3% 80.2% 78.9% 80.3%
Bonds
Sr. Secured 64.4% 59.0% 63.5% 56.3% 65.6% 63.5%
Sr. Unsecured 51.0% 48.3% 49.2% 26.5% 51.6% 49.2%
Sr. Subordinated 20.5% 26.2% 29.4% 21.7% 28.0% 29.4%
Subordinated 53.4% 34.3% 29.3% 0.0% 58.3% 29.3%
Jr. Subordinated n.a. 0.5% 18.4% n.a. 0.0% 18.4%

Moodys credit ratings are opinions of relative expected credit losses, which are a function of both the
probability of default and severity of default (LGD). Exhibit 10 shows annual average credit loss rates
from 1982 through 2010 for Moodys-rated corporate issuers. With the default rate falling and loss
severity (i.e. 1-recovery rate) decreasing, the average credit loss rate among all Moodys-rated issuers
dropped to 0.6% in 2010 from 3.4% in 2009. To put this in perspective, the average annual credit
loss rate for Moodys-rated issuers since 1982 is 1.0%.

EXHIBIT 10
Credit Loss Rates Fell Considerably in 2010
Investment Grade Speculative-Grade All-Rated
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%

Default Rate Outlook for 2011

At the beginning of 2010, reflecting the decline in the high yield bonds spreads, Moodys default rate
forecasting model (Credit Transition Model or CTM) predicted that the global speculative-grade

8
Please note that the ultimate recovery rates only apply to companies who have emerged from defaults. Therefore, some of the 2009 and 2010 defaults are not included
in the ultimate recovery data under the Default Year panel if such defaults have not yet been resolved. These observations will be added when their resolution is
concluded.

7 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

default rate would fall sharply to 3.3% by the end of the year. The models prediction turned out to
be quite accurate as the realized rate came in at 3.2%, just slightly below CTMs forecast. 9

Looking into 2011, CTM forecasts that the global speculative-grade default rate will continue to slide
this year. The downward pressure can be attributed to improved fundamentals (as reflected in
improved ratings, momentum, and credit outlooks) as well as our expectations of stable economic
conditions including further tightening in the high yield spread. This forecast is consistent with the
declining number of distressed issuers as evidenced in Moodys Distressed Index and the reduced
number of companies with the weakest Speculative-Grade Liquidity Rating as reflected in Moodys
Liquidity-Stress Index (LSI). Generally speaking, LSI declines when corporate liquidity improves, and
that signals a lower default rate in the near future. 10

Based on the models projection, the global speculative-grade default rate is expected to fall from 3.2%
in 2010 to 1.4% in 2011, under the baseline scenario (see Exhibit 11). This forecast implies
approximately 28 total defaults globally in 2011. Compared to 2010, the default rate is expected to
decline more gradually in 2011 and may stabilize towards the end of the year.

The baseline forecast assumes that the unemployment rate will ease from its current level of 9.7% to
8.9% by the fourth quarter of 2011 and that the high yield spread will decline from 540 bps to 365
bps. Under a more pessimistic macroeconomic scenario, where the unemployment rate climbs to
13.4% and the high yield bond spread increases to 890 basis points, the global speculative-grade
default rate is forecasted to rebound to 4.9% by the end of 2011.

EXHIBIT 11
Speculative-Grade Default Rate Expected to Remain Low in 2011
Actual Baseline_Forecast Pessimistic_Forecast
16%
14%
12%
10%
8%
6%
4%
2%
0%
Jun-07
Jan-94

Jul-11
Jul-04

Jan-08
Jun-93

Jun-00
Feb-91

Jul-97
Dec-96
Oct-95

Oct-09
Aug-94
Sep-91

Dec-03
Oct-02

Aug-08

May-10
Mar-95

Mar-09
Jan-01
Feb-98

Dec-10
Mar-02
Apr-99

Apr-06
Apr-92

Sep-98

Feb-05
Nov-99

Nov-06
Nov-92

Aug-01
May-96

Sep-05
May-03

For U.S. and European speculative-grade issuers, Moodys forecasting model projects default rates
dropping to 1.6% and 1.0%, respectively, by the end of 2011 under the baseline scenario. Across
industries over the coming year, default rates are expected to be highest in the Consumer
Transportation sector in the U.S. and the Media: Advertising, Printing & Publishing sector in Europe.
Exhibit 12 shows the baseline one-year default rate forecasts across industries in both the U.S. and
Europe, sorted from highest to lowest by the U.S. rates.

9
For a thorough review of our forecast performance in 2010, please see Evaluating Moodys Corporate Default Forecasts for 2010, Moodys Special Comment,
February 2011.
10
See Puchalla et al, Liquidity Stress Hits Five-Year Low, Moodys SGL Monitor, Feb 2011

8 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 12
One-Year Corporate Default Rate Forecasts by Industry
Industry US Europe Industry US Europe
Transportation: Consumer 3.5% 0.8% Healthcare & Pharmaceuticals 1.1% 0.4%
Hotel, Gaming, & Leisure 3.3% 0.7% Telecommunications 1.1% 0.6%
Wholesale 3.1% 0.2% Consumer goods: non-durable 1.0% 0.0%
Media: Advertising, Printing & Publishing 2.8% 4.0% Consumer goods: durable 1.0% 0.9%
Retail 2.5% 0.4% High Tech Industries 1.0% 0.1%
Automotive 2.5% 0.3% Metals & Mining 0.8% 0.3%
Transportation: Cargo 2.2% 0.5% Beverage, Food, & Tobacco 0.8% 0.5%
Environmental Industries 2.2% 0.0% Construction & Building 0.7% 0.2%
Services: Business 2.0% 2.2% Chemicals, Plastics, & Rubber 0.7% 0.3%
Services: Consumer 1.9% 0.0% FIRE: Finance 0.6% 0.2%
Containers, Packaging, & Glass 1.6% 1.7% FIRE: Real Estate 0.5% 0.9%
Aerospace & Defense 1.5% 1.8% FIRE: Insurance 0.3% 0.1%
Media: Broadcasting & Subscription 1.5% 0.5% Banking 0.3% 0.2%
Energy: Electricity 1.4% 0.1% Utilities: Electric 0.0% 0.0%
Capital Equipment 1.4% 0.2% Utilities: Oil & Gas 0.0% 0.0%
Forest Products & Paper 1.4% 0.4% Sovereign & Public Finance 0.0% 0.0%
Energy: Oil & Gas 1.2% 1.0% Utilities: Water 0.0% 0.0%
Media: Diversified & Production 1.2% 0.4%

Rating Accuracy Metrics

Moodys ratings have historically proven to be effective predictors of default. This can be seen in
Exhibit 13, which plots the median ratings of roughly 1,700 corporate issuers that defaulted from
1983 to 2010. The chart shows that, historically, Moodys-rated issuers have been downgraded to the
B1 level as early as five years prior to default. The comparable rating was B3 among issuers that
defaulted in 2010. At one year prior to default, 2010 defaulters ratings were lowered to Caa2, also
below the B3 rating for companies that defaulted during the entire period of 1983-2010.

EXHIBIT 13
Median Ratings Prior to Default
2010 1983-2010
Ba3

B1

B2

B3

Caa1

Caa2

Caa3

60 55 50 45 40 35 30 25 20 15 10 5 0
Months prior to default

9 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

As a valuable tool to measure credit risk, ratings are expected to differentiate strong credits from
weaker ones. In other words, an effective rating system should not only assign low ratings to issuers
that ultimately default but also assign high ratings to those that are remote from default. A metric
designed to measure this aspect of ratings performance is the cumulative accuracy profile (CAP) plot as
shown in Exhibit 14. A rating system that possessed no predictive information about default risk
would lie on the 45o line; the further the CAP curve bows toward the northwest corner, the better it is
at identifying defaults in the riskiest rating categories. Exhibit 14 shows that the CAP curve for 2010
bows towards the northwest corner more than the one for the 1983-2010 period, which suggests that
the rating performance in 2010 is better than the historical average.

EXHIBIT 14
One Year Cumulative Accuracy Plots, 2010 vs. Historical Average
2010 1983-2010 45 Degree Line
100%
Cumulative Proportion of Defaulters

80%

60%

40%

20%

0%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cumulative Proportion of Issuers

Another way to measure rating performance is the accuracy ratio, which is derived from the CAP
curve. The accuracy ratio (AR) is the ratio of the area between the CAP curve and the 45o line to the
maximum possible area above the 45o line, divided by survival rate (i.e. 1-default rate). 11, 12 AR values
range from minus one to positive one and a higher AR indicates better rating accuracy. Exhibit 15
presents the one- and five-year horizon accuracy ratios for the period of 1983-2010. The chart shows
that while the five-year ratio remains below the average level since 1983, the one-year ratio has
recovered quickly from its 2008 cyclical low. The graph further suggests that the one-year accuracy
ratio is positively correlated with the credit cycle: when defaults increase, the accuracy ratio falls. At
the five-year horizon, this correlation is much less evident.

11
Accuracy Ratio is defined in Benchmarking Quantitative Default Risk Models: A Validation Methodology (2000). The Accuracy Ratios from those reports published
prior to 2010 were defined as the ratio between the CAP curve and the 45 degree line to the maximum possible area above the 45 degree line. In other words, the new
AR equals the old AR divided by the survival rate (i.e., 1- default rate) for the cohort under consideration. The adjustment was made for the purposing of allowing
Accuracy Ratios to be 100% when defaulters are perfectly differentiated from non-defaulters.
12
The Accuracy Ratio is also equivalent to the Average Default Position, an arguably more intuitive measure of ordinal accuracy. See Measuring Ratings Accuracy Using
the Average Default Position, Moodys Special Comment, February 2011.

10 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 15
One- and Five-Year Accuracy Ratios by Cohort Year, 1983-2010
1-Year 5-Year
1.0

0.9

0.8

0.7

0.6

0.5

Cohort Year

11 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

Moodys Related Research

Special Comments:
Emery and Keisman, Building the Better LGD Mousetrap, December 7, 2010 (129319)
Emery and Ou, Corporate Default and Recovery Rates, 1920-2009, February 2010 (123042)
Keisman, After Black Swans, Now What? Recoveries on Defaulted Debt as the New Normal
Begins, May 2010 (124964)
Keisman, Cheating Death: Private Equity Manages Solid Recoveries When Sponsored Companies
Default, November 2010 (128561)
Keisman, Hard Data for Hard Times II: The Crisis That Wasn't, February 2011 (131330)
Mann, Measuring Ratings Accuracy Using the Average Default Position, February 2011(129451)
Zhang and Metz, Evaluating Moodys Corporate Default Forecasts for 2010, February 2011
(131027)
To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of
this report and that more recent reports may be available. All research may not be available to all clients.

12 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

Data Tables and Charts

(A guide to some of the following data tables is available on page 60)
EXHIBIT 16
Moodys-Rated 2010 Corporate Bond and Loan Defaults
In Jan 2010
1 1 2
Company Country Initial Default Type Bonds Loans Cohort? Notes
ACIH, Inc. United States Missed interest payment $220 No
Ahern Rentals Inc. United States Distressed exchange $53 Yes
Ambac Financial Group, Inc. United States Chapter 11 $1,222 Yes
American Media Operations, Inc. United States Missed interest payment $381 $466 No
American Safety Razor Company United States Chapter 11 $425 Yes
Angiotech Pharmaceuticals, Inc. Canada Missed interest payment $250 Yes
Anglo Irish Bank Corporation Limited Ireland Distressed exchange $1,947 Yes
Atrium Companies, Inc. United States Missed interest payment $0 $50 No
Bank of Ireland Ireland Distressed exchange $1,794 Yes
Bankruptcy Management Solutions, Inc. United States Distressed exchange $360 Yes
Black Gaming, LLC United States Missed interest payment $15 No
Blockbuster Inc. United States Missed principal payment $930 Yes
BMS Holdings, Inc. United States Distressed exchange $213 Yes
Brookstone Company, Inc. United States Distressed exchange $160 Yes
Builders FirstSource, Inc. United States Distressed exchange $270 Yes
Catalyst Paper Corporation Canada Distressed exchange $319 Yes
Central Proteinaprima Tbk (P.T.) Indonesia Missed interest payment $325 Yes
Chelsea Building Society United Kingdom Distressed exchange $306 Yes
Cleveland Unlimited, Inc. United States Missed principal payment $150 Yes
Compton Petroleum Corporation Canada Distressed exchange $450 Yes
Contech Construction Products, Inc. United States Distressed exchange $240 Yes
Electrical Components International, Inc. United States Prepackaged Chapter 11 $305 Yes
Energy Future Competitive Holdings Co. United States Distressed exchange $0 Yes 4
Energy Future Holdings Corp. United States Distressed exchange $3,594 Yes
EnviroSolutions Holdings, Inc. United States Prepackaged Chapter 11 $0 Yes 4
EnviroSolutions Real Property Holdings, Inc United States Prepackaged Chapter 11 $211 Yes
Gateway Casinos & Entertainment Inc. Canada Missed pri & int payments $1,105 Yes
Golden Nugget, Inc. United States Distressed exchange $60 No
Graceway Pharmaceuticals, LLC United States Missed interest payment $330 Yes
Great Atlantic & Pacific Tea Co., Inc. (The) United States Chapter 11 $693 Yes
Green Valley Ranch Gaming, LLC United States Missed interest payment $773 Yes
Haights Cross Comm Operating Company United States Missed interest payment $108 No
Hipotecaria Su Casita, S.A. de C.V. Mexico Missed pri & int payments $73 Yes
Holdings Gaming Borrower, L.P. United States Distressed exchange $250 Yes
Independencia International Ltd. Brazil Bankruptcy $165 No
Independencia S/A Brazil Bankruptcy $0 No 4
Indianapolis Downs, LLC United States Missed interest payment $375 Yes
International Industrial Bank Russia Missed pri & int payments $552 Yes
Jacuzzi Brands Corp. United States Distressed exchange $175 Yes

13 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 16
Moodys-Rated 2010 Corporate Bond and Loan Defaults
In Jan 2010
1 1 2
Company Country Initial Default Type Bonds Loans Cohort? Notes
Japan Airlines International Co., Ltd. Japan Suspension of payments $735 $3,838 No
Local Insight Regatta Holdings, Inc. United States Chapter 11 $211 $327 Yes
Loehmann's Capital Corporation United States Missed interest payment $110 $31 Yes
Marsico Parent Company, LLC United States Distressed exchange $600 Yes
Marsico Parent Holdco, LLC United States Distressed exchange $556 Yes
MEGA Brands Inc. Canada Distressed exchange $72 $345 Yes
Metrogas S.A. Argentina Bankruptcy $249 Yes
Mobile-8 Telecom Tbk Indonesia Missed pri & int payments $68 No
Motorsport Aftermarket Group, Inc. United States Distressed exchange $51 Yes
Neenah Foundry Company United States Missed interest payment $225 $42 No
Neff Corp. United States Distressed exchange $531 No
Network Communications, Inc. United States Missed interest payment $175 Yes
Newark Group, Inc. (The) United States Missed interest payment $122 No
Oriental Trading Company, Inc. United States Missed interest payment $624 Yes
Penhall International, Corp. United States Missed interest payment $175 Yes
Penton Media Inc. United States Prepackaged Chapter 11 $965 Yes
Radio One, Inc. United States Missed interest payment $297 Yes
Regent Broadcasting LLC United States Missed pri & int payments $188 Yes
Sagittarius Restaurants LLC United States Distressed exchange $156 Yes
Securus Technologies, Inc. United States Distressed exchange $43 Yes
Spheris Inc. United States Missed interest payment $125 Yes
Spirit Finance Corporation United States Missed pri & int payments $50 No
Takefuji Corporation Japan Distressed exchange $1,115 No
TCO Funding Corporation United States Distressed exchange $55 Yes
Texas Competitive Electric Holdings Co United States Distressed exchange $1,689 Yes
Titan Petrochemicals Group Ltd. China Distressed exchange $209 Yes
Trico Shipping AS Norway Missed interest payment $400 Yes
Tristan Oil Ltd. Kazakhstan Missed interest payment $420 Yes
Truvo Subsidiary Corp. Begium Chapter 11 $692 $976 Yes
U.S. Concrete, Inc. United States Prepackaged Chapter 11 $272 $40 Yes
United Site Services, Inc. United States Missed interest payment $265 No
WasteQuip, Inc. United States Missed interest payment Yes 3
Weather Finance III S.a.r.l. Greece Suspension of payments $1,595 $311 Yes
White Birch Paper Company United States Missed interest payment $70 No
William Lyon Homes, Inc. United States Distressed exchange $11 No
Wolverine Tube, Inc. United States Distressed exchange $131 No
Workflow Management, Inc. United States Missed pri & int payments $30 No
Xerium Technologies, Inc. United States Prepackaged Chapter 11 $620 Yes

1 Default volume in millions of USD

2 Only issuers included in the January 1 cohort are included in Moody's default rates
3 Default amount not publicly available
4 These companies failed to make payments on debts that they guaranteed. Guaranteed debts are only added to the issuers but not to the guarantors in order to avoid double counting

14 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 17
Annual Moodys-Rated Global Corporate Issuer Default Counts, 1920-2010
Inv- Spec- All- Inv- Spec- All- Inv- Spec- All-
Year Grade Grade Rated Year Grade Grade Rated Year Grade Grade Rated
1920 8 25 33 1951 0 1 1 1982 2 11 13
1921 7 24 31 1952 0 0 0 1983 0 13 13
1922 10 23 33 1953 0 0 0 1984 1 12 13
1923 5 22 27 1954 0 1 1 1985 0 15 15
1924 3 37 40 1955 0 1 1 1986 3 30 33
1925 7 34 41 1956 0 0 0 1987 0 31 31
1926 4 18 22 1957 0 1 1 1988 0 29 29
1927 1 15 16 1958 0 0 0 1989 4 48 52
1928 0 8 8 1959 0 0 0 1990 0 82 82
1929 3 12 15 1960 0 2 2 1991 1 65 66
1930 2 21 23 1961 0 3 3 1992 0 31 31
1931 6 79 85 1962 0 4 4 1993 0 19 19
1932 10 108 118 1963 0 3 3 1994 0 16 16
1933 9 188 197 1964 0 0 0 1995 0 27 27
1934 5 60 65 1965 0 0 0 1996 0 17 17
1935 9 51 60 1966 0 1 1 1997 0 25 25
1936 3 19 22 1967 0 0 0 1998 1 50 51
1937 4 17 21 1968 0 1 1 1999 1 99 100
1938 9 17 26 1969 0 0 0 2000 4 120 124
1939 2 13 15 1970 2 25 27 2001 4 183 187
1940 2 22 24 1971 0 3 3 2002 14 127 141
1941 0 10 10 1972 0 5 5 2003 0 82 82
1942 0 4 4 1973 2 3 5 2004 0 38 38
1943 0 3 3 1974 0 3 3 2005 2 29 31
1944 0 3 3 1975 0 4 4 2006 0 31 31
1945 0 2 2 1976 0 2 2 2007 0 18 18
1946 0 0 0 1977 1 3 4 2008 14 89 103
1947 0 1 1 1978 0 4 4 2009 11 254 265
1948 0 0 0 1979 0 1 1 2010 2 55 57
1949 0 5 5 1980 0 4 4
1950 0 0 0 1981 0 2 2

15 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 18
Annual Rated Global Corporate Bond and Loan Default Volumes, 1970-2010*
Investment Grade Speculative Grade All Ratings
Year Bond Loan Total Bond Loan Total Bond Loan Total
1970 $154 $0 $154 $756 $0 $756 $910 $0 $910
1971 $0 $0 $0 $132 $0 $132 $132 $0 $132
1972 $0 $0 $0 $215 $0 $215 $215 $0 $215
1973 $17 $0 $17 $94 $0 $94 $112 $0 $112
1974 $0 $0 $0 $69 $0 $69 $69 $0 $69
1975 $0 $0 $0 $176 $0 $176 $176 $0 $176
1976 $0 $0 $0 $34 $0 $34 $34 $0 $34
1977 $68 $0 $68 $179 $0 $179 $247 $0 $247
1978 $0 $0 $0 $112 $0 $112 $112 $0 $112
1979 $0 $0 $0 $18 $0 $18 $18 $0 $18
1980 $0 $0 $0 $302 $0 $302 $302 $0 $302
1981 $0 $0 $0 $47 $0 $47 $47 $0 $47
1982 $243 $0 $243 $515 $0 $515 $758 $0 $758
1983 $0 $0 $0 $1,110 $0 $1,110 $1,110 $0 $1,110
1984 $183 $0 $183 $399 $0 $399 $582 $0 $582
1985 $0 $0 $0 $1,344 $0 $1,344 $1,344 $0 $1,344
1986 $138 $0 $138 $3,986 $0 $3,986 $4,124 $0 $4,124
1987 $0 $0 $0 $8,940 $242 $9,182 $8,940 $242 $9,182
1988 $0 $0 $0 $5,425 $361 $5,786 $5,425 $361 $5,786
1989 $1,506 $0 $1,506 $10,021 0 $10,021 $11,527 $0 $11,527
1990 $0 $0 $0 $19,559 $1,603 $21,161 $19,559 $1,603 $21,161
1991 $1,348 $0 $1,348 $15,485 $570 $16,055 $16,833 $570 $17,403
1992 $0 $0 $0 $6,601 $698 $7,299 $6,601 $698 $7,299
1993 $0 $0 $0 $1,871 $424 $2,295 $1,871 $424 $2,295
1994 $0 $0 $0 $2,100 $299 $2,399 $2,100 $299 $2,399
1995 $0 $0 $0 $4,788 $27 $4,816 $4,788 $27 $4,816
1996 $0 $0 $0 $4,053 $1,435 $5,488 $4,053 $1,435 $5,488
1997 $0 $0 $0 $5,104 $948 $6,052 $5,104 $948 $6,052
1998 $399 $0 $399 $9,630 $3,017 $12,647 $10,029 $3,017 $13,046
1999 $461 $1,225 $1,686 $24,980 $14,107 $39,088 $25,441 $15,332 $40,773
2000 $4,115 $3,950 $8,065 $24,723 $26,136 $50,858 $28,838 $30,086 $58,924
2001 $22,351 $5,363 $27,714 $78,299 $33,850 $112,149 $100,650 $39,213 $139,863
2002 $47,900 $13,122 $61,022 $105,191 $37,162 $142,352 $153,091 $50,284 $203,375
2003 $0 $870 $870 $35,181 $10,123 $45,304 $35,181 $10,992 $46,174
2004 $0 $0 $0 $11,810 $4,197 $16,008 $11,810 $4,197 $16,008
2005 $2,155 $2,825 $4,980 $26,633 $8,745 $35,378 $28,788 $11,570 $40,358
2006 $0 $0 $0 $7,758 $2,630 $10,388 $7,758 $2,630 $10,388
2007 $0 $0 $0 $4,755 $1,983 $6,738 $4,755 $1,983 $6,738
2008 $183,155 $10,380 $193,535 $55,060 $32,322 $87,382 $238,215 $42,701 $280,916
2009 $38,945 $21,931 $60,876 $145,405 $123,686 $269,091 $184,350 $145,617 $329,966
2010 $4,856 $0 $4,856 $20,261 $14,007 $34,268 $25,117 $14,007 $39,124

* Default volume in millions of USD

16 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 19
Annual Issuer Default Counts and Volume Totals by Geographical Region, 1986-2010
Issuer Counts Dollar Volumes*

Africa & Asia- Latin North Africa & Asia- Latin North
Year Middle East Pacific Europe America America Middle East Pacific Europe America America
1986 0 0 0 0 33 $0 $0 $0 $0 $4,124
1987 0 0 1 0 30 $0 $0 $125 $0 $9,057
1988 0 0 0 0 29 $0 $0 $0 $0 $5,786
1989 0 4 0 0 48 $0 $969 $0 $0 $10,558
1990 0 1 0 0 81 $0 $200 $0 $0 $20,961
1991 0 0 1 0 65 $0 $0 $999 $0 $16,404
1992 0 0 0 0 31 $0 $0 $0 $0 $7,299
1993 0 0 0 0 19 $0 $0 $0 $0 $2,295
1994 0 0 1 0 15 $0 $0 $774 $0 $1,625
1995 0 0 0 1 26 $0 $0 $0 $0 $4,816
1996 0 0 0 1 16 $0 $0 $0 $218 $5,270
1997 0 2 0 2 21 $0 $614 $0 $310 $5,129
1998 0 3 3 0 45 $0 $626 $1,018 $0 $11,402
1999 0 6 11 6 77 $0 $4,004 $4,347 $1,608 $30,814
2000 0 1 4 1 118 $0 $3,743 $938 $177 $54,065
2001 4 11 18 7 147 $2,758 $5,887 $11,449 $2,547 $117,221
2002 0 1 26 18 96 $0 $1,434 $47,385 $16,163 $138,392
2003 0 2 7 10 63 $0 $550 $3,210 $3,852 $38,561
2004 1 0 3 1 33 $183 $0 $1,873 $576 $13,377
2005 0 0 1 1 29 $0 $0 $207 $100 $40,050
2006 0 0 7 2 22 $0 $0 $1,601 $167 $8,620
2007 0 0 3 0 15 $0 $0 $771 $0 $5,967
2008 0 3 12 2 86 $0 $625 $53,374 $555 $226,361
2009 1 12 37 14 201 $650 $5,445 $29,506 $3,808 $290,557
2010 0 1 8 3 45 $0 $6,081 $8,993 $696 $23,354

* Default volume in millions of USD

17 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 20
2010 Defaulted Corporate Bond and Loan Recoveries
Bank Loan Bond

Company Initial Default Type 1st Lien 2nd Lien Sr. Sec. Sr. Unsec. Sr. Sub. Sub.
ACIH, Inc. Payment default 1.5%
Ahern Rentals Inc. Distressed exchange 75.0%
Ambac Financial Group, Inc. Bankruptcy 16.9%
American Media Operations, Inc. Payment default 98.1% 35.0%
American Safety Razor Company Bankruptcy 93.3% 8.7%
Angiotech Pharmaceuticals, Inc. Payment default 49.5%
Anglo Irish Bank Corporation Limited Distressed exchange 18.7%
Anthracite Capital, Inc. Payment default 10.0%
Arpeni Pratama Ocean Line, Tbk (P.T.) Payment default 51.1%
Atrium Companies, Inc. Payment default 89.0%
Bank of Ireland Distressed exchange 50.4%
Bankruptcy Management Solutions, Inc. Distressed exchange 65.4% 22.0%
Blockbuster Inc. Payment default 64.5% 1.0%
Brookstone Company, Inc. Distressed exchange 88.5%
Builders FirstSource, Inc. Distressed exchange 98.0%
Catalyst Paper Corporation Distressed exchange 84.3%
Chelsea Building Society Distressed exchange 60.5%
Chem Rx Corporation Bankruptcy 50.4% 9.5%
Cleveland Unlimited, Inc. Payment default 90.0%
Compton Petroleum Corporation Distressed exchange 87.0%
Electrical Components International, Inc. Bankruptcy 76.0% 15.0%
Energy Future Holdings Corp. Distressed exchange 61.8%
EnviroSolutions Real Property Holdings, Inc. Bankruptcy 79.0%
Frontera Copper Corporation Payment default 65.3%
Gateway Casinos & Entertainment Inc. Payment default 90.5% 23.7%
Golden Nugget, Inc. Distressed exchange 40.0%
Graceway Pharmaceuticals, LLC Payment default 15.5%
Great Atlantic & Pacific Tea Co., Inc. (The) Bankruptcy 88.5% 33.8%
Green Valley Ranch Gaming, LLC Payment default 80.2% 7.1%
Independencia International Ltd. Bankruptcy 61.0%
Indianapolis Downs, LLC Payment default 83.0%
InSight Health Services Holdings Corp. Payment default 22.5%
International Aluminum Corporation Bankruptcy 59.8%
International Industrial Bank Payment default 40.4%
Jacuzzi Brands Corp. Distressed exchange 13.3%
Japan Airlines International Co., Ltd. Payment default 96.5%
Local Insight Regatta Holdings, Inc. Bankruptcy 36.8% 4.0%

18 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 20
2010 Defaulted Corporate Bond and Loan Recoveries
Bank Loan Bond

Company Initial Default Type 1st Lien 2nd Lien Sr. Sec. Sr. Unsec. Sr. Sub. Sub.
Marsico Parent Company, LLC Distressed exchange 60.0%
Marsico Parent Holdco, LLC Distressed exchange 5.1%
MEGA Brands Inc. Distressed exchange 68.3%
Metrogas S.A. Bankruptcy 44.0%
Movie Gallery, Inc. Bankruptcy 18.4% 13.5%
Neenah Foundry Company Payment default 51.0%
Neff Corp. Distressed exchange 96.3% 22.8%
Network Communications, Inc. Payment default 50.0%
Oriental Trading Company, Inc. Payment default 84.6% 18.3%
Orleans Homebuilders, Inc. Bankruptcy 34.5%
Palm Harbor Homes, Inc. Bankruptcy 20.0%
Penhall International, Corp. Payment default 62.5%
Penton Media Inc. Bankruptcy 71.1% 13.7%
Radio One, Inc. Payment default 86.8%
Regent Broadcasting LLC Payment default 81.9%
RHI Entertainment, Inc. Bankruptcy 43.0%
Spheris Inc. Payment default 10.0%
Spirit Finance Corporation Payment default 84.2%
SuperMedia Inc. Distressed exchange 69.3%
Takefuji Corporation Distressed exchange 15.8%
TerreStar Networks, Inc. Bankruptcy 101.0%
Texas Competitive Electric Holdings Co LLC Distressed exchange 59.7%
Thompson Publishing Group Inc. Bankruptcy 59.1%
Titan Petrochemicals Group Ltd. Distressed exchange 44.0%
Trico Marine Services, Inc. Payment default 30.0%
Trico Shipping AS Payment default 83.5%
Tristan Oil Ltd. Payment default 45.0%
Truvo Subsidiary Corp. Bankruptcy 3.7%
U.S. Concrete, Inc. Bankruptcy 53.7%
United Site Services, Inc. Payment default 32.0%
Universal Building Products, Inc. Bankruptcy 34.9%
Vertis, Inc. Bankruptcy 92.4% 25.0%
Weather Finance III S.a.r.l. Payment default 86.5% 30.8%
William Lyon Homes, Inc. Distressed exchange 83.0%
Workflow Management, Inc. Bankruptcy 77.4%
Xerium Technologies, Inc. Bankruptcy 93.4%

* Based on post default trading prices

19 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 21
Annual Defaulted Corporate Bond and Loan Recoveries*
Loan Bond

Year 1st Lien Sr. Sec. Sr. Unsec. Sr. Sub. Sub. Jr. Sub. All Bonds
1982 n.a. 72.5% 35.8% 48.1% 30.0% n.a. 35.3%
1983 n.a. 40.0% 52.7% 43.5% 41.1% n.a. 44.5%
1984 n.a. n.a. 49.4% 67.9% 44.3% n.a. 45.5%
1985 n.a. 83.6% 60.2% 29.6% 39.7% 48.5% 43.6%
1986 n.a. 59.2% 51.1% 46.8% 41.4% n.a. 47.4%
1987 n.a. 71.0% 63.8% 46.5% 46.9% n.a. 51.3%
1988 n.a. 55.4% 45.2% 33.4% 33.8% 36.5% 38.8%
1989 n.a. 46.5% 45.1% 34.6% 26.4% 16.9% 32.3%
1990 72.0% 33.8% 37.0% 25.6% 19.1% 10.7% 25.5%
1991 67.9% 48.4% 36.7% 41.8% 24.4% 7.8% 35.5%
1992 60.6% 62.1% 49.2% 49.4% 38.0% 13.5% 45.9%
1993 53.4% n.a. 37.1% 51.9% 44.2% n.a. 43.1%
1994 67.6% 69.3% 53.7% 29.6% 38.0% 40.0% 45.6%
1995 75.4% 62.0% 47.6% 34.3% 41.5% n.a. 43.3%
1996 85.5% 47.6% 62.8% 43.8% 22.6% n.a. 41.5%
1997 78.8% 75.5% 56.1% 44.7% 33.1% 30.6% 48.8%
1998 56.7% 46.8% 39.5% 45.0% 18.2% 62.0% 38.3%
1999 73.6% 36.0% 38.0% 26.9% 35.6% n.a. 33.8%
2000 68.8% 38.7% 24.2% 20.8% 31.9% 7.0% 25.3%
2001 64.9% 35.0% 21.2% 19.8% 15.9% 47.0% 21.6%
2002 58.8% 49.0% 29.5% 21.4% 24.5% n.a. 29.7%
2003 73.4% 66.3% 41.9% 37.2% 12.3% n.a. 40.4%
2004 87.7% 73.3% 52.1% 42.3% 94.0% n.a. 58.5%
2005 83.8% 71.9% 54.9% 26.1% 51.3% n.a. 56.0%
2006 83.6% 74.6% 55.0% 41.4% 56.1% n.a. 55.0%
2007 68.6% 80.5% 53.3% 54.5% n.a. n.a. 54.7%
2008 61.7% 54.9% 33.2% 23.3% 23.6% n.a. 33.9%
2009 53.6% 37.6% 37.1% 22.4% 45.3% n.a. 33.9%
2010 70.9% 62.5% 49.6% 33.5% 33.7% n.a. 50.0%

* Issuer-weighted, based on post default trading prices

20 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 22
Average Sr. Unsecured Bond Recovery Rates by Year Prior to Default, 1982-2010
Year 1 Year 2 Year 3 Year 4 Year 5
Aaa n.a. 3.33%** n.a. 97.00% 85.55%
Aa 37.24% 40.15% 36.30% 50.43% 38.80%
A 31.77% 47.56% 45.71% 39.90% 41.82%
Baa 41.47% 43.02% 43.00% 44.57% 42.69%
Ba 47.11% 44.61% 42.77% 40.81% 40.80%
B 37.90% 36.06% 36.74% 38.06% 41.35%
Caa-C 35.50% 34.81% 33.41% 35.33% 34.96%
Investment Grade 38.98% 43.90% 43.86% 44.10% 43.15%
Speculative Grade 37.27% 36.80% 37.00% 38.20% 40.34%
All Rated 37.36% 37.48% 37.92% 39.24% 40.97%
* Issuer-weighted, based on post default trading prices
** Based on three observations

EXHIBIT 23
Average Cumulative Credit Loss Rates by Letter Rating, 1982-2010*
Year 1 Year 2 Year 3 Year 4 Year 5
Aaa 0.00% 0.01% n.a. 0.00% 0.02%
Aa 0.01% 0.04% 0.07% 0.10% 0.18%
A 0.04% 0.10% 0.22% 0.37% 0.49%
Baa 0.12% 0.32% 0.57% 0.84% 1.19%
Ba 0.64% 1.91% 3.54% 5.41% 6.90%
B 2.77% 6.73% 10.45% 13.49% 15.57%
Caa-C 11.66% 19.62% 26.40% 30.64% 35.08%
Investment Grade 0.06% 0.15% 0.28% 0.43% 0.60%
Speculative Grade 3.09% 6.42% 9.56% 12.13% 14.00%
All Rated 1.13% 2.31% 3.38% 4.22% 4.85%
* Based on average default rates and senior unsecured bond recoveries measured on issuer-weighted basis

21 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 24
Annual Credit Loss Rates by Letter Rating, 1982-2010
Year Aaa Aa A Baa Ba B Caa-C Inv-Grade Spec-Grade All Rated
1982 0.00% 0.00% 0.16% 0.20% 1.79% 1.51% 16.05% 0.14% 2.31% 0.67%
1983 0.00% 0.00% 0.00% 0.00% 0.43% 3.01% 19.91% 0.00% 1.81% 0.46%
1984 0.00% 0.00% 0.00% 0.18% 0.42% 3.42% 50.59% 0.05% 1.68% 0.47%
1985 0.00% 0.00% 0.00% 0.00% 0.56% 2.98% 0.00% 0.00% 1.37% 0.38%
1986 0.00% 0.00% 0.00% 0.49% 1.00% 5.67% 11.51% 0.12% 2.76% 0.91%
1987 0.00% 0.00% 0.00% 0.00% 0.99% 2.35% 7.25% 0.00% 1.58% 0.56%
1988 0.00% 0.00% 0.00% 0.00% 0.69% 3.40% 15.65% 0.00% 1.96% 0.75%
1989 0.00% 0.34% 0.00% 0.33% 1.67% 4.79% 13.74% 0.16% 3.18% 1.30%
1990 0.00% 0.00% 0.00% 0.00% 2.14% 9.74% 36.47% 0.00% 6.29% 2.26%
1991 0.00% 0.00% 0.00% 0.17% 3.10% 7.83% 30.00% 0.04% 6.04% 1.91%
1992 0.00% 0.00% 0.00% 0.00% 0.16% 4.68% 15.13% 0.00% 2.64% 0.73%
1993 0.00% 0.00% 0.00% 0.00% 0.36% 2.86% 18.40% 0.00% 1.95% 0.53%
1994 0.00% 0.00% 0.00% 0.00% 0.11% 1.88% 2.44% 0.00% 0.97% 0.28%
1995 0.00% 0.00% 0.00% 0.00% 0.38% 2.23% 4.85% 0.00% 1.55% 0.49%
1996 0.00% 0.00% 0.00% 0.00% 0.00% 0.51% 5.21% 0.00% 0.61% 0.20%
1997 0.00% 0.00% 0.00% 0.00% 0.08% 0.85% 6.50% 0.00% 0.90% 0.31%
1998 0.00% 0.00% 0.00% 0.07% 0.61% 2.30% 6.89% 0.02% 1.98% 0.76%
1999 0.00% 0.00% 0.00% 0.07% 0.82% 3.03% 11.51% 0.02% 3.37% 1.37%
2000 0.00% 0.00% 0.00% 0.30% 0.55% 4.57% 14.83% 0.11% 4.83% 1.99%
2001 0.00% 0.00% 0.14% 0.16% 1.09% 7.54% 25.13% 0.11% 8.13% 3.13%
2002 0.00% 0.00% 0.12% 0.77% 0.97% 3.19% 20.34% 0.33% 5.68% 2.16%
2003 0.00% 0.00% 0.00% 0.00% 0.58% 1.23% 13.01% 0.00% 3.12% 1.07%
2004 0.00% 0.00% 0.00% 0.00% 0.20% 0.40% 5.89% 0.00% 1.17% 0.41%
2005 0.00% 0.00% 0.00% 0.08% 0.00% 0.46% 3.01% 0.03% 0.79% 0.30%
2006 0.00% 0.00% 0.00% 0.00% 0.09% 0.53% 2.72% 0.00% 0.79% 0.29%
2007 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2.80% 0.00% 0.45% 0.17%
2008 0.00% 0.37% 0.31% 0.32% 0.78% 1.38% 9.88% 0.31% 2.92% 1.36%
2009 0.00% 0.00% 0.11% 0.54% 1.51% 4.66% 21.61% 0.23% 8.26% 3.41%
2010 0.00% 0.00% 0.10% 0.00% 0.00% 0.24% 6.06% 0.04% 1.60% 0.65%
Average 0.00% 0.02% 0.03% 0.13% 0.73% 3.01% 13.70% 0.06% 2.78% 1.01%
Max 0.00% 0.37% 0.31% 0.77% 3.10% 9.74% 50.59% 0.33% 8.26% 3.41%
Min 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.45% 0.17%

* Based on issuer-weighted average default rates and issuer-weighted senior unsecured bond recovery rates

22 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 25
2010 One-Year Letter Migration Rates*
From/To: Aaa Aa A Baa Ba B Caa Ca_C WR Default
Aaa 75.248% 5.941% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 18.812% 0.000%
Aa 0.175% 61.189% 7.343% 0.524% 0.000% 0.000% 0.000% 0.000% 30.769% 0.000%
A 0.000% 1.237% 75.707% 3.975% 0.795% 0.177% 0.000% 0.000% 17.933% 0.177%
Baa 0.086% 0.086% 1.809% 86.477% 1.378% 0.086% 0.086% 0.000% 9.991% 0.000%
Ba 0.000% 0.000% 0.000% 5.567% 79.920% 4.573% 0.000% 0.000% 9.940% 0.000%
B 0.000% 0.000% 0.000% 0.000% 5.499% 75.870% 4.602% 0.000% 13.580% 0.449%
Caa 0.000% 0.000% 0.000% 0.000% 0.251% 12.030% 68.922% 1.253% 9.023% 8.521%
Ca-C 0.000% 0.000% 0.000% 0.000% 2.083% 2.083% 14.583% 27.083% 18.750% 35.417%

* In August 2010, approximately 400 issuers rating were withdrawn as their Medium Term Note Program ratings became provisional ratings. This led to higher withdrawal rate in 2010 .

EXHIBIT 26
Average One-Year Letter Rating Migration Rates, 1920-2010
From/To: Aaa Aa A Baa Ba B Caa Ca_C WR Default
Aaa 86.556% 8.214% 0.827% 0.162% 0.032% 0.001% 0.001% 0.000% 4.206% 0.000%
Aa 1.195% 84.152% 7.238% 0.740% 0.167% 0.037% 0.006% 0.005% 6.392% 0.068%
A 0.079% 2.917% 84.575% 5.549% 0.683% 0.121% 0.029% 0.009% 5.946% 0.092%
Baa 0.041% 0.286% 4.467% 81.252% 4.996% 0.789% 0.131% 0.015% 7.742% 0.280%
Ba 0.007% 0.083% 0.474% 5.923% 73.373% 6.838% 0.576% 0.068% 11.367% 1.292%
B 0.006% 0.050% 0.154% 0.592% 5.768% 71.304% 5.551% 0.534% 12.260% 3.781%
Caa 0.000% 0.021% 0.029% 0.189% 0.808% 8.067% 62.742% 3.841% 11.945% 12.358%
Ca-C 0.000% 0.026% 0.113% 0.061% 0.468% 3.265% 7.691% 51.801% 13.225% 23.350%

EXHIBIT 27
Average One-Year Transition Rates, 1970-2010
From/To: Aaa Aa A Baa Ba B Caa Ca_C WR Default
Aaa 87.395% 8.626% 0.602% 0.010% 0.027% 0.002% 0.002% 0.000% 3.336% 0.000%
Aa 0.971% 85.616% 7.966% 0.359% 0.045% 0.018% 0.008% 0.001% 4.996% 0.020%
A 0.062% 2.689% 86.763% 5.271% 0.488% 0.109% 0.032% 0.004% 4.528% 0.054%
Baa 0.043% 0.184% 4.525% 84.517% 4.112% 0.775% 0.173% 0.019% 5.475% 0.176%
Ba 0.008% 0.056% 0.370% 5.644% 75.759% 7.239% 0.533% 0.080% 9.208% 1.104%
B 0.010% 0.034% 0.126% 0.338% 4.762% 73.524% 5.767% 0.665% 10.544% 4.230%
Caa 0.000% 0.021% 0.021% 0.142% 0.463% 8.263% 60.088% 4.104% 12.176% 14.721%
Ca-C 0.000% 0.000% 0.000% 0.000% 0.324% 2.374% 8.880% 36.270% 16.701% 35.451%

23 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 28
Average Five-Year Letter Rating Migration Rates, 1970-2006
From/To: Aaa Aa A Baa Ba B Caa Ca-C WR Default
Aaa 54.130% 24.062% 5.209% 0.357% 0.253% 0.038% 0.038% 0.000% 15.832% 0.081%
Aa 3.243% 50.038% 21.225% 3.220% 0.521% 0.150% 0.030% 0.012% 21.374% 0.186%
A 0.202% 8.545% 52.504% 14.337% 2.617% 0.831% 0.143% 0.023% 20.247% 0.551%
Baa 0.231% 1.132% 13.513% 46.508% 8.794% 2.827% 0.517% 0.083% 24.763% 1.631%
Ba 0.043% 0.181% 2.325% 12.105% 26.621% 10.741% 1.286% 0.129% 38.668% 7.900%
B 0.038% 0.062% 0.295% 1.828% 6.931% 22.064% 4.665% 0.677% 43.918% 19.523%
Caa 0.000% 0.000% 0.028% 0.759% 2.065% 7.138% 8.234% 1.034% 44.365% 36.378%
Ca-C 0.000% 0.000% 0.000% 0.000% 0.208% 2.033% 1.94% 2.633% 44.352% 48.833%

24 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 29
2010 One-Year Alphanumeric Rating Migration Rates*
From/To Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca-C WR Default

Aaa 75.248 4.950 0.990 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 18.812 0.000

Aa1 0.000 43.114 10.778 3.593 0.599 4.790 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 37.126 0.000

Aa2 0.000 1.093 60.656 6.011 5.464 0.000 0.546 0.546 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 25.683 0.000

Aa3 0.450 0.450 0.450 57.658 8.559 0.901 0.450 0.450 0.000 0.450 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 30.180 0.000

A1 0.000 0.318 0.000 2.866 61.465 11.465 0.955 0.318 0.000 0.637 0.637 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 21.019 0.318

A2 0.000 0.000 0.000 1.034 5.943 65.116 6.718 2.326 0.258 0.775 1.292 0.000 0.000 0.000 0.258 0.000 0.000 0.000 0.000 0.000 16.279 0.000

A3 0.000 0.000 0.000 0.000 0.000 2.088 73.086 4.640 1.160 0.928 0.464 0.000 0.000 0.232 0.000 0.000 0.000 0.000 0.000 0.000 17.169 0.232

Baa1 0.000 0.000 0.000 0.250 0.000 0.500 4.750 79.000 4.250 1.500 0.250 0.750 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 8.750 0.000

Baa2 0.236 0.000 0.000 0.000 0.000 0.000 0.000 3.546 79.196 4.728 0.000 0.000 0.000 0.000 0.000 0.000 0.236 0.000 0.000 0.000 12.057 0.000

Baa3 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.183 9.467 76.627 2.367 0.296 0.888 0.296 0.000 0.000 0.000 0.000 0.000 0.000 8.876 0.000

Ba1 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.704 10.563 77.465 3.521 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 7.746 0.000

Ba2 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.786 4.762 11.905 66.071 5.952 0.595 0.595 0.000 0.000 0.000 0.000 0.000 8.333 0.000

Ba3 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.518 0.518 11.917 63.212 6.218 4.145 0.518 0.000 0.000 0.000 0.000 12.953 0.000

B1 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2.353 10.196 65.882 5.098 0.784 0.000 0.392 0.000 0.000 14.510 0.784

B2 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.733 0.000 3.297 14.286 57.509 8.425 1.099 0.733 0.000 0.000 13.919 0.000

B3 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.826 0.826 1.102 11.019 63.361 7.438 1.928 0.275 0.000 12.672 0.551

Caa1 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.446 0.893 3.125 12.054 66.071 5.357 0.893 0.000 8.929 2.232

Caa2 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.877 7.018 9.649 55.263 6.140 0.000 9.649 11.404

Caa3 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.639 3.279 6.557 16.393 29.508 8.197 8.197 26.230

Ca-C 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2.083 0.000 0.000 0.000 2.083 4.167 6.250 4.167 27.083 18.750 35.417

* Data in percent
In August 2010, approximately 400 issuers rating were withdrawn as their Medium Term Note Program ratings became provisional ratings. This led to higher withdrawal rate in 2010 .

25 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 30
Average One-Year Alphanumeric Rating Migration Rates, 1983-2010*
From/To Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca-C WR Default

Aaa 86.236 5.828 2.914 0.552 0.306 0.128 0.014 0.012 0.000 0.000 0.017 0.017 0.000 0.002 0.000 0.000 0.000 0.002 0.000 0.000 3.972 0.000

Aa1 2.188 74.914 8.364 6.413 1.600 0.528 0.129 0.165 0.033 0.006 0.000 0.000 0.003 0.000 0.000 0.012 0.000 0.000 0.000 0.000 5.645 0.000

Aa2 1.062 4.739 74.219 9.255 3.458 1.320 0.450 0.110 0.114 0.008 0.024 0.000 0.000 0.016 0.008 0.006 0.000 0.024 0.000 0.004 5.183 0.000

Aa3 0.214 1.491 4.375 74.940 8.841 2.909 0.995 0.267 0.215 0.083 0.022 0.029 0.016 0.016 0.000 0.000 0.003 0.000 0.000 0.000 5.537 0.047

A1 0.063 0.114 1.338 5.348 75.430 8.043 2.908 0.697 0.386 0.159 0.227 0.120 0.041 0.071 0.020 0.010 0.000 0.006 0.000 0.000 4.960 0.060

A2 0.078 0.037 0.230 1.130 5.190 75.750 7.976 2.863 0.840 0.397 0.185 0.104 0.116 0.052 0.041 0.012 0.034 0.029 0.006 0.000 4.866 0.064

A3 0.050 0.057 0.143 0.248 1.870 6.707 73.370 6.762 3.224 1.060 0.446 0.178 0.178 0.101 0.052 0.023 0.008 0.004 0.007 0.014 5.442 0.057

Baa1 0.030 0.043 0.084 0.152 0.271 1.845 6.808 72.636 7.382 2.969 0.783 0.405 0.297 0.365 0.071 0.045 0.056 0.031 0.007 0.021 5.556 0.142

Baa2 0.046 0.073 0.040 0.084 0.169 0.712 2.631 5.867 73.603 6.747 1.642 0.634 0.569 0.480 0.241 0.111 0.119 0.018 0.028 0.011 6.005 0.171

Baa3 0.049 0.012 0.037 0.046 0.128 0.254 0.583 2.735 8.738 69.997 5.019 2.589 1.126 0.835 0.375 0.270 0.193 0.096 0.103 0.044 6.481 0.292

Ba1 0.026 0.002 0.028 0.050 0.178 0.143 0.355 0.574 3.058 9.795 63.002 4.747 3.869 1.493 1.092 0.668 0.126 0.150 0.046 0.056 9.868 0.674

Ba2 0.000 0.000 0.027 0.000 0.027 0.080 0.066 0.304 0.747 3.176 8.678 62.466 7.005 2.943 2.251 1.030 0.208 0.194 0.084 0.112 9.841 0.760

Ba3 0.000 0.019 0.011 0.028 0.022 0.146 0.132 0.161 0.292 0.716 2.535 6.180 63.876 5.948 4.429 2.142 0.499 0.329 0.071 0.118 10.618 1.729

B1 0.029 0.013 0.016 0.008 0.039 0.083 0.091 0.065 0.126 0.278 0.452 2.450 6.541 63.918 6.685 3.973 1.257 0.548 0.262 0.366 10.421 2.381

B2 0.000 0.000 0.007 0.016 0.019 0.000 0.039 0.096 0.094 0.139 0.276 0.604 1.883 6.961 61.573 7.892 3.312 1.617 0.507 0.598 10.593 3.775

B3 0.000 0.005 0.041 0.000 0.008 0.020 0.069 0.042 0.047 0.096 0.083 0.225 0.575 2.341 6.338 59.094 6.346 3.909 1.202 1.160 11.240 7.158

Caa1 0.000 0.041 0.000 0.000 0.000 0.033 0.000 0.066 0.000 0.004 0.066 0.037 0.254 0.792 2.232 8.529 51.079 8.512 4.361 2.761 11.885 9.349

Caa2 0.000 0.000 0.000 0.000 0.000 0.012 0.000 0.012 0.061 0.232 0.104 0.086 0.440 0.763 1.252 3.720 7.176 46.051 5.106 5.014 12.075 17.895

Caa3 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.140 0.105 0.000 0.175 0.350 1.419 2.698 6.694 38.549 7.692 14.824 27.352

Ca-C 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.070 0.052 0.209 0.226 0.556 1.633 1.738 3.423 3.875 35.778 16.994 35.447

* Data in percent

26 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 31
Annual Issuer-Weighted Corporate Default Rates by Letter Rating, 1920-2010*
Year Aaa Aa A Baa Ba B Caa-C Inv Grade Spec Grade All rated
1920 0.000 0.000 0.334 0.962 2.157 4.368 0.439 3.010 1.244
1921 0.000 0.185 0.340 0.639 0.447 2.693 12.270 0.380 2.066 1.031
1922 0.000 0.189 0.170 1.108 1.077 1.733 7.692 0.515 1.776 1.019
1923 0.000 0.000 0.000 0.614 0.910 2.320 5.952 0.242 1.713 0.805
1924 0.000 0.371 0.000 0.118 2.041 2.788 12.414 0.138 2.846 1.152
1925 0.000 0.000 0.147 0.709 1.714 2.545 14.634 0.325 2.557 1.177
1926 0.000 0.464 0.177 0.142 1.395 2.050 5.195 0.225 1.756 0.784
1927 0.000 0.000 0.222 0.000 1.269 1.869 13.043 0.073 1.781 0.726
1928 0.000 0.000 0.000 0.000 0.183 1.252 11.111 0.000 0.897 0.373
1929 0.000 0.303 0.000 0.434 0.752 0.877 9.434 0.240 1.294 0.688
1930 0.000 0.000 0.000 0.421 0.922 2.902 7.813 0.159 2.131 1.024
1931 0.000 0.000 0.281 1.039 2.959 9.220 32.468 0.490 7.845 3.811
1932 0.000 0.677 0.873 0.898 5.973 13.785 23.392 0.780 10.811 5.434
1933 0.000 0.000 0.266 1.808 11.111 15.916 25.668 0.806 15.391 8.424
1934 0.000 0.610 0.348 0.817 2.632 4.309 16.040 0.578 5.929 3.462
1935 0.000 0.000 1.345 1.899 4.826 4.173 13.072 1.253 6.090 3.857
1936 0.000 0.803 0.510 0.344 1.225 2.358 7.930 0.465 2.736 1.643
1937 0.000 0.000 0.545 1.101 0.651 2.697 9.040 0.661 2.595 1.666
1938 0.000 0.870 1.719 1.988 0.985 1.468 12.739 1.579 2.593 2.122
1939 0.000 0.000 0.000 0.950 0.597 1.875 5.714 0.402 1.751 1.210
1940 0.000 0.000 0.000 1.325 0.418 1.097 11.823 0.572 2.606 1.868
1941 0.000 0.000 0.000 0.000 0.955 0.766 5.063 0.000 1.698 1.087
1942 0.000 0.000 0.000 0.000 0.000 0.818 1.980 0.000 0.750 0.468
1943 0.000 0.000 0.000 0.000 0.000 1.345 0.000 0.000 0.615 0.374
1944 0.000 0.000 0.000 0.000 0.000 0.512 2.532 0.000 0.679 0.401
1945 0.000 0.000 0.000 0.000 0.000 0.000 3.226 0.000 0.525 0.294
1946 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1947 0.000 0.000 0.000 0.000 0.000 0.000 2.439 0.000 0.314 0.156
1948 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1949 0.000 0.000 0.000 0.000 1.370 1.111 7.407 0.000 1.901 0.835
1950 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1951 0.000 0.000 0.000 0.000 0.000 0.000 4.651 0.000 0.450 0.180
1952 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1953 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1954 0.000 0.000 0.000 0.000 0.000 0.000 7.143 0.000 0.471 0.165
1955 0.000 0.000 0.000 0.000 0.000 1.504 0.000 0.000 0.505 0.163
1956 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1957 0.000 0.000 0.000 0.000 0.000 1.274 0.000 0.000 0.452 0.144

27 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 31
Annual Issuer-Weighted Corporate Default Rates by Letter Rating, 1920-2010*
Year Aaa Aa A Baa Ba B Caa-C Inv Grade Spec Grade All rated
1958 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1959 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1960 0.000 0.000 0.000 0.000 1.231 0.000 0.000 0.000 0.737 0.243
1961 0.000 0.000 0.000 0.000 0.581 0.000 8.696 0.000 1.070 0.353
1962 0.000 0.000 0.000 0.000 1.700 1.361 0.000 0.000 1.463 0.463
1963 0.000 0.000 0.000 0.000 1.153 1.563 0.000 0.000 1.156 0.351
1964 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1965 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1966 0.000 0.000 0.000 0.000 0.000 2.273 0.000 0.000 0.415 0.119
1967 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1968 0.000 0.000 0.000 0.000 0.000 0.000 5.405 0.000 0.387 0.107
1969 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
1970 0.000 0.000 0.000 0.541 4.264 19.718 53.333 0.271 8.772 2.641
1971 0.000 0.000 0.000 0.000 0.881 0.000 14.286 0.000 1.152 0.285
1972 0.000 0.000 0.000 0.000 0.000 7.018 42.857 0.000 1.957 0.455
1973 0.000 0.000 0.000 0.459 0.000 3.774 44.444 0.231 1.277 0.454
1974 0.000 0.000 0.000 0.000 0.514 7.143 0.000 0.000 1.336 0.275
1975 0.000 0.000 0.000 0.000 1.023 6.154 0.000 0.000 1.739 0.360
1976 0.000 0.000 0.000 0.000 0.990 0.000 0.000 0.000 0.868 0.175
1977 0.000 0.000 0.000 0.290 0.525 3.279 50.000 0.109 1.345 0.351
1978 0.000 0.000 0.000 0.000 1.090 5.556 0.000 0.000 1.806 0.352
1979 0.000 0.000 0.000 0.000 0.496 0.000 0.000 0.000 0.424 0.087
1980 0.000 0.000 0.000 0.000 0.000 4.938 40.000 0.000 1.626 0.343
1981 0.000 0.000 0.000 0.000 0.000 4.598 0.000 0.000 0.708 0.163
1982 0.000 0.000 0.255 0.317 2.783 2.353 25.000 0.211 3.595 1.036
1983 0.000 0.000 0.000 0.000 0.911 6.364 42.105 0.000 3.835 0.967
1984 0.000 0.000 0.000 0.362 0.832 6.751 100.000 0.096 3.324 0.927
1985 0.000 0.000 0.000 0.000 1.413 7.483 0.000 0.000 3.448 0.950
1986 0.000 0.000 0.000 1.010 2.047 11.602 23.529 0.240 5.644 1.855
1987 0.000 0.000 0.000 0.000 2.730 6.489 20.000 0.000 4.357 1.558
1988 0.000 0.000 0.000 0.000 1.259 6.202 28.571 0.000 3.582 1.365
1989 0.000 0.618 0.000 0.596 3.040 8.720 25.000 0.291 5.797 2.361
1990 0.000 0.000 0.000 0.000 3.405 15.470 57.895 0.000 9.982 3.588
1991 0.000 0.000 0.000 0.275 4.892 12.361 47.368 0.066 9.531 3.009
1992 0.000 0.000 0.000 0.000 0.309 9.218 29.787 0.000 5.197 1.434
1993 0.000 0.000 0.000 0.000 0.572 4.555 29.268 0.000 3.107 0.836
1994 0.000 0.000 0.000 0.000 0.246 4.056 5.263 0.000 2.090 0.614
1995 0.000 0.000 0.000 0.000 0.726 4.260 9.259 0.000 2.956 0.935

28 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 31
Annual Issuer-Weighted Corporate Default Rates by Letter Rating, 1920-2010*
Year Aaa Aa A Baa Ba B Caa-C Inv Grade Spec Grade All rated
1996 0.000 0.000 0.000 0.000 0.000 1.369 13.986 0.000 1.649 0.533
1997 0.000 0.000 0.000 0.000 0.192 1.943 14.815 0.000 2.049 0.698
1998 0.000 0.000 0.000 0.121 1.002 3.808 11.404 0.039 3.274 1.255
1999 0.000 0.000 0.000 0.106 1.316 4.895 18.575 0.037 5.440 2.214
2000 0.000 0.000 0.000 0.391 0.721 6.026 19.549 0.140 6.373 2.622
2001 0.000 0.000 0.172 0.198 1.390 9.570 31.902 0.137 10.327 3.978
2002 0.000 0.000 0.172 1.096 1.377 4.534 28.862 0.461 8.063 3.059
2003 0.000 0.000 0.000 0.000 1.005 2.112 22.385 0.000 5.368 1.844
2004 0.000 0.000 0.000 0.000 0.409 0.844 12.288 0.000 2.445 0.855
2005 0.000 0.000 0.000 0.182 0.000 1.025 6.667 0.068 1.745 0.674
2006 0.000 0.000 0.000 0.000 0.197 1.177 6.041 0.000 1.764 0.654
2007 0.000 0.000 0.000 0.000 0.000 0.000 5.980 0.000 0.959 0.367
2008 0.000 0.556 0.456 0.472 1.163 2.066 14.778 0.460 4.373 2.028
2009 0.000 0.000 0.181 0.862 2.405 7.411 34.359 0.372 13.137 5.422
2010 0.000 0.000 0.194 0.000 0.000 0.482 12.014 0.074 3.173 1.283
Mean 0.000 0.062 0.096 0.270 1.070 3.408 13.862 0.150 2.784 1.146
Median 0.000 0.000 0.000 0.000 0.651 2.050 8.313 0.000 1.764 0.698
St Dev 0.000 0.185 0.264 0.463 1.612 4.044 17.054 0.276 3.098 1.418
Min 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Max 0.000 0.870 1.719 1.988 11.111 19.718 100.000 1.579 15.391 8.424

* Data in percent

29 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 32
Annual Issuer-Weighted Corporate Default Rates by Alphanumeric Rating, 1983-2010
Inv Spec All
Year Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca-C Grade Grade rated
1983 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2.614 0.000 12.245 21.053 n.a. 53.333 n.a. 0.000 0.000 3.835 0.967
1984 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.064 1.163 1.613 0.000 5.926 11.321 4.082 n.a. n.a. n.a. 100.00 0.096 3.324 0.927
0
1985 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.626 2.857 4.444 8.451 11.364 n.a. 0.000 n.a. 0.000 0.000 3.448 0.950
1986 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 3.488 0.893 1.183 3.436 7.821 16.216 14.679 n.a. 28.571 n.a. 0.000 0.240 5.644 1.855
1987 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 3.788 0.943 2.978 4.240 7.547 10.370 n.a. 22.222 n.a. 0.000 0.000 4.357 1.558
1988 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2.575 4.178 6.780 11.111 n.a. 23.529 n.a. 50.000 0.000 3.582 1.365
1989 0.000 0.000 0.000 1.356 0.000 0.000 0.000 0.000 0.826 1.020 0.813 1.852 4.793 5.621 9.032 18.605 n.a. 27.273 n.a. 0.000 0.291 5.797 2.361
1990 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 3.738 2.844 3.509 7.843 22.619 28.378 n.a. 57.143 0.000 75.000 0.000 9.982 3.588
1991 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.743 0.000 0.000 1.136 0.000 9.143 3.521 11.043 27.174 n.a. 51.852 0.000 44.444 0.066 9.531 3.009
1992 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.735 0.976 1.471 26.582 n.a. 31.579 0.000 28.571 0.000 5.197 1.434
1993 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.885 0.000 0.791 2.479 3.279 10.084 n.a. 25.000 0.000 57.143 0.000 3.107 0.836
1994 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.623 1.905 3.593 8.805 n.a. 7.018 0.000 0.000 0.000 2.090 0.614
1995 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.835 4.425 5.882 1.980 n.a. 2.740 0.000 24.242 0.000 2.956 0.935
1996 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.158 0.000 3.306 0.000 14.953 0.000 12.500 0.000 1.649 0.533
1997 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.467 0.000 1.183 7.018 0.000 13.592 0.000 18.868 0.000 2.049 0.698
1998 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.319 0.000 0.000 1.887 1.232 2.133 5.425 4.923 5.825 12.048 26.667 16.667 0.039 3.274 1.255
1999 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.344 0.525 0.576 2.459 2.560 5.153 8.126 12.048 21.849 21.429 46.154 0.037 5.440 2.214
2000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.295 0.000 0.998 0.510 0.629 1.000 3.081 4.911 12.062 11.307 29.487 20.690 40.000 0.140 6.373 2.622
2001 0.000 0.000 0.000 0.000 0.000 0.454 0.000 0.292 0.276 0.000 0.000 1.351 2.841 3.150 10.406 18.072 25.954 33.333 47.619 42.105 0.137 10.327 3.978
2002 0.000 0.000 0.000 0.000 0.000 0.000 0.452 0.803 0.733 1.923 2.388 0.631 1.096 2.206 4.739 7.629 16.878 25.758 33.766 48.951 0.461 8.063 3.059
2003 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.643 0.717 1.481 0.355 2.389 4.372 9.662 21.898 33.708 37.500 0.000 5.368 1.844
2004 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.924 0.000 0.604 2.375 8.065 9.174 15.094 32.258 0.000 2.445 0.855
2005 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.248 0.327 0.000 0.000 0.000 0.000 0.589 2.465 3.077 6.283 21.053 21.739 0.068 1.745 0.674
2006 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.484 0.780 0.557 2.194 2.279 6.742 18.182 17.778 0.000 1.764 0.654
2007 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2.210 8.333 14.815 33.333 0.000 0.959 0.367
2008 0.000 0.000 0.000 1.754 1.201 0.259 0.000 0.271 0.794 0.321 0.000 0.000 2.715 1.783 0.825 3.198 7.600 18.812 32.877 54.054 0.460 4.373 2.028
2009 0.000 0.000 0.000 0.000 0.000 0.000 0.521 1.144 0.736 0.698 2.273 0.597 4.010 4.098 8.681 8.516 17.012 39.298 57.143 69.421 0.372 13.137 5.422

30 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 32
Annual Issuer-Weighted Corporate Default Rates by Alphanumeric Rating, 1983-2010
Inv Spec All
Year Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca-C Grade Grade rated
2010 0.000 0.000 0.000 0.000 0.356 0.000 0.254 0.000 0.000 0.000 0.000 0.000 0.000 0.846 0.000 0.588 2.336 11.982 27.350 39.080 0.074 3.173 1.283
Mean 0.000 0.000 0.000 0.111 0.056 0.025 0.044 0.127 0.140 0.364 0.670 0.587 1.950 2.697 5.891 9.968 8.284 22.363 17.638 32.493 0.089 4.750 1.710
Media 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.357 2.343 5.032 8.321 7.600 21.898 18.182 32.796 0.000 3.709 1.324
n
StDev 0.000 0.000 0.000 0.411 0.234 0.097 0.134 0.292 0.277 0.773 1.097 0.788 1.967 2.291 5.492 8.238 7.400 15.212 17.212 25.467 0.143 3.023 1.212
Min 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.959 0.367
Max 0.000 0.000 0.000 1.754 1.201 0.454 0.521 1.144 0.826 3.488 3.788 2.844 9.143 7.843 22.619 28.378 25.954 57.143 57.143 100.00 0.461 13.137 5.422
0

31 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 33
Average Cumulative Issuer-Weighted Global Default Rates, 1920-2010*
Rating 1 2 3 4 5 6 7 8 9 10
Aaa 0 0.008 0.029 0.084 0.163 0.249 0.359 0.51 0.669 0.854
Aa 0.07 0.205 0.319 0.489 0.748 1.053 1.354 1.644 1.919 2.237
A 0.095 0.29 0.584 0.908 1.244 1.602 1.988 2.382 2.813 3.242
Baa 0.293 0.867 1.546 2.28 3.061 3.839 4.581 5.337 6.121 6.907
Ba 1.369 3.258 5.362 7.559 9.658 11.654 13.464 15.225 16.922 18.698
B 4.028 9.051 13.937 18.245 22.009 25.351 28.453 31.107 33.434 35.488
Caa-C 14.694 24.432 31.521 36.954 41.28 44.421 46.762 48.864 50.937 52.862
Inv Grade 0.156 0.463 0.84 1.259 1.717 2.189 2.659 3.134 3.629 4.132
Spec Grade 3.91 7.896 11.608 14.924 17.835 20.395 22.672 24.727 26.621 28.455
All rated 1.542 3.153 4.659 6.011 7.218 8.293 9.256 10.143 10.987 11.811

Rating 11 12 13 14 15 16 17 18 19 20
Aaa 1.012 1.142 1.28 1.321 1.359 1.435 1.511 1.574 1.648 1.698
Aa 2.608 3.015 3.424 3.838 4.151 4.391 4.588 4.828 5.144 5.416
A 3.691 4.135 4.531 4.912 5.356 5.764 6.12 6.478 6.814 7.139
Baa 7.665 8.424 9.197 9.904 10.537 11.179 11.763 12.269 12.748 13.275
Ba 20.256 21.822 23.348 24.713 25.977 27.148 28.314 29.397 30.355 31.282
B 37.407 39.22 40.928 42.543 43.978 45.346 46.568 47.567 48.283 48.75
Caa-C 54.825 56.754 58.496 60.348 62.29 64.135 65.768 67.232 68.583 69.911
Inv Grade 4.643 5.156 5.654 6.118 6.561 6.979 7.35 7.705 8.058 8.411
Spec Grade 30.118 31.748 33.306 34.749 36.09 37.351 38.553 39.633 40.556 41.397
All rated 12.588 13.351 14.08 14.751 15.38 15.969 16.508 17.007 17.47 17.917

*Data in percent

EXHIBIT 34
Average Cumulative Issuer-Weighted Global Default Rates, 1970-2010*
Rating 1 2 3 4 5 6 7 8 9 10
Aaa 0 0.013 0.013 0.037 0.104 0.172 0.244 0.321 0.404 0.494
Aa 0.021 0.059 0.103 0.184 0.273 0.363 0.443 0.512 0.559 0.619
A 0.055 0.177 0.362 0.549 0.756 0.984 1.239 1.535 1.844 2.136
Baa 0.181 0.51 0.933 1.427 1.953 2.504 3.031 3.575 4.195 4.904
Ba 1.157 3.191 5.596 8.146 10.453 12.581 14.44 16.295 18.178 20.101
B 4.465 10.432 16.334 21.51 26.173 30.562 34.721 38.353 41.646 44.573
Caa-C 18.163 30.204 39.709 47.317 53.768 58.079 61.181 64.813 68.506 72.384
Inv Grade 0.087 0.253 0.476 0.73 1.006 1.296 1.587 1.895 2.225 2.574
Spec Grade 4.673 9.564 14.195 18.27 21.804 24.89 27.595 30.038 32.313 34.445
All rated 1.63 3.308 4.86 6.188 7.314 8.281 9.116 9.872 10.585 11.266

32 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 34
Average Cumulative Issuer-Weighted Global Default Rates, 1970-2010*
Rating 11 12 13 14 15 16 17 18 19 20
Aaa 0.589 0.69 0.795 0.854 0.918 0.987 1.063 1.09 1.09 1.09
Aa 0.703 0.825 0.985 1.138 1.26 1.393 1.566 1.8 2.187 2.596
A 2.428 2.713 3.006 3.299 3.657 4.062 4.545 5.067 5.543 6.019
Baa 5.619 6.374 7.184 8.029 8.845 9.697 10.47 11.165 11.778 12.411
Ba 22.005 23.984 25.898 27.797 29.702 31.473 33.049 34.354 35.706 36.867
B 47.182 49.727 52.082 54.399 56.345 57.91 59.279 60.682 61.669 62.693
Caa-C 74.847 74.97 74.97 74.97 76.162 78.415 78.993 78.993 78.993 78.993
Inv Grade 2.927 3.295 3.687 4.081 4.489 4.928 5.386 5.846 6.292 6.747
Spec Grade 36.409 38.34 40.155 41.929 43.628 45.164 46.497 47.634 48.733 49.704
All rated 11.904 12.531 13.145 13.745 14.337 14.925 15.494 16.034 16.556 17.068

*Data in percent

EXHIBIT 35
Average Cumulative Issuer-Weighted Global Default Rates, 1983-2010*
Rating 1 2 3 4 5 6 7 8 9 10
Aaa 0 0.016 0.016 0.048 0.086 0.132 0.182 0.186 0.186 0.186
Aa 0.023 0.066 0.116 0.202 0.291 0.351 0.388 0.419 0.447 0.501
A 0.062 0.2 0.414 0.623 0.853 1.099 1.371 1.677 1.969 2.216
Baa 0.202 0.561 0.998 1.501 2.06 2.636 3.175 3.71 4.26 4.89
Ba 1.197 3.437 6.183 9.067 11.51 13.757 15.76 17.679 19.526 21.337
B 4.466 10.524 16.526 21.774 26.524 31.034 35.301 39.032 42.312 45.194
Caa 15.529 27.592 37.251 45.146 51.803 56.26 59.232 62.759 67.199 73.035
Ca-C 38.739 50.58 59.678 66.353 71.652 73.385 75.92 78.884 78.884 78.884
Inv Grade 0.095 0.274 0.508 0.769 1.054 1.343 1.622 1.907 2.185 2.467
Spec Grade 4.944 10.195 15.233 19.671 23.477 26.82 29.79 32.433 34.804 39.967
All rated 1.819 3.717 5.485 6.988 8.241 9.303 10.212 11.006 11.706 12.344

Rating 11 12 13 14 15 16 17 18 19 20
Aaa 0.186 0.186 0.186 0.186 0.186 0.186 0.186 0.186 0.186 0.186
Aa 0.586 0.722 0.869 0.993 1.126 1.262 1.445 1.763 2.268 2.754
A 2.449 2.673 2.934 3.241 3.633 4.125 4.762 5.519 6.104 6.641
Baa 5.541 6.225 7.079 8.004 8.881 9.845 10.738 11.492 12.165 12.72
Ba 23.033 24.843 26.653 28.663 30.722 32.449 33.992 35.325 37.036 38.372
B 47.76 50.361 52.884 55.42 57.456 58.903 60.602 62.768 64.315 65.936
Caa 77.147 77.369 77.369 77.369 79.539 83.436 84.472 84.472 84.472 84.472
Ca-C 78.884 78.884 78.884 78.884 78.884
Inv Grade 2.75 3.045 3.394 3.768 4.167 4.627 5.14 5.703 6.222 6.688
Spec Grade 38.877 40.781 42.631 44.574 46.411 47.908 49.294 50.636 52.066 53.292
All rated 12.918 13.48 14.056 14.653 15.245 15.829 16.435 17.074 17.688 18.235

*Data in percent

33 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 36
Average Cumulative Issuer-Weighted Global Default Rates by Alphanumeric Rating, 1983-2010*
Rating 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Aaa 0 0.016 0.016 0.048 0.086 0.132 0.182 0.186 0.186 0.186 0.186 0.186 0.186 0.186 0.186 0.186 0.186 0.186 0.186 0.186
Aa1 0 0 0 0.094 0.141 0.158 0.158 0.158 0.158 0.158 0.158 0.158 0.312 0.504 0.723 0.806 0.806 0.806 0.806 0.806
Aa2 0 0.014 0.088 0.192 0.334 0.431 0.495 0.561 0.635 0.718 0.812 0.919 0.985 1.012 1.044 1.179 1.392 1.638 2.039 2.328
Aa3 0.048 0.127 0.182 0.254 0.327 0.38 0.415 0.435 0.444 0.502 0.614 0.822 1.021 1.184 1.35 1.51 1.744 2.239 3.022 3.849
A1 0.061 0.217 0.461 0.672 0.855 0.992 1.089 1.18 1.297 1.468 1.661 1.857 2.096 2.396 2.689 3.101 3.525 4.002 4.193 4.382
A2 0.065 0.174 0.351 0.578 0.788 1.073 1.463 1.918 2.324 2.642 2.877 3.044 3.22 3.455 3.768 4.214 5.067 5.938 6.694 7.343
A3 0.058 0.214 0.439 0.627 0.923 1.235 1.55 1.907 2.255 2.5 2.777 3.113 3.516 3.928 4.553 5.21 5.808 6.74 7.548 8.332
Baa1 0.146 0.38 0.643 0.897 1.204 1.501 1.801 2.016 2.207 2.473 2.842 3.417 4.085 4.886 5.938 7.199 7.987 8.325 8.325 8.325
Baa2 0.176 0.486 0.897 1.519 2.078 2.686 3.226 3.723 4.337 5.098 5.99 6.873 7.657 8.468 9.303 10.052 10.893 11.752 12.571 12.977
Baa3 0.302 0.876 1.558 2.219 3.099 3.993 4.84 5.847 6.79 7.735 8.442 9.007 10.189 11.405 12.118 12.971 14.049 15.158 16.402 17.702
Ba1 0.709 1.986 3.721 5.546 7.226 9.012 10.455 11.506 12.537 13.694 14.804 16.262 17.257 18.085 19.505 20.585 21.774 23.288 25.714 27.53
Ba2 0.8 2.286 4.198 6.249 8.077 9.538 10.953 12.522 13.97 15.243 16.997 18.987 21.154 23.141 25.735 27.848 29.7 30.375 30.667 30.667
Ba3 1.826 5.291 9.371 13.66 17.163 20.379 23.342 26.385 29.384 32.311 34.619 36.725 39.272 42.941 45.543 48.002 49.971 51.734 53.574 55.247
B1 2.512 6.969 11.678 15.866 20.159 24.509 29.191 33.167 36.694 39.935 42.811 45.991 49.303 52.636 54.412 55.884 58.32 60.551 63.076 65.886
B2 3.986 9.863 15.713 21.076 25.701 29.903 33.774 37.281 40.724 43.516 45.95 47.937 50.187 52.736 56.664 59.499 60.985 64.384 64.895 64.895
B3 7.584 16.097 24.299 31.262 37.199 42.764 47.117 51.039 53.727 56.154 58.428 60.844 62.107 63.086 63.702 63.702 64.049 64.713 64.713 64.713
Caa1 9.94 21.715 32.211 40.782 48.782 54.343 57.144 60.441 65.864 70.904 75.409 76.229 76.229
Caa2 19.045 30.446 39.104 46.371 51.475 55.336 58.498 61.973 65.153 70.38 74.745 74.745 74.745 74.745 77.166 81.516 82.671 82.671 82.671 82.671
Caa3 29.542 45.41 54.642 61.612 67.565 69.136 71.854 75.593 80.516 92.822
Ca-C 38.739 50.58 59.678 66.353 71.652 73.385 75.92 78.884 78.884 78.884 78.884 78.884 78.884 78.884 78.884
Inv 0.095 0.274 0.508 0.769 1.054 1.343 1.622 1.907 2.185 2.467 2.75 3.045 3.394 3.768 4.167 4.627 5.14 5.703 6.222 6.688
Grade
Spec 4.944 10.195 15.233 19.671 23.477 26.82 29.79 32.433 34.804 36.967 38.877 40.781 42.631 44.574 46.411 47.908 49.294 50.636 52.066 53.292
Grade
All 1.819 3.717 5.485 6.988 8.241 9.303 10.212 11.006 11.706 12.344 12.918 13.48 14.056 14.653 15.245 15.829 16.435 17.074 17.688 18.235
rated

*Data in percent

34 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 37
Average Cumulative Issuer-Weighted Global Default Rates by Alphanumeric Rating, 1998-2010*
Rating 1 2 3 4 5 6 7 8 9 10
Aaa 0 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036
Aa1 0 0 0 0 0 0 0 0 0 0
Aa2 0 0.009 0.097 0.191 0.304 0.442 0.486 0.526 0.577 0.646
Aa3 0.052 0.131 0.167 0.215 0.268 0.323 0.407 0.421 0.441 0.497
A1 0.116 0.299 0.515 0.756 1.02 1.181 1.321 1.481 1.685 2.112
A2 0.114 0.277 0.506 0.701 0.917 1.275 1.808 2.569 3.449 4.404
A3 0.083 0.273 0.531 0.777 1.173 1.465 1.818 2.296 2.929 3.643
Baa1 0.19 0.454 0.693 0.885 1.102 1.386 1.654 1.973 2.212 2.727
Baa2 0.226 0.546 0.958 1.521 1.98 2.509 2.958 3.344 3.934 4.608
Baa3 0.364 0.981 1.694 2.339 3.171 3.8 4.617 5.928 7.365 9.484
Ba1 0.459 1.691 3.282 4.561 5.992 7.378 8.744 9.972 11.802 14.194
Ba2 0.778 1.817 3.288 5.026 6.439 7.783 8.966 11.137 12.753 15.251
Ba3 1.197 3.636 6.481 9.635 11.831 13.925 15.894 19.076 23.552 27.965
B1 1.742 5.783 10.25 14.055 17.177 20.312 23.918 27.506 31.478 35.782
B2 3.535 9.127 14.944 20.47 24.573 28.362 32.013 35.446 39.077 42.178
B3 5.864 14.276 23.143 30.428 36.322 41.959 46.774 52.011 57.49 62.171
Caa1 9.985 21.769 32.25 40.683 48.701 54.445 57.346 60.726 65.184 70.734
Caa2 19.193 32.018 41.632 48.96 54.657 58.212 60.563 63.049 63.049 63.049
Caa3 30.037 45.982 55.399 62.335 68.164 68.318 69.411 71.255 71.255 71.255
Ca-C 43.446 56.688 66.734 72.545 75.897 76.111 76.111 76.111 76.111
Inv Grade 0.137 0.354 0.612 0.873 1.169 1.456 1.774 2.175 2.641 3.252
Spec 5.309 10.979 16.418 20.994 24.56 27.57 30.237 33.07 36.139 39.275
Grade
All rated 2.085 4.263 6.282 7.911 9.165 10.188 11.091 12.05 13.078 14.215

*Data in percent

35 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 38
Average Cumulative Issuer-Weighted Global Default Rates by Broad Industry Group, 1970-2010*
Industry\Year 1 2 3 4 5 6 7 8 9 10
Banking 0.434 0.899 1.386 1.834 2.209 2.529 2.788 3.057 3.308 3.571
Capital Industries 2.248 4.672 6.995 9.083 10.904 12.515 13.983 15.385 16.706 17.932
Consumer 2.628 5.361 7.88 10.045 11.845 13.386 14.714 15.861 16.97 17.963
Industries
Energy & 1.5 2.973 4.251 5.297 6.219 7.064 7.746 8.289 8.819 9.338
Environment
FIRE 0.709 1.474 2.224 2.911 3.537 4.151 4.736 5.323 5.946 6.616
Media & Publishing 3.883 8.006 11.986 15.399 18.494 21.151 23.267 25.047 26.64 28.195
Retail & 2.806 5.737 8.513 10.854 12.878 14.645 16.109 17.482 18.865 20.173
Distribution
GRI** 0.315 0.668 0.878 1.029 1.201 1.218 1.218 1.218 1.218 1.218
Technology 1.904 3.846 5.529 6.815 7.754 8.444 9.044 9.512 9.884 10.245
Transportation 2.343 4.323 6.034 7.504 8.778 9.883 10.825 11.755 12.643 13.589
Utilities 0.173 0.347 0.506 0.659 0.808 0.952 1.084 1.203 1.323 1.451

*Data in percent
** Government Related Issuers

36 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 39
Annual Default Rates by Broad Industry Groups, 1970-2010*
Capital Consumer Energy and Media & Retail & Trans-
Year Banking Industries Industries Environment FIRE Publishing Distribution GRI** Technology portation Utilities
1970 n.a. 0.000 0.948 0.000 16.667 0.000 0.000 0.000 0.833 15.686 0.000

1971 n.a. 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2.308 0.000

1972 n.a. 0.362 0.000 0.000 0.000 0.000 0.000 0.000 0.000 3.113 0.000

1973 n.a. 0.359 0.000 0.000 0.000 0.000 2.941 0.000 0.000 1.613 0.000

1974 0.000 0.362 0.000 0.000 0.000 0.000 3.030 0.000 0.000 0.000 0.000

1975 0.000 0.364 0.775 0.000 0.000 4.255 1.527 0.000 0.000 0.000 0.000

1976 0.000 0.359 0.735 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

1977 0.000 0.000 0.749 0.000 0.000 4.000 0.000 0.000 0.000 1.770 0.000

1978 0.000 0.000 0.749 1.156 0.000 0.000 1.563 0.000 0.725 0.000 0.000

1979 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.702 0.000 0.000

1980 0.000 0.380 0.000 1.075 0.000 0.000 0.000 0.000 0.694 0.930 0.000

1981 0.000 0.370 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.930 0.000

1982 0.000 1.107 0.000 0.885 0.000 3.774 4.839 0.000 1.840 2.000 0.000

1983 0.000 1.081 0.570 2.353 0.000 0.000 0.000 0.000 0.608 3.941 0.417

1984 0.000 0.705 1.078 3.802 0.000 0.000 0.000 0.000 1.770 1.020 0.000

1985 0.000 1.220 1.370 3.333 1.136 0.000 0.000 0.000 0.548 0.971 0.000

1986 0.000 3.361 1.578 6.993 0.000 3.478 1.020 0.000 0.503 2.691 0.000

1987 0.399 2.400 2.431 5.387 0.000 1.250 1.747 0.000 0.461 0.897 0.412

1988 2.034 0.788 2.585 1.394 0.604 3.297 1.633 0.000 1.186 0.000 0.418

1989 2.134 3.175 4.167 0.000 3.352 6.486 0.758 11.111 1.156 1.835 0.000

1990 2.688 4.897 8.293 0.639 0.000 5.882 5.536 0.000 2.339 5.505 0.409

1991 2.073 3.576 3.745 1.266 0.506 4.000 9.630 0.000 1.616 9.184 1.240

1992 0.506 1.989 2.806 0.639 0.490 7.042 2.429 0.000 1.190 0.000 0.823

1993 0.472 1.565 1.149 1.205 0.000 2.778 2.353 0.000 0.387 0.000 0.000

1994 0.000 0.415 0.924 0.575 0.000 1.198 2.597 0.000 1.091 1.778 0.000

1995 0.000 1.254 2.681 0.518 1.113 0.000 1.786 0.000 0.669 0.851 0.000

1996 0.000 0.498 1.244 0.930 0.000 2.390 0.573 0.000 0.616 0.000 0.360

1997 0.000 0.445 2.193 0.000 0.282 1.299 3.209 0.000 0.555 0.794 0.000

1998 0.130 1.150 2.376 1.384 0.925 2.695 6.091 0.000 0.710 0.727 0.000

1999 0.247 2.228 4.526 5.354 0.620 2.850 2.784 2.632 1.891 5.263 0.315

2000 0.000 4.047 6.396 1.282 0.805 1.782 5.923 0.000 2.597 4.013 0.000

2001 0.120 7.044 5.532 1.920 1.224 4.018 7.767 0.000 7.540 4.082 0.570

2002 0.603 2.823 2.078 4.573 0.198 10.138 3.235 0.000 8.604 5.882 0.535

2003 0.122 2.446 2.141 1.236 0.588 3.694 4.469 0.000 4.376 3.200 0.528

2004 0.000 1.476 2.107 0.307 0.197 1.622 1.238 0.000 0.742 1.619 0.257

2005 0.114 1.297 0.501 0.902 0.189 0.509 1.923 0.000 0.246 3.922 0.253

2006 0.000 1.281 0.969 0.000 0.365 1.429 1.194 0.000 0.743 2.362 0.000

2007 0.000 0.712 0.654 0.000 0.000 0.928 1.813 0.000 0.488 0.000 0.000

2008 0.956 3.054 3.794 1.690 1.650 4.186 2.247 0.000 1.176 3.008 0.000

2009 1.463 10.132 7.827 1.994 3.307 22.167 3.625 0.000 5.372 5.645 0.238

2010 0.457 1.563 1.850 2.270 0.773 3.593 3.279 0.000 1.272 0.873 0.231

*Data in percent
** Government Related Issuers

37 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 40
Annual Volume-Weighted Corporate Bond Default Rates by Letter Rating, 1994-2010*
Year Aaa Aa A Baa Ba B Caa-C Inv-Grade Spec-Grade All Rated
1994 0.000 0.000 0.000 0.000 0.141 1.971 13.136 0.000 1.631 0.333
1995 0.000 0.000 0.000 0.000 0.567 4.651 6.876 0.000 3.088 0.716
1996 0.000 0.000 0.000 0.000 0.000 1.624 22.529 0.000 2.309 0.659
1997 0.000 0.000 0.000 0.000 0.051 3.064 7.111 0.000 1.950 0.504
1998 0.000 0.000 0.000 0.000 0.747 3.023 13.225 0.000 2.908 0.863
1999 0.000 0.000 0.000 0.140 1.143 5.483 20.515 0.031 5.783 1.114
2000 0.000 0.000 0.000 0.623 1.039 6.069 20.723 0.137 5.857 1.350
2001 0.000 0.000 0.728 0.957 1.178 13.898 55.132 0.548 15.614 3.014
2002 0.000 0.000 2.718 2.529 4.872 15.699 79.565 1.931 22.468 5.070
2003 0.000 0.000 0.000 0.000 3.622 2.560 17.062 0.000 5.669 0.991
2004 0.000 0.000 0.000 0.000 0.000 0.258 9.190 0.000 1.879 0.328
2005 0.000 0.000 0.000 0.201 0.000 1.639 16.337 0.073 3.762 0.749
2006 0.000 0.000 0.000 0.000 0.033 1.062 4.008 0.000 1.050 0.212
2007 0.000 0.000 0.000 0.000 0.000 0.000 3.655 0.000 0.602 0.117
2008 0.000 0.816 2.370 1.108 8.097 1.287 11.019 1.466 5.807 2.221
2009 0.000 0.000 0.014 0.642 2.599 6.416 40.360 0.187 16.774 2.810
2010 0.000 0.000 0.147 0.000 0.000 0.083 6.046 0.070 1.635 0.332
Mean 0.000 0.048 0.352 0.365 1.417 4.046 20.382 0.261 5.811 1.258
Median 0.000 0.000 0.000 0.000 0.567 2.560 13.225 0.000 3.088 0.749
StDev NA 0.198 0.846 0.668 2.232 4.529 20.264 0.564 6.330 1.315
Min 0.000 0.000 0.000 0.000 0.000 0.000 3.655 0.000 0.602 0.117
Max 0.000 0.816 2.718 2.529 8.097 15.699 79.565 1.931 22.468 5.070

*Data in percent

EXHIBIT 41
Average Volume-Weighted Corporate Bond Default Rates by Letter Rating, 1994-2010*
Rating Year 1 Year 2 Year 3 Year 4 Year 5
Aaa 0.000 0.057 0.057 0.057 0.057
Aa 0.037 0.097 0.106 0.116 0.128
A 0.483 0.961 1.344 1.618 2.010
Baa 0.381 0.840 1.202 1.783 2.617
Ba 1.377 3.528 5.735 7.836 9.078
B 4.585 10.583 15.395 19.639 22.284
Caa-C 20.539 33.953 44.222 47.937 49.726
Inv-Grade 0.331 0.688 0.962 1.260 1.691
Spec-Grade 6.153 11.839 16.471 19.798 21.768
All Rated 1.400 2.749 3.860 4.743 5.472

*Data in percent

38 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/70

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 39 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.703 2.703 2.703

Aa 78 0 0 0 0 0 0 0 0 0 0 0 0 0 1.439 1.439 1.439 2.921 2.921 2.921 2.921

A 253 0 0 0 0.413 0.413 0.835 0.835 0.835 0.835 0.835 1.292 1.292 1.292 1.292 1.292 1.292 1.793 1.793 2.878 2.878

Baa 372 0.541 0.541 0.541 1.118 1.412 1.412 1.722 2.363 3.03 3.03 3.392 3.392 4.573 4.983 5.405 5.845 7.243 8.26 9.378 9.981

Ba 239 4.264 5.143 5.6 6.077 7.058 8.079 8.618 9.195 10.426 10.426 10.426 11.99 14.505 15.4 15.4 17.451 20.775 23.29 23.29 24.794

B 36 19.718 19.718 22.586 22.586 22.586 22.586 22.586 22.586 22.586 22.586 22.586 22.586 31.187 31.187 31.187 31.187 36.48 36.48 36.48 36.48

Caa-C 15 53.333 60 80 88 88 88 88 100

IG 742 0.271 0.271 0.271 0.696 0.84 0.987 1.136 1.44 1.752 1.752 2.083 2.083 2.606 2.963 3.145 3.332 4.293 4.901 5.761 5.985

SG 290 8.772 9.854 11.72 12.498 13.302 14.142 14.585 15.526 16.526 16.526 16.526 17.781 21.123 21.834 21.834 23.445 26.945 28.92 28.92 30.135

All 1032 2.641 2.938 3.445 3.964 4.281 4.606 4.829 5.287 5.76 5.76 6.016 6.281 7.375 7.799 7.944 8.392 9.79 10.615 11.32 11.69

1/1/71

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 40 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.703 2.703 2.703 2.703

Aa 75 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1.786

A 282 0 0 0.364 0.364 0.736 0.736 0.736 0.736 0.736 1.135 1.135 1.547 1.963 1.963 1.963 2.398 2.398 3.336 3.336 3.336

Baa 398 0 0 0.531 0.801 1.079 1.369 1.97 2.595 2.595 2.935 2.935 4.055 4.443 4.844 5.261 6.583 7.539 8.584 9.141 10.314

Ba 229 0.881 1.339 1.817 2.801 3.827 4.369 4.948 6.187 6.187 6.187 7.744 10.248 11.141 11.141 13.173 17.569 20.086 20.086 21.594 21.594

B 27 0 3.846 3.846 3.846 3.846 3.846 3.846 3.846 3.846 3.846 3.846 16.253 16.253 16.253 16.253 22.953 22.953 22.953 22.953 22.953

Caa-C 7 14.286 57.143 74.286 74.286 74.286 74.286 100

IG 795 0 0 0.391 0.524 0.795 0.933 1.216 1.506 1.506 1.813 1.813 2.462 2.795 2.965 3.139 3.856 4.421 5.218 5.427 6.075

SG 263 1.152 3.141 3.97 4.829 5.727 6.201 7.21 8.282 8.282 8.282 9.626 13.212 13.97 13.97 15.674 20.282 22.366 22.366 23.649 23.649

All 1058 0.285 0.77 1.266 1.57 1.986 2.2 2.641 3.097 3.097 3.343 3.598 4.786 5.193 5.333 5.764 7.107 7.898 8.572 8.927 9.482

39 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/72

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 41 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.632 2.632 2.632 2.632 2.632

Aa 79 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1.667 1.667

A 304 0 0.336 0.336 0.336 0.336 0.336 0.336 0.336 0.336 0.336 0.715 1.098 1.098 1.098 1.497 1.497 2.363 2.363 2.838 3.33

Baa 431 0 0.487 0.735 1.246 1.51 2.061 2.638 2.638 3.27 3.27 3.966 4.327 5.07 5.456 6.673 7.553 8.516 9.541 11.162 13.982

Ba 225 0 0.471 1.439 2.45 2.983 3.549 4.751 4.751 4.751 6.233 9.412 10.258 10.258 13.107 17.196 19.513 19.513 20.877 22.329 28.42

B 29 7.018 7.018 7.018 7.018 7.018 7.018 7.018 7.018 7.018 7.018 18.288 18.288 18.288 18.288 24.825 24.825 24.825 24.825 24.825 24.825

Caa-C 7 42.857 59.184 59.184 59.184 59.184 79.592 79.592 79.592 79.592 79.592 79.592 79.592

IG 855 0 0.362 0.485 0.735 0.863 1.124 1.392 1.392 1.678 1.678 2.13 2.439 2.753 2.915 3.579 4.102 4.842 5.23 6.238 7.485

SG 261 1.957 2.769 3.609 4.487 4.95 5.927 6.961 6.961 6.961 8.231 12.295 13.011 13.011 15.427 19.764 21.709 21.709 22.886 24.151 29.473

All 1116 0.455 0.92 1.205 1.594 1.794 2.206 2.632 2.632 2.861 3.1 4.208 4.588 4.848 5.383 6.631 7.366 7.993 8.488 9.522 11.303

1/1/73

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 41 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.632 2.632 2.632 2.632 2.632 2.632

Aa 82 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1.587 1.587 1.587

A 310 0 0 0 0 0 0 0 0 0 0.366 0.737 0.737 0.737 1.126 1.126 1.969 1.969 2.428 2.906 3.418

Baa 441 0.459 0.693 1.174 1.422 1.941 2.482 2.482 3.077 3.077 3.734 4.417 5.12 5.85 7 7.83 8.738 9.709 11.767 13.932 13.932

Ba 206 0 1.008 2.061 2.617 3.206 4.447 4.447 4.447 5.951 9.936 10.778 10.778 12.647 16.686 20.134 20.134 21.465 22.88 30.225 31.81

B 27 3.774 3.774 3.774 3.774 3.774 3.774 3.774 3.774 3.774 15.437 15.437 15.437 15.437 22.202 22.202 22.202 22.202 22.202 22.202 22.202

Caa-C 5 44.444 44.444 44.444 44.444 72.222 72.222 72.222 72.222 72.222 72.222 72.222

IG 874 0.231 0.348 0.586 0.708 0.957 1.214 1.214 1.486 1.486 1.92 2.363 2.665 2.975 3.614 4.117 4.828 5.2 6.363 7.367 7.581

SG 238 1.277 2.156 3.077 3.563 4.586 5.661 5.661 5.661 6.962 11.769 12.489 12.489 14.095 18.433 21.364 21.364 22.529 23.778 30.293 31.687

All 1112 0.454 0.731 1.11 1.305 1.705 2.119 2.119 2.341 2.573 3.765 4.255 4.507 5.024 6.234 7.089 7.695 8.174 9.341 11.067 11.437

40 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/74

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 44 0 0 0 0 0 0 0 0 0 0 0 0 0 2.439 2.439 2.439 2.439 2.439 2.439 2.439

Aa 90 0 0 0 0 0 0 0 0 1.242 1.242 1.242 1.242 1.242 1.242 1.242 1.242 2.739 2.739 2.739 2.739

A 308 0 0 0 0 0 0 0 0 0.365 0.734 0.734 0.734 1.119 1.119 1.949 1.949 2.397 2.863 3.368 3.368

Baa 431 0 0.48 0.728 1.245 1.784 1.784 2.378 2.378 3.035 3.717 4.42 5.152 5.538 6.375 7.291 8.267 9.817 11.99 11.99 11.99

Ba 198 0.514 1.593 2.165 2.771 4.05 4.05 4.05 4.821 8.871 9.726 9.726 11.597 17.625 21.033 21.033 22.395 25.269 32.668 34.271 36.097

B 29 7.143 7.143 7.143 7.143 7.143 7.143 7.143 12.03 22.379 22.379 22.379 22.379 29.772 29.772 29.772 29.772 29.772 29.772 29.772 29.772

Caa-C 2 0 0 0 50 50 50 50 50 50 50

IG 873 0 0.235 0.355 0.6 0.852 0.852 1.12 1.12 1.69 2.128 2.425 2.73 3.045 3.541 4.24 4.605 5.555 6.538 6.748 6.748

SG 229 1.336 2.272 2.766 3.809 4.905 4.905 4.905 6.221 11.066 11.798 11.798 13.431 19.584 22.544 22.544 23.744 26.329 33.088 34.543 36.179

All 1102 0.275 0.651 0.844 1.241 1.65 1.65 1.87 2.099 3.398 3.884 4.133 4.646 5.843 6.689 7.288 7.761 8.912 10.614 10.979 11.178

1/1/75

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 52 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2

Aa 105 0 0 0 0 0 0 0 1.026 1.026 1.026 1.026 1.026 1.026 2.204 2.204 3.426 3.426 3.426 3.426 3.426

A 321 0 0 0 0 0 0 0 0 0.355 0.355 0.355 0.726 0.726 1.526 1.526 1.961 2.871 3.365 3.899 3.899

Baa 412 0 0 0.265 0.819 0.819 1.429 1.429 2.431 3.123 3.833 4.57 4.957 5.794 6.253 7.232 9.288 11.428 11.428 11.428 11.428

Ba 201 1.023 2.105 3.246 3.847 3.847 3.847 4.57 8.403 9.21 9.21 10.99 16.733 19.977 21.171 22.463 23.824 29.415 30.916 32.581 32.581

B 33 6.154 6.154 6.154 9.566 9.566 9.566 13.677 22.309 22.309 22.309 22.309 28.525 28.525 28.525 28.525 37.459 47.883 47.883 47.883 47.883

Caa-C 2 0 0 50 50 50 50 50 50 50

IG 890 0 0 0.118 0.361 0.361 0.618 0.618 1.163 1.581 1.864 2.155 2.454 2.924 3.586 3.932 5.007 6.118 6.316 6.531 6.531

SG 236 1.739 2.655 4.101 5.113 5.113 5.113 6.33 10.836 11.517 11.517 13.049 18.818 21.586 22.598 23.695 26.043 32.155 33.46 34.891 34.891

All 1126 0.36 0.545 0.925 1.316 1.316 1.526 1.744 2.979 3.44 3.677 4.163 5.298 6.099 6.806 7.251 8.485 10.24 10.581 10.953 10.953

41 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/76

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 66 0 0 0 0 0 0 0 0 0 0 0 1.667 1.667 1.667 1.667 1.667 1.667 1.667 1.667 1.667

Aa 113 0 0 0 0 0 0 0.948 0.948 0.948 0.948 0.948 0.948 2.048 2.048 3.187 3.187 3.187 3.187 3.187 3.187

A 368 0 0 0 0 0 0 0 0.615 0.615 0.615 1.276 1.276 2.357 2.357 3.135 4.358 4.358 4.843 4.843 5.364

Baa 371 0 0.284 0.583 0.583 0.91 0.91 2.338 3.078 3.838 4.628 5.042 5.934 5.934 6.979 9.181 10.895 11.493 11.493 11.493 11.493

Ba 207 0.99 2.032 3.124 3.124 3.731 4.384 7.155 7.886 7.886 9.488 14.612 17.49 18.555 19.694 20.892 27.121 28.458 29.919 29.919 29.919

B 27 0 0 4.082 4.082 4.082 9.13 19.821 19.821 19.821 19.821 28.261 28.261 28.261 28.261 41.304 58.074 58.074 58.074 58.074 58.074

Caa-C 2 0 50 50 50 50 50 50 50

IG 918 0 0.112 0.227 0.227 0.349 0.349 0.989 1.514 1.781 2.056 2.484 2.932 3.562 3.891 5.081 6.135 6.323 6.528 6.528 6.754

SG 236 0.868 2.235 3.666 3.666 4.199 5.343 8.984 9.627 9.627 11.067 16.457 19.041 19.994 21.019 23.198 30.076 31.313 32.66 32.66 32.66

All 1154 0.175 0.535 0.906 0.906 1.104 1.309 2.472 3.016 3.239 3.7 4.899 5.661 6.333 6.755 8.072 9.888 10.212 10.566 10.566 10.76

1/1/77

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 67 0 0 0 0 0 0 0 0 0 0 1.667 1.667 1.667 1.667 1.667 1.667 1.667 1.667 1.667 1.667

Aa 120 0 0 0 0 0 0.889 0.889 0.889 0.889 0.889 0.889 1.927 1.927 2.993 2.993 2.993 2.993 2.993 2.993 2.993

A 389 0 0 0 0 0 0 0.578 0.578 0.578 1.198 1.198 2.896 2.896 3.997 5.154 5.154 5.613 5.613 6.11 6.11

Baa 355 0.29 0.594 0.594 0.594 0.594 2.042 2.793 3.565 4.368 4.79 5.695 5.695 6.758 8.433 10.16 10.763 10.763 10.763 10.763 10.763

Ba 196 0.525 1.627 1.627 2.242 2.903 5.697 6.433 6.433 8.04 13.172 16.051 17.107 18.227 19.403 25.556 26.885 28.347 28.347 28.347 28.347

B 31 3.279 6.733 6.733 10.788 15.249 25.219 25.219 25.219 25.219 33.091 33.091 33.091 33.091 45.256 60.897 60.897 60.897 60.897 60.897 60.897

Caa-C 2 50 50 50 50 50 50 50

IG 931 0.109 0.221 0.221 0.221 0.221 0.842 1.35 1.61 1.877 2.292 2.728 3.644 3.962 5.116 6.138 6.32 6.52 6.52 6.74 6.74

SG 229 1.345 2.758 2.758 3.815 4.953 8.586 9.227 9.227 10.657 16.002 18.56 19.496 20.496 22.617 29.346 30.564 31.899 31.899 31.899 31.899

All 1160 0.351 0.712 0.712 0.905 1.104 2.237 2.767 2.985 3.434 4.603 5.345 6.26 6.67 7.948 9.711 10.026 10.372 10.372 10.562 10.562

42 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/78

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 71 0 0 0 0 0 0 0 0 0 1.538 1.538 1.538 3.101 3.101 3.101 3.101 3.101 3.101 3.101 3.101

Aa 132 0 0 0 0 0.81 0.81 0.81 0.81 0.81 0.81 1.728 1.728 1.728 1.728 1.728 1.728 1.728 1.728 1.728 1.728

A 381 0 0 0 0 0 0.584 0.584 0.584 1.212 1.212 2.601 2.601 4.108 4.901 4.901 5.372 5.372 5.88 5.88 5.88

Baa 341 0 0 0 0 1.406 1.77 2.522 2.913 3.324 4.639 5.113 6.131 7.736 9.946 10.525 10.525 10.525 10.525 10.525 10.525

Ba 188 1.09 1.09 1.09 1.752 4.559 6.038 6.038 9.251 15.188 17.083 18.132 19.254 21.611 27.784 29.121 32.074 32.074 32.074 32.074 32.074

B 37 5.556 5.556 11.852 15.242 22.612 22.612 26.912 26.912 32.534 38.667 38.667 38.667 47.429 60.572 60.572 60.572 60.572 60.572 60.572 60.572

Caa-C 2 0 0 0 0 0 0 0 0 100

IG 925 0 0 0 0 0.605 0.977 1.23 1.361 1.765 2.331 3.223 3.533 4.817 5.812 5.989 6.183 6.183 6.397 6.397 6.397

SG 227 1.806 1.806 2.823 3.918 7.412 8.643 9.298 12.025 18.569 21 21.892 22.851 25.916 32.502 33.707 36.359 36.359 36.359 36.359 36.359

All 1152 0.352 0.352 0.54 0.734 1.836 2.351 2.669 3.215 4.579 5.418 6.306 6.704 8.221 9.938 10.245 10.749 10.749 10.934 10.934 10.934

1/1/79

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 75 0 0 0 0 0 0 0 0 1.449 1.449 1.449 2.92 2.92 2.92 2.92 2.92 2.92 2.92 2.92 2.92

Aa 133 0 0 0 0.797 0.797 0.797 0.797 0.797 0.797 1.699 1.699 1.699 1.699 1.699 1.699 1.699 1.699 1.699 1.699 1.699

A 377 0 0 0 0 0.576 0.576 0.576 1.194 1.194 2.571 2.571 3.685 4.464 4.464 4.929 4.929 5.427 5.427 5.427 5.427

Baa 336 0 0.317 0.317 1.69 2.046 2.413 2.794 2.794 4.076 4.54 5.545 8.205 10.404 10.978 10.978 10.978 10.978 10.978 10.978 10.978

Ba 208 0.496 0.496 1.066 3.465 5.98 9.303 12.062 18.602 20.198 21.075 22.015 24.995 31.334 32.469 34.924 34.924 34.924 34.924 34.924 34.924

B 34 0 6.452 9.916 17.423 17.423 21.769 26.659 38.393 45.239 45.239 45.239 56.191 56.191 56.191

Caa-C 2 0 0 0 0 0 0 0 100

IG 921 0 0.113 0.113 0.706 1.07 1.194 1.321 1.585 2.138 3.012 3.317 4.736 5.713 5.888 6.078 6.078 6.288 6.288 6.288 6.288

SG 244 0.424 1.329 2.299 5.368 7.519 10.954 13.953 21.63 23.748 24.522 25.356 28.932 34.773 35.842 38.175 38.175 38.175 38.175 38.175 38.175

All 1165 0.087 0.358 0.545 1.604 2.297 3.009 3.639 5.167 5.973 6.828 7.212 8.944 10.605 10.902 11.389 11.389 11.567 11.567 11.567 11.567

43 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/80

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 88 0 0 0 0 0 0 0 1.258 1.258 1.258 2.54 2.54 2.54 2.54 2.54 2.54 2.54 2.54 2.54 2.54

Aa 130 0 0 0 0 0 0 0 0.893 1.794 1.794 1.794 1.794 1.794 1.794 1.794 1.794 1.794 1.794 1.794 1.794

A 382 0 0 0.274 0.832 0.832 0.832 1.731 2.045 3.045 3.045 4.128 4.884 4.884 5.334 5.334 5.817 5.817 5.817 5.817 6.909

Baa 336 0 0 1.002 1.349 1.706 2.448 2.448 3.278 4.169 5.593 8.103 10.685 11.761 11.761 11.761 11.761 11.761 11.761 11.761 11.761

Ba 208 0 0.533 3.877 5.042 8.73 11.921 17.995 20.212 21.034 23.742 26.601 32.804 35.101 37.574 37.574 37.574 37.574 39.009 39.009 39.009

B 41 4.938 7.579 15.981 21.775 28.033 31.544 43.99 48.658 48.658 48.658 60.067 68.054 68.054 68.054 68.054 68.054 68.054 68.054 68.054 68.054

Caa-C 5 40 40 40 40 40 40 70 70 70 70 70

IG 936 0 0 0.458 0.809 0.929 1.175 1.556 2.222 3.062 3.5 4.86 5.951 6.284 6.467 6.467 6.669 6.669 6.669 6.669 7.127

SG 254 1.626 2.495 6.586 8.487 12.521 15.692 23.048 25.53 26.217 28.464 32.46 38.681 40.692 42.868 42.868 42.868 42.868 44.124 44.124 44.124

All 1190 0.343 0.521 1.71 2.367 3.236 4.033 5.691 6.674 7.484 8.211 9.976 11.812 12.377 12.839 12.839 13.01 13.01 13.191 13.191 13.578

1/1/81

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 93 0 0 0 0 0 0 1.227 1.227 1.227 2.493 2.493 2.493 2.493 2.493 2.493 2.493 2.493 2.493 2.493 2.493

Aa 134 0 0 0 0 0 0 0.83 2.504 2.504 2.504 2.504 2.504 2.504 2.504 2.504 2.504 2.504 2.504 2.504 3.839

A 387 0 0.267 0.267 0.267 0.267 1.16 1.475 2.143 2.143 3.226 3.987 3.987 4.442 4.442 4.931 4.931 4.931 4.931 6.026 6.587

Baa 339 0 0.632 1.961 2.65 3.365 3.365 3.763 4.617 5.98 8.378 10.343 11.356 11.356 11.356 11.356 11.356 11.356 11.356 11.356 12.144

Ba 242 0 3.62 5.044 8.051 11.708 18.392 20.847 21.535 24.568 28.667 35.11 37.22 39.503 39.503 39.503 39.503 40.863 42.271 42.271 42.271

B 45 4.598 11.986 17.015 25.046 27.985 41.383 41.383 41.383 41.383 51.153 57.259 57.259 57.259 57.259 57.259 57.259 57.259 57.259 57.259 57.259

Caa-C 6 0 0 0 0 0 20 40 40 40 40 40 40 40 40 40 40 40 40 40 40

IG 953 0 0.328 0.779 1.01 1.248 1.618 2.137 2.955 3.381 4.705 5.614 5.938 6.116 6.116 6.312 6.312 6.312 6.312 6.758 7.449

SG 293 0.709 4.815 6.77 10.491 13.958 21.865 24.418 24.984 27.475 32.242 38.437 40.221 42.165 42.165 42.165 42.165 43.31 44.491 44.491 44.491

All 1246 0.163 1.348 2.135 3.128 4.06 6.007 6.935 7.701 8.504 10.422 12.173 12.712 13.154 13.154 13.317 13.317 13.491 13.671 14.042 14.617

44 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/82

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 96 0 0 0 0 0 1.198 1.198 1.198 2.448 2.448 2.448 2.448 2.448 2.448 2.448 2.448 2.448 2.448 2.448 2.448

Aa 146 0 0 0 0 0 0.752 2.285 2.285 2.285 2.285 2.285 2.285 2.285 3.395 3.395 3.395 3.395 3.395 4.65 4.65

A 398 0.255 0.255 0.255 0.255 1.118 1.118 1.766 1.766 3.169 3.905 3.905 4.338 4.338 4.338 4.338 4.338 4.338 4.865 5.406 8.764

Baa 326 0.317 0.317 1.369 2.097 2.477 3.291 4.164 5.55 7.99 10.007 11.057 11.057 11.057 11.057 11.057 11.057 11.057 11.833 12.639 12.639

Ba 255 2.783 5.303 7.977 11.676 18.565 20.729 21.332 24.01 28.437 32.622 34.547 36.625 36.625 36.625 36.625 37.973 39.416 39.416 39.416 42.563

B 43 2.353 9.676 14.838 17.63 30.063 30.063 30.063 30.063 35.443 54.81 54.81 54.81 54.81 54.81 54.81 54.81 54.81 54.81 54.81 54.81

Caa-C 12 25 51.471 51.471 51.471 61.176 70.882 70.882 70.882 70.882 70.882 70.882 70.882 70.882 70.882 70.882 70.882 70.882 70.882 70.882 70.882

IG 966 0.211 0.211 0.546 0.777 1.257 1.763 2.563 2.98 4.423 5.32 5.639 5.813 5.813 6.007 6.007 6.007 6.007 6.444 7.121 8.519

SG 310 3.595 7.726 10.65 14.079 21.816 24.05 24.548 26.775 31.101 36.754 38.386 40.159 40.159 40.159 40.159 41.288 42.487 42.487 42.487 45.131

All 1276 1.036 2.029 2.97 3.943 6.073 6.958 7.69 8.462 10.43 12.131 12.654 13.084 13.084 13.242 13.242 13.412 13.588 13.951 14.513 16.061

1/1/83

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 98 0 0 0 0 2.395 2.395 2.395 3.697 3.697 3.697 3.697 3.697 3.697 3.697 3.697 3.697 3.697 3.697 3.697 3.697

Aa 222 0 0 0 0 0.487 1.994 1.994 1.994 1.994 1.994 1.994 1.994 2.707 2.707 2.707 2.707 2.707 2.707 3.542 4.411

A 426 0 0 0 0.262 0.262 0.843 0.843 2.102 3.416 4.117 4.497 4.497 4.497 4.497 4.497 4.497 4.497 4.993 6.534 7.082

Baa 272 0 1.167 1.575 3.302 3.776 4.299 5.395 6.546 7.748 7.748 7.748 7.748 7.748 7.748 7.748 7.748 8.694 10.657 12.7 14.829

Ba 230 0.911 2.394 4.516 12.154 14.205 17.368 21 26.13 31.769 31.769 33.236 33.236 33.236 33.236 35.066 36.948 38.918 40.954 45.098 49.321

B 113 6.364 11.117 18.03 25.386 28.702 29.891 32.613 40.541 48.603 53.743 56.634 56.634 56.634 56.634 56.634 56.634 56.634 56.634 56.634 56.634

Caa-C 10 42.105 65.263 65.263 65.263 76.842 76.842 76.842 76.842 76.842 76.842 76.842 76.842 76.842 76.842 76.842 76.842 76.842 76.842 76.842 76.842

IG 1018 0 0.305 0.41 0.958 1.423 2.16 2.415 3.344 4.17 4.465 4.626 4.626 4.804 4.804 4.804 4.804 5.008 5.636 6.933 7.84

SG 353 3.835 6.998 10.691 18.027 20.91 23.23 26.417 32.473 38.739 40.383 42.232 42.232 42.232 42.232 43.423 44.694 46.011 47.378 50.185 53.072

All 1371 0.967 1.968 2.927 5.033 6.026 7.088 7.904 9.732 11.426 11.915 12.316 12.316 12.465 12.465 12.625 12.79 13.132 13.837 15.291 16.433

45 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/84

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 80 0 0 0 1.449 1.449 1.449 3.078 3.078 3.078 3.078 3.078 3.078 3.078 3.078 3.078 3.078 3.078 3.078 3.078 3.078

Aa 238 0 0 0 0.899 1.832 1.832 1.832 1.832 1.832 1.832 1.832 2.482 2.482 2.482 2.482 2.482 2.482 3.238 4.024 4.024

A 454 0 0.228 0.467 0.718 1.504 1.775 2.909 4.091 4.72 4.72 4.72 4.72 4.72 4.72 4.72 4.72 5.166 6.543 7.033 7.568

Baa 281 0.362 0.362 0.77 1.225 1.729 2.789 3.909 5.085 5.085 5.77 5.77 5.77 5.77 5.77 5.77 6.703 8.667 11.729 13.868 13.868

Ba 247 0.832 3.488 11.671 14.397 18.146 21.69 27.255 32.482 33.468 34.577 34.577 34.577 34.577 36.116 36.116 37.82 39.571 41.375 45.039 45.039

B 120 6.751 12.851 20.268 24.182 27.363 32.372 42.663 48.124 50.43 55.648 55.648 55.648 55.648 55.648 59.872 59.872 59.872 59.872 59.872 59.872

Caa-C 2 100

IG 1053 0.096 0.195 0.402 0.951 1.65 2.013 2.899 3.688 3.97 4.124 4.124 4.296 4.296 4.296 4.296 4.492 5.097 6.552 7.427 7.661

SG 369 3.324 7.121 15.006 18.147 21.68 25.743 32.937 38.186 39.544 41.84 41.84 41.84 41.84 42.898 44.063 45.266 46.51 47.799 50.442 50.442

All 1422 0.927 1.962 4.065 5.233 6.574 7.713 9.821 11.407 11.865 12.367 12.367 12.508 12.508 12.66 12.818 13.143 13.814 15.199 16.288 16.483

1/1/85

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 81 0 0 0 0 0 1.626 1.626 1.626 1.626 1.626 1.626 1.626 1.626 1.626 1.626 1.626 1.626 1.626 1.626 1.626

Aa 296 0 0 0 0.789 0.789 0.789 0.789 0.789 0.789 0.789 1.394 1.394 1.394 1.394 1.394 1.394 2.101 2.84 2.84 2.84

A 518 0 0.21 1.337 2.296 2.547 3.866 4.968 5.258 5.258 5.258 5.258 5.258 5.258 5.258 5.258 5.68 6.547 7.468 7.966 7.966

Baa 275 0 0.813 1.272 1.788 2.876 3.447 4.643 5.287 5.997 5.997 5.997 5.997 5.997 5.997 8.051 10.215 13.603 14.787 14.787 14.787

Ba 292 1.413 6.753 9.361 12.866 18.452 24.098 29.643 31.181 32.041 32.041 33.071 33.071 34.266 34.266 35.65 37.112 40.218 43.364 43.364 43.364

B 149 7.483 16.843 22.974 26.36 30.568 42.248 47.198 49.445 54.767 54.767 54.767 54.767 54.767 59.075 59.075 59.075 59.075 59.075 59.075 59.075

Caa-C 5 0 0 0 33.333 33.333 33.333 33.333 33.333 33.333 33.333 100

IG 1170 0 0.277 0.876 1.629 1.968 2.797 3.537 3.802 3.948 3.948 4.112 4.112 4.112 4.112 4.491 5.078 6.287 7.134 7.36 7.36

SG 446 3.448 10.116 13.976 17.729 22.781 30.274 35.527 37.195 39.079 39.079 40.565 40.565 41.426 42.394 43.432 44.531 46.866 49.254 49.254 49.254

All 1616 0.95 2.966 4.431 5.948 7.405 9.689 11.333 11.858 12.322 12.322 12.717 12.717 12.859 13.008 13.473 14.114 15.439 16.481 16.666 16.666

46 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/86

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 108 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 292 0 0 0.789 0.789 1.23 1.23 1.23 1.23 1.23 1.828 1.828 1.828 1.828 1.828 1.828 2.55 3.289 3.289 3.289 3.289

A 576 0 0.19 0.79 1.207 1.865 2.549 2.549 2.549 2.549 2.549 2.549 2.549 2.549 2.549 3.254 3.986 4.773 5.198 5.198 5.647

Baa 308 1.01 1.387 3.077 3.962 5.813 7.269 8.317 8.905 8.905 8.905 8.905 8.905 8.905 10.608 11.497 13.331 15.216 15.216 15.216 15.216

Ba 357 2.047 5.965 8.572 13.639 20.319 26.802 28.671 30.789 32.327 33.158 33.158 35.168 35.168 35.168 37.761 43.294 44.729 44.729 44.729 46.355

B 187 11.602 17.495 21.44 25.408 34.91 40.67 46.458 49.913 49.913 49.913 49.913 49.913 53.144 60.953 60.953 60.953 60.953 60.953 60.953 60.953

Caa-C 10 23.529 23.529 40.523 40.523 40.523 40.523 40.523 40.523 40.523 100

IG 1284 0.24 0.412 1.239 1.625 2.431 3.062 3.288 3.412 3.412 3.552 3.552 3.552 3.552 3.88 4.387 5.256 6.167 6.361 6.361 6.57

SG 554 5.644 10.207 13.493 18.111 25.598 31.723 34.701 37.146 38.235 39.434 39.434 40.859 41.68 43.489 45.388 49.434 50.487 50.487 50.487 51.666

All 1838 1.855 3.313 4.829 6.317 8.739 10.589 11.378 11.961 12.17 12.503 12.503 12.747 12.874 13.408 14.097 15.377 16.271 16.429 16.429 16.771

1/1/87

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 132 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 312 0 0 0 0.394 0.394 0.394 0.394 0.394 0.945 0.945 0.945 0.945 0.945 0.945 1.612 2.293 2.293 2.293 2.293 2.293

A 543 0 0 0.409 1.262 1.925 1.925 1.925 1.925 1.925 1.925 1.925 1.925 1.925 2.271 2.99 3.758 4.583 4.583 5.017 5.017

Baa 338 0 1.049 1.42 3.372 5.006 6.31 7.269 7.269 7.269 7.269 7.922 7.922 9.333 10.067 11.572 12.341 12.341 12.341 12.341 12.341

Ba 462 2.73 4.252 9.068 15.816 22.846 25.454 28.518 30.233 31.496 32.206 33.83 34.775 34.775 37.005 40.571 44.324 44.324 44.324 45.809 45.809

B 270 6.489 14.02 20.744 32.026 40.224 46.118 48.151 48.151 48.151 48.151 48.151 50.145 54.677 59.326 61.791 67.452 67.452 67.452 67.452 67.452

Caa-C 10 20 30.667 30.667 30.667 30.667 30.667 30.667 30.667 65.333 65.333 65.333 65.333 65.333 65.333 65.333 65.333 65.333 65.333 65.333 65.333

IG 1325 0 0.249 0.511 1.422 2.087 2.39 2.612 2.612 2.738 2.738 2.876 2.876 3.172 3.479 4.269 4.928 5.275 5.275 5.462 5.462

SG 742 4.357 8.248 13.692 21.96 29.28 32.935 35.598 36.731 37.996 38.468 39.533 40.78 42.173 45.101 48.216 52.392 52.392 52.392 53.427 53.427

All 2067 1.558 3.075 5.052 8.239 10.786 11.956 12.77 13.035 13.412 13.511 13.827 14.049 14.514 15.236 16.355 17.526 17.801 17.801 18.099 18.099

47 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/88

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 139 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 333 0 0.657 1.001 1.001 1.001 1.001 1.001 1.482 1.482 1.482 1.482 1.482 2.05 2.631 3.222 3.222 3.222 3.222 3.222 3.222

A 543 0 0.195 0.803 1.431 1.431 1.431 1.431 1.431 1.431 1.431 1.431 1.431 1.431 2.121 2.487 3.271 3.271 3.689 3.689 3.689

Baa 330 0 0.333 1.384 2.837 3.991 5.263 5.263 5.263 5.263 5.83 5.83 6.454 7.106 9.118 10.511 10.511 10.511 10.511 10.511 10.511

Ba 503 1.259 6.609 12.567 20.234 22.673 25.575 26.523 27.577 28.754 30.092 30.856 31.705 33.526 38.45 42.695 42.695 42.695 44.012 44.012 47.211

B 337 6.202 13.086 25.333 33.786 39.494 43.032 44.72 46.694 46.694 47.92 53.872 57.42 61.291 63.503 68.537 68.537 68.537 68.537 68.537 68.537

Caa-C 11 28.571 28.571 28.571 28.571 28.571 28.571 28.571 64.286 64.286 64.286 64.286 64.286 64.286 64.286 64.286 64.286 64.286 64.286 64.286 64.286

IG 1345 0 0.319 0.902 1.508 1.785 2.088 2.088 2.203 2.203 2.328 2.328 2.464 2.744 3.616 4.223 4.542 4.542 4.714 4.714 4.714

SG 851 3.582 9.48 17.836 25.712 29.341 32.43 33.623 35.304 36.058 37.328 39.786 41.451 43.841 47.759 52.023 52.023 52.023 52.929 52.929 55.068

All 2196 1.365 3.733 7.028 9.986 11.258 12.325 12.637 13.136 13.313 13.686 14.178 14.591 15.238 16.584 17.761 18.01 18.01 18.28 18.28 18.577

1/1/89

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 154 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 332 0.618 0.618 0.618 0.618 0.618 0.618 1.071 1.071 1.071 1.071 1.071 1.601 2.147 2.698 2.698 2.698 2.698 2.698 2.698 4.183

A 573 0 0.185 0.758 0.758 0.758 0.758 0.758 0.758 0.758 0.758 0.758 0.758 1.7 2.032 2.387 2.387 2.767 2.767 2.767 4.081

Baa 346 0.596 1.224 1.876 2.911 3.289 3.289 3.289 3.289 3.773 3.773 4.308 4.869 7.176 8.984 9.625 9.625 9.625 9.625 9.625 10.421

Ba 479 3.04 9.752 17.576 20.06 23.007 23.439 24.415 26.052 27.289 29.428 30.225 32.794 37.429 43.436 43.436 43.436 43.436 43.436 46.535 49.93

B 374 8.72 22.848 31.087 37.312 41.127 43.744 46.826 46.826 49.894 53.606 56.461 59.627 61.462 65.629 65.629 65.629 68.273 68.273 68.273 70.916

Caa-C 12 25 43.75 57.813 57.813 57.813 57.813 57.813 57.813 57.813 57.813 57.813 57.813 57.813 57.813 57.813 57.813 57.813 57.813 57.813 57.813

IG 1405 0.291 0.519 0.914 1.166 1.259 1.259 1.364 1.364 1.477 1.477 1.599 1.852 2.901 3.584 3.872 3.872 4.029 4.029 4.029 5.104

SG 865 5.801 15.802 23.843 27.808 31.055 32.337 34.094 35.088 36.969 39.605 41.09 43.768 47.301 52.442 52.442 52.442 53.241 53.241 55.13 58.155

All 2270 2.362 6.101 9.068 10.49 11.509 11.861 12.387 12.627 13.13 13.661 14.033 14.711 16.125 17.5 17.724 17.724 17.969 17.969 18.24 19.509

48 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/90

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 175 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 377 0 0 0 0 0 0.368 0.368 0.368 0.368 0.368 0.368 0.824 1.29 1.29 1.29 1.29 1.29 1.29 2.535 4.511

A 600 0 0 0 0 0 0 0 0 0 0 0.28 0.569 0.872 1.195 1.195 1.54 1.54 1.54 2.736 4.402

Baa 340 0 0.629 0.629 0.629 0.629 0.629 0.629 0.629 0.629 1.16 1.719 4.592 7 7.646 7.646 7.646 7.646 7.646 8.486 11.076

Ba 466 3.405 11.805 14.42 17.495 18.292 19.631 20.606 21.682 23.54 24.228 26.457 32.114 36.522 36.522 36.522 36.522 36.522 39.195 43.487 43.487

B 387 15.47 24.827 32.44 36.116 38.319 40.972 41.775 45.625 49.21 52.032 56.75 58.63 64.995 64.995 64.995 67.795 67.795 67.795 70.723 76.887

Caa-C 20 57.895 71.93 71.93 71.93 71.93 71.93 71.93 71.93 71.93 100

IG 1492 0 0.142 0.142 0.142 0.142 0.236 0.236 0.236 0.236 0.347 0.577 1.41 2.152 2.413 2.413 2.556 2.556 2.556 3.539 5.243

SG 873 9.982 18.878 23.546 26.795 28.149 29.964 30.842 32.827 35.157 36.909 39.766 43.993 48.636 48.636 48.636 49.397 49.397 51.127 54.781 56.813

All 2365 3.589 6.687 8.171 9.142 9.52 10.061 10.277 10.734 11.217 11.641 12.348 13.732 15.085 15.289 15.289 15.515 15.515 15.764 17.063 18.693

1/1/91

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Aaa 162 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 422 0 0 0 0 0.316 0.316 0.316 0.316 0.316 0.316 0.724 1.148 1.148 1.148 1.148 1.148 1.148 2.297 4.709 4.709

A 589 0 0 0 0 0 0 0 0 0 0.274 0.556 0.851 1.163 1.163 1.496 1.496 1.496 2.655 4.274 4.716

Baa 370 0.275 0.275 0.275 0.275 0.275 0.275 0.275 0.275 0.712 1.167 3.503 5.467 5.994 5.994 5.994 6.612 7.275 7.972 9.41 9.41

Ba 367 4.892 6.202 8.097 8.535 9.527 10.61 11.21 13.291 14.079 16.67 22.32 26.435 26.435 27.682 27.682 27.682 27.682 32.503 34.303 34.303

B 336 12.361 22.016 27.379 30.059 33.874 34.643 39.278 42.715 45.38 49.869 51.659 59.552 59.552 59.552 62.441 62.441 65.571 68.85 76.179 76.179

Caa-C 20 47.368 47.368 47.368 47.368 47.368 47.368 47.368 47.368 73.684 73.684 100

IG 1543 0.066 0.066 0.066 0.066 0.153 0.153 0.153 0.153 0.255 0.466 1.231 1.916 2.156 2.156 2.288 2.427 2.573 3.489 5.078 5.249

SG 723 9.531 14.604 17.988 19.394 21.554 22.47 24.551 27.011 28.895 32.009 36.638 41.707 41.707 42.49 43.348 43.348 44.308 48.322 51.692 51.692

All 2266 3.009 4.496 5.434 5.798 6.385 6.594 7.033 7.499 7.907 8.588 9.921 11.226 11.424 11.529 11.748 11.863 12.106 13.372 15.096 15.239

49 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/92

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Aaa 145 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 434 0 0 0 0.284 0.284 0.284 0.284 0.284 0.284 0.655 0.655 0.655 0.655 0.655 0.655 0.655 0.655 1.759 2.369

A 662 0 0 0 0 0 0 0 0 0.236 0.479 0.987 1.254 1.254 1.254 1.254 1.254 2.903 4.984 5.745

Baa 383 0 0 0 0 0 0 0 0.401 0.817 2.978 4.36 4.86 4.86 5.408 5.988 6.601 7.232 8.525 8.525

Ba 348 0.309 1.035 1.035 1.978 2.495 3.069 5.02 6.504 8.138 13.387 19.005 19.005 20.146 21.403 21.403 21.403 26.474 28.409 28.409

B 266 9.218 16.183 20.03 24.695 27.086 30.949 34.552 37.307 43.577 45.457 51.632 51.632 51.632 51.632 51.632 51.632 54.968 66.226 66.226

Caa-C 26 29.787 35.404 35.404 35.404 35.404 44.632 44.632 63.088 63.088 81.544 81.544 81.544 81.544 81.544 81.544 100

IG 1624 0 0 0 0.078 0.078 0.078 0.078 0.171 0.361 1.054 1.574 1.794 1.794 1.914 2.041 2.175 3.004 4.442 4.909

SG 640 5.201 8.734 10.35 12.74 13.94 15.985 18.374 20.66 23.702 28.157 33.546 33.546 34.284 35.095 35.095 36.05 40.243 45.024 45.024

All 2264 1.435 2.357 2.75 3.353 3.609 4.018 4.45 4.904 5.536 6.775 7.993 8.178 8.275 8.48 8.589 8.816 10.003 11.742 12.146

1/1/93

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Aaa 123 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 443 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.495 1.04

A 716 0 0 0 0 0 0 0 0.201 0.618 1.053 1.284 1.284 1.284 1.284 1.284 2.449 3.982 4.321

Baa 449 0 0 0.262 0.262 0.547 0.844 1.472 2.12 3.799 4.868 5.629 5.629 6.047 6.488 6.953 8.871 10.874 11.411

Ba 374 0.572 0.572 2.749 3.54 4.427 5.944 8.197 9.45 13.475 17.765 17.765 17.765 18.705 19.696 19.696 23.319 25.963 25.963

B 255 4.555 9.292 14.21 16.116 19.208 22.043 26.286 34.412 38.387 42.736 44.349 46.144 46.144 48.436 51.014 53.983 64.602 64.602

Caa-C 23 29.268 29.268 36.714 45.152 45.152 45.152 72.576 72.576 100

IG 1731 0 0 0.067 0.067 0.141 0.218 0.378 0.625 1.226 1.676 1.961 1.961 2.066 2.176 2.291 3.25 4.502 4.913

SG 652 3.107 4.979 8.362 9.777 11.408 13.316 16.533 20.093 24.401 28.563 29.078 29.65 30.265 31.587 32.314 35.576 40.113 40.113

All 2383 0.836 1.316 2.185 2.51 2.915 3.347 4.058 4.869 6.073 7.116 7.432 7.516 7.692 7.971 8.166 9.393 11.004 11.357

50 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/94

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Aaa 118 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 406 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.539

A 850 0 0 0 0 0 0 0.159 0.489 0.832 1.194 1.194 1.194 1.194 1.194 2.126 3.6 3.872

Baa 514 0 0.209 0.209 0.436 0.673 1.91 2.425 3.771 4.625 5.237 5.237 5.579 5.943 6.33 8.398 10.616 11.089

Ba 425 0.246 1.859 2.151 3.13 4.989 8.315 11.115 14.154 17.424 18.047 18.047 18.828 19.696 19.696 22.951 28.924 28.924

B 343 4.056 8.266 11.409 13.259 16.683 21.483 27.582 32.576 37.97 42.004 45.45 45.45 48.247 49.84 53.422 57.304 57.304

Caa-C 40 5.263 11.184 21.633 21.633 21.633 33.243 33.243 57.518 57.518 57.518 57.518 57.518 57.518 57.518 57.518 57.518

IG 1888 0 0.057 0.057 0.119 0.184 0.519 0.727 1.234 1.612 1.933 1.933 2.022 2.117 2.216 3.147 4.347 4.706

SG 808 2.09 4.985 6.901 8.176 10.531 14.715 18.585 22.838 26.787 28.659 29.945 30.415 31.979 32.568 35.841 40.887 40.887

All 2696 0.614 1.469 1.988 2.358 2.952 4.106 5.042 6.258 7.293 7.88 8.089 8.236 8.549 8.715 9.935 11.594 11.898

1/1/95

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Aaa 113 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 447 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.432 0.918

A 920 0 0 0 0 0 0.139 0.427 0.876 1.193 1.193 1.193 1.193 1.193 2.029 3.133 3.379

Baa 532 0 0 0 0.44 1.583 2.06 3.559 4.086 4.368 4.368 4.687 5.032 5.403 7.394 9.533 9.989

Ba 432 0.726 0.988 2.158 3.825 7.538 10.015 13.141 16.052 17.742 17.742 18.47 19.278 19.278 21.321 30.443 30.443

B 462 4.26 6.734 9.547 12.819 16.651 22.713 31.722 38.882 43.451 46.037 46.747 48.348 49.279 52.384 54.652 54.652

Caa-C 60 9.259 18.221 18.221 26.83 37.537 42.534 65.521 77.014 77.014

IG 2012 0 0 0 0.116 0.414 0.601 1.118 1.457 1.672 1.672 1.753 1.839 1.93 2.787 3.893 4.226

SG 954 2.956 4.762 6.66 9.467 13.574 17.805 24.212 29.257 32.285 33.556 34.259 35.437 35.884 38.388 43.939 43.939

All 2966 0.935 1.487 2.038 2.878 4.127 5.259 7.096 8.457 9.243 9.485 9.679 9.954 10.101 11.188 12.918 13.192

51 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/96

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Aaa 123 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 479 0 0 0 0 0 0 0 0 0 0 0 0 0 0.4 0.846

A 992 0 0 0 0 0.122 0.377 0.641 0.923 0.923 0.923 0.923 0.923 1.853 2.838 3.057

Baa 615 0 0 0.181 0.743 1.327 2.753 3.397 3.856 4.102 4.366 4.944 4.944 6.603 8.742 9.128

Ba 462 0 0.736 2.404 6.445 8.513 12.62 15.478 17.372 17.372 18.606 19.298 20.078 21.835 29.603 29.603

B 541 1.369 4.234 9.06 12.018 18.447 26.431 34.198 38.898 41.953 42.636 44.252 45.23 49.612 54.411 55.835

Caa-C 75 13.986 20.13 27.151 42.374 48.439 61.33 66.486 66.486 66.486 66.486 66.486 66.486 66.486 66.486 66.486

IG 2209 0 0 0.051 0.208 0.425 0.935 1.231 1.483 1.55 1.622 1.773 1.773 2.613 3.679 3.973

SG 1078 1.648 3.807 7.386 11.628 15.962 22.2 27.361 30.427 31.81 32.74 33.804 34.624 37.386 43.47 44.05

All 3287 0.533 1.202 2.276 3.534 4.787 6.666 8.07 8.903 9.22 9.447 9.751 9.88 10.981 12.731 13.055

1/1/97

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Aaa 124 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 522 0 0 0 0 0 0 0 0 0 0 0 0 0.344 0.728

A 1057 0 0 0 0.109 0.336 0.573 1.079 1.079 1.079 1.079 1.079 2.094 2.992 3.192

Baa 709 0 0.15 0.775 1.266 2.472 3.202 3.594 3.805 4.262 4.766 4.766 5.955 8.209 8.562

Ba 557 0.192 1.721 5.903 9.443 12.393 15.632 17.507 17.507 18.483 19.03 19.65 21.048 27.21 27.21

B 646 1.943 6.475 10.432 16.38 26.515 33.28 37.414 40.533 41.037 43.481 45.019 50.255 57.016 58.148

Caa-C 85 14.815 25.096 38.37 48.642 65.209 69.302 69.302 69.302 69.302 69.302 69.302 69.302 69.302 69.302

IG 2412 0 0.044 0.228 0.419 0.868 1.182 1.517 1.576 1.703 1.838 1.838 2.597 3.641 3.908

SG 1288 2.049 5.667 10.235 15.288 22.348 27.295 30.156 31.633 32.346 33.718 34.688 37.607 43.645 44.098

All 3700 0.698 1.895 3.399 4.966 7.204 8.706 9.628 9.992 10.236 10.606 10.776 11.867 13.671 13.958

52 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/98

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12 13

Aaa 113 0 0 0 0 0 0 0 0 0 0 0 0 0

Aa 563 0 0 0 0 0 0 0.247 0.247 0.247 0.247 0.247 0.559 0.913

A 1070 0 0 0.102 0.316 0.54 1.021 1.021 1.021 1.021 1.021 1.987 3.017 3.21

Baa 847 0.121 0.627 1.019 2.117 3.283 3.597 3.937 4.306 4.709 4.709 5.694 7.313 7.608

Ba 631 1.002 3.793 6.883 10.688 13.918 16.245 16.919 18.057 18.491 18.998 20.139 26.235 26.235

B 854 3.813 10.08 17.636 28.496 34.987 40.415 44.326 44.94 47.202 49.518 53.277 57.95 58.587

Caa-C 122 11.404 28.326 39.525 55.904 61.594 65.434 68.44 68.44 73.295 73.295 86.648 86.648 86.648

IG 2593 0.039 0.203 0.373 0.816 1.284 1.585 1.746 1.86 1.982 1.982 2.674 3.633 3.88

SG 1607 3.277 8.962 15.026 23.461 28.564 32.588 35.072 35.866 37.37 38.722 41.297 46.281 46.585

All 4200 1.255 3.403 5.598 8.693 10.624 12.012 12.807 13.094 13.539 13.83 14.872 16.596 16.843

1/1/99

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11 12

Aaa 101 0 0 0 0 0 0 0 0 0 0 0 0

Aa 600 0 0 0 0 0 0.223 0.223 0.223 0.223 0.223 0.501 1.136

A 1080 0 0 0.203 0.309 0.759 0.759 0.759 0.759 0.759 1.668 2.628 2.628

Baa 961 0.106 0.546 1.468 2.698 3.1 3.391 3.704 4.215 4.215 5.257 7.103 7.357

Ba 643 1.316 3.319 5.689 8.55 10.852 11.441 12.434 13.179 13.603 15.486 21.086 21.656

B 1021 4.895 13.602 24.086 32.63 37.442 40.955 42.106 44.098 46.614 50.058 55.241 55.753

Caa-C 239 18.575 29.4 48.821 55.772 61.783 66.795 66.795 69.009 69.009 74.644 74.644 74.644

IG 2742 0.037 0.191 0.594 1.061 1.379 1.524 1.627 1.792 1.792 2.483 3.488 3.713

SG 1903 5.44 12.198 21.081 27.461 31.466 33.981 34.954 36.388 37.763 40.348 45.112 45.592

All 4645 2.214 4.94 8.541 11.129 12.671 13.548 13.901 14.399 14.735 15.826 17.625 17.897

53 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/00

Rating n(0) 1 2 3 4 5 6 7 8 9 10 11

Aaa 116 0 0 0 0 0 0 0 0 0 0 0

Aa 600 0 0 0 0 0 0 0 0 0 0 0.613

A 1146 0 0.186 0.38 0.793 0.903 0.903 0.903 0.903 2.02 3.35 3.35

Baa 1046 0.391 0.903 1.997 2.592 2.848 3.262 3.71 3.71 4.243 6.386 6.601

Ba 580 0.721 2.3 4.51 6.281 6.281 7.596 7.965 8.387 11.243 19.144 19.743

B 1106 6.026 16.616 25.709 31.063 34.574 36.124 39.252 41.384 44.278 50.185 50.622

Caa-C 276 19.549 42.176 52.456 59.396 66.164 67.545 69.399 69.399 73.771 79.6 79.6

IG 2908 0.14 0.397 0.862 1.234 1.367 1.508 1.658 1.658 2.284 3.499 3.704

SG 1962 6.373 15.974 23.135 27.512 30.151 31.555 33.479 34.72 37.428 43.596 44.044

All 4870 2.622 6.489 9.425 11.185 12.123 12.635 13.264 13.57 14.645 16.909 17.159

1/1/01

Rating n(0) 1 2 3 4 5 6 7 8 9 10

Aaa 114 0 0 0 0 0 0 0 0 0 0

Aa 661 0 0 0 0 0 0 0 0 0 0.557

A 1185 0.172 0.442 0.729 0.729 0.729 0.729 0.729 2.139 3.226 3.378

Baa 1034 0.198 1.569 2.142 2.39 2.791 3.224 3.224 3.568 5.799 5.799

Ba 522 1.39 3.153 4.66 4.949 6.285 6.671 7.116 9.654 17.66 18.318

B 1068 9.575 19.495 25.341 28.72 30.406 33.638 35.68 39.157 47.142 47.562

Caa-C 260 31.902 43.875 55.355 62.866 65.223 66.841 66.841 69.999 73.999 73.999

IG 2994 0.137 0.713 1.021 1.103 1.235 1.375 1.375 2.065 3.195 3.386

SG 1850 10.33 18.133 23.31 26.131 27.722 29.765 31.006 33.923 41.231 41.689

All 4844 3.979 7.168 9.132 10.076 10.625 11.259 11.551 12.698 15.073 15.311

54 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/02

Rating n(0) 1 2 3 4 5 6 7 8 9

Aaa 132 0 0 0 0 0 0 0 0 0

Aa 668 0 0 0 0 0 0 0 0 0.533

A 1193 0.172 0.355 0.355 0.355 0.355 0.355 1.682 2.571 2.853

Baa 1135 1.096 1.489 1.595 1.824 1.949 1.949 2.397 4.485 4.485

Ba 541 1.377 3.367 4.366 5.506 6.49 6.876 8.662 14.785 15.377

B 817 4.534 9.895 12.558 14.696 18.057 19.648 24.905 35.894 37.211

Caa-C 315 28.862 42.698 52.006 54.367 58.662 61.562 63.484 70.124 70.124

IG 3128 0.461 0.672 0.71 0.789 0.832 0.832 1.512 2.544 2.775

SG 1673 8.066 13.72 16.761 18.518 20.985 22.181 25.523 33.754 34.636

All 4801 3.059 5.028 5.967 6.51 7.168 7.444 8.674 11.147 11.505

1/1/03

Rating n(0) 1 2 3 4 5 6 7 8

Aaa 128 0 0 0 0 0 0 0 0

Aa 607 0 0 0 0 0 0 0 0.572

A 1171 0 0 0 0 0 1.285 2.025 2.3

Baa 1109 0 0 0.213 0.329 0.329 0.466 1.795 1.795

Ba 524 1.005 1.458 2.227 2.816 3.155 5.814 11.28 12.234

B 807 2.114 3.809 5.83 8.668 9.995 14.401 26.042 27.522

Caa-C 304 22.385 35.62 38.085 42.909 45.084 47.865 55.646 55.646

IG 3015 0 0 0.078 0.119 0.119 0.685 1.437 1.662

SG 1635 5.368 8.448 10.076 12.322 13.35 16.783 25.309 26.404

All 4650 1.845 2.833 3.375 4.029 4.29 5.532 8.075 8.501

55 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/04

Rating n(0) 1 2 3 4 5 6 7

Aaa 135 0 0 0 0 0 0 0

Aa 570 0 0 0 0 0.231 0.231 0.809

A 1142 0 0 0 0 1.355 1.714 1.98

Baa 1130 0 0.194 0.194 0.194 0.316 1.896 1.896

Ba 517 0.409 0.641 1.453 1.767 3.903 9.428 9.874

B 889 0.844 2.103 4.246 5.258 8.633 20.414 21.559

Caa-C 262 12.288 18.789 24.226 27.67 32.95 47.066 48.406

IG 2977 0 0.073 0.073 0.073 0.695 1.404 1.617

SG 1668 2.446 4.097 6.226 7.299 10.442 20.232 21.151

All 4645 0.855 1.447 2.098 2.397 3.671 6.684 7.077

1/1/05

Rating n(0) 1 2 3 4 5 6

Aaa 135 0 0 0 0 0 0

Aa 582 0 0 0 0.21 0.21 1.005

A 1175 0 0 0 0.941 1.388 1.639

Baa 1133 0.182 0.182 0.182 0.637 1.986 1.986

Ba 516 0 0.721 1.003 3.505 9.231 9.978

B 944 1.025 2.91 3.902 7.609 20.057 21.011

Caa-C 322 6.667 11.106 14.544 22.395 41.02 45.032

IG 3025 0.068 0.068 0.068 0.645 1.305 1.554

SG 1782 1.745 3.741 4.943 8.943 20.14 21.489

All 4807 0.674 1.347 1.72 3.291 6.958 7.523

56 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/06

Rating n(0) 1 2 3 4 5

Aaa 135 0 0 0 0 0

Aa 610 0 0 0.19 0.19 0.898

A 1201 0 0 0.857 1.265 1.496

Baa 1136 0 0 0.32 1.238 1.238

Ba 551 0.197 0.197 2.74 9.873 9.873

B 1014 1.177 2.084 7.102 18.965 20.838

Caa-C 342 6.041 10.321 20.155 40.116 46.638

IG 3082 0 0 0.493 0.98 1.209

SG 1907 1.764 2.993 8.049 19.732 21.772

All 4989 0.654 1.075 3.047 7.102 7.91

1/1/07

Rating n(0) 1 2 3 4

Aaa 147 0 0 0 0

Aa 642 0 0.17 0.17 0.805

A 1201 0 0.804 1.185 1.399

Baa 1118 0 0.299 1.372 1.372

Ba 551 0 1.768 8.309 8.578

B 1163 0 4.661 17.066 20.666

Caa-C 328 5.98 18.438 41.432 45.843

IG 3108 0 0.456 0.98 1.191

SG 2042 0.959 6.045 18.456 21.245

All 5150 0.367 2.509 7.288 8.424

57 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/08

Rating n(0) 1 2 3

Aaa 176 0 0 0

Aa 734 0.556 0.556 1.081

A 1127 0.456 1.039 1.258

Baa 1096 0.472 1.082 1.082

Ba 538 1.163 7.082 7.317

B 1162 2.07 13.851 17.052

Caa-C 422 14.778 38.752 45.574

IG 3133 0.46 0.879 1.077

SG 2122 4.373 17.071 20.211

All 5255 2.029 7.282 8.642

1/1/09

Rating n(0) 1 2

Aaa 155 0 0

Aa 675 0 0.181

A 1136 0.181 0.387

Baa 1082 0.862 0.862

Ba 521 2.405 2.847

B 970 7.411 8.981

Caa-C 526 34.359 43.535

IG 3048 0.372 0.487

SG 2017 13.137 16.336

All 5065 5.423 6.76

58 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

EXHIBIT 42
Cumulative Issuer-Weighted Default Rates by Annual Cohort, 1970-2010 (Data in Percent)
1/1/10

Rating n(0) 1

Aaa 101 0

Aa 572 0

A 1132 0.194

Baa 1161 0

Ba 503 0

B 891 0.482

Caa-C 447 12.014

IG 2966 0.074

SG 1841 3.174

All 4807 1.283

59 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

Guide to Data Tables and Charts

In this section we briefly describe the interpretation of some of the Exhibits contained in this report.
Methodological details are discussed in separate sections below.

Exhibit 13 was derived by mapping Moodys ratings to a linear scale, then taking the median values of
the numerically mapped ratings.

Exhibit 22 shows average senior unsecured recovery rates by letter rating and year prior to default.
Each cell in the table indicates the average recovery rate on senior unsecured bonds with a specific
rating within T years of default. For example, the 36.06% two-year B recovery rate reported in Exhibit
22 indicates the average recovery rate on B rated issues that default at some time within a two-year
period, not recovery rate for issuers rated B exactly two years before default. 13 Together with issuer-
weighted average cumulative default rates, these multi-period recovery estimates are used to calculate
cumulative expected credit loss rates, as presented in Exhibit 23.

Exhibits 33 through 37 show issuer-weighted historical average default rates by rating category over
various investment horizons. These data were generated by averaging the multi-year default rates of
cohorts formed at monthly intervals. In addition to their being statements of historical fact, these data
are also useful proxies for expected default rates. For example, over a five-year period a portfolio of B-
rated issuers defaulted at a 26.5% average rate between 1983 and 2010 (see Exhibit 35). For an
investor with a five-year exposure to a B-rated debt obligation or counterparty, this estimate also
happens to be the best estimate of the expected risk of default for a B-rated exposure based on the
available historical data, particularly over long investment horizons.

Exhibit 41 shows average cumulative volume-weighted default rates by rating category. Whereas
issuer-based default rates weight each issuer equally, these data weight each issuer by the total volume
of defaulted debt; larger defaults receive relatively more weight. Average default rates based on debt
volume affected are less suitable estimates of expected default risk. One reason is that issuer default
volumes vary considerably over time. On average, a leveraged corporate issuer defaults on
approximately $300 million of bonds. However, that total has been as high as $30 billion
(WorldCom). Issuer-based default rates receive particular emphasis in the rating process because the
expected likelihood of default of a debt issuer holding a given rating is expected be the same regardless
of differences in the nominal sizes of the exposures.

Exhibit 42 shows the cumulative issuer-weighted historical default rates of cohorts formed at annual
intervals between the years 1970 and 2010 (January 1 of each year). These data are a subset of the data
used to calculate the issuer-weighted averages shown in Exhibits 34 (which, again, are based on cohorts
formed at monthly time intervals). The default rates in Exhibit 42 may be useful for scenario analysis.
For example, if one believed that future default rates for a given pool of issuers will behave as they did
in, say, 1997, then one can use the January 1, 1997 cohort cumulative default rates as proxies for
expected default rates.

13
The details of the calculation may be found in Moodys Special Comment, Recovery Rates on Defaulted Bonds and Preferred Stocks, December 2003.

60 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

Methodology and Data Sources

Moodys Definition of Default

Moodys definition of default is applicable only to debt or debt-like obligations (e.g., swap
agreements). Four events constitute a debt default under Moodys definition:

a) a missed or delayed disbursement of a contractually-obligated interest or principal payment

(excluding missed payments cured within a contractually allowed grace period), as defined in
credit agreements and indentures;
b) a bankruptcy filing or legal receivership by the debt issuer or obligor that will likely cause a miss or
delay in future contractually-obligated debt service payments;
c) a distressed exchange whereby 1) an obligor offers creditors a new or restructured debt, or a new
package of securities, cash or assets that amount to a diminished financial obligation relative to the
original obligation and 2) the exchange has the effect of allowing the obligor to avoid a
bankruptcy or payment default in the future; or
d) a change in the payment terms of a credit agreement or indenture imposed by the sovereign that
results in a diminished financial obligation, such as a forced currency re-denomination (imposed
by the debtor himself, or his sovereign) or a forced change in some other aspect of the original
promise, such as indexation or maturity. 14
Moodys definition of default does not include so-called technical defaults, such as maximum
leverage or minimum debt coverage violations, unless the obligor fails to cure the violation and fails to
honor the resulting debt acceleration which may be required. Also excluded are payments owed on
long-term debt obligations which are missed due to purely technical or administrative errors which are
1) not related to the ability or willingness to make the payments and 2) are cured in very short order
(typically, 1-2 business days).

Rating Migration Calculations

A rating migration matrix completely summarizes changes in credit ratings over a given time horizon.
The cells of the matrix are discrete-time estimates of rating migration probabilities. They show rate of
rating change measured at two points in time; e.g. the start and end of one year. When calculating
credit rating migration rates, Moody's treats rating changes, rating withdrawals, and defaults as
mutually exclusive states. For example, an issuer that is downgraded on the day of default is counted
only as a default, not a downgrade or a downgrade and default. Similarly, an issuer whose rating is
withdrawn on the day of default is counted as a default, not a withdrawal.

The probability that an issuers rating i held on cohort date y will transition to rating j (which includes
default and withdrawal) over a time horizon T is calculated as:

14
Moreover, unlike a general tax on financial wealth, the imposition of a tax by a sovereign on the coupon or principal payment on a specific class of government debt
instruments (even if retroactive) would represent a default. Targeted taxation on government securities would represent a default even if the governments action were
motivated by fairness or other considerations, rather than inability or unwillingness to pay.

61 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

y
nijy (T )
p (T ) =
ij
niy (0)
The weighted average rating migration rate for all cohorts y in the historical data set Y is calculated as:

n
yY
y
ij (T )
p ij (T ) =
n
yY
i
y
(0)

Default Rate Calculation

Moodys method for calculating cumulative default rates is a discrete-time approximation of the
nonparametric continuous-time hazard rate approach.15 Cumulative default rates are calculated from
marginal default rates, which represent the probability that an issuer that has survived in the sample
through a particular date will default over the next time interval (typically, one year) following that
date.

The marginal default rate for issuers holding rating i on cohort date y is the ratio of the number of
defaulting issuers in period t divided by the number of issuers exposed to the risk of default in period t:

xiy (t )
d iy (t ) =
niy (t ) xiy (t 1) 12 [ wiy (t ) + wiy (t 1)]
The denominator of the marginal default rate adjusts for defaults that occur prior to time interval t, as
well as rating withdrawals, w(t), that occur in periods prior to interval t and a small adjustment for
withdrawals that occur in time interval t. Cumulative default rates for investment horizons of length
T, D(T), are built up from the marginal default rates:

T
Diy (T ) = 1 [1 d iy (t )]
t =1

Or, expanding the above equation (and dropping indices for brevity):

T 1
D(T ) = d (1) + d (2)[1 d (1)] + d (3)[(1 d (1))(1 d (2))] + ... + d (T )( [1 d (t )])
t =1

In the first time period, a fraction of the credit exposures in the cohort either defaults or survives. The
credit exposures that survive period one may then go on to default or survive in period two; those that
survive period two may go on to default or survive in period three, etc. Because the time periods are
non-overlapping and the probability of default in each period is assumed to be independent, the T-
period cumulative default rate is defined as one minus the product of the T marginal survival rates.

15
See Moodys Global Credit Research Measuring Corporate Default Rates , November 2006

62 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

The calculation of the average cumulative default rate for rating class i,
Di (T ) , is derived from the

weighted average marginal default rates,

d i (t ) , calculated from all the available cohort marginal
default rates in the historical data set Y:

T
Di (T ) = 1 [1 d i (t )]
t =1

where

x
yY
i
y
(t )
d (t ) =
n
i y
i (t )
yY

The default rates calculated in multi-year rating migration matrices are not comparable to those
calculated using Moodys discrete-time hazard rate method described above. Rating migration matrices
account for rating withdrawals separately (in the column labeled WR) while the hazard rate method
incrementally adjusts the denominator of the marginal default rate to remove rating withdrawals.
Occasionally, withdrawal-adjusted rating migration matrices are calculated as follows:

y *
pijy (T )
p (T ) =
ij
(1 piwy (T ))

Using this method, all issuers whose ratings are withdrawn are removed. In effect, data for issuers
whose ratings are withdrawn is completely discarded. This method generally yields higher default rate
estimates than the hazard rate method. Hence, Moodys hazard rate-derived default rate estimates lay
between unadjusted migration matrix-derived default rates and withdrawal-adjusted migration matrix-
derived default rates.

Recovery Rate Calculations

Moody's estimates defaulted debt recovery rates using market bid prices observed roughly 30 days after
the date of default. Recovery rates are measured as the ratio of price to par value. Using post-default
prices to measure recovery (or its complement, loss severity) parallels common practice in the credit
default swaps market. Moreover, recovery rates measured in this way are most relevant for cash bond
investors who liquidate their holdings shortly after default as often required by their portfolio
governance rules or their own investment objectives. For investors holding defaulted securities until
ultimate resolution, prices observed shortly after default are generally accepted as the market's estimate
of discounted expected ultimate recovery rates.

The alternative approach of directly measuring ultimate realized recoveries presents a number of
estimation challenges, including the appropriate discount rate to apply to cash-flows and valuing the
assets used to pay creditor claims, which may include illiquid new securities (e.g., equity and derivative
instruments) as well as physical assets. The table below defines the various ways Moody's calculates

63 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

recovery rates.16 For the purposes of measuring expected credit loss rates, we rely on issuer-weighted
mean recovery rates.

Statistic Definition
Issuer-Weighted Mean They are derived by estimating mean recovery rates for each issuer, then averaging them
Recovery Rates across issuers. They are useful for predicting recovery rates for portfolios that are well
diversified across issuers.
Value-Weighted Mean They represent the average of recovery rates on all defaulted issuers, weighted by the face
Recovery Rates value of those issues. These estimates are useful for predicting recovery rates on the market
portfolio.
Issuer-Weighted They are estimated as median of issuer-weighted recovery rates and are used for predicting
Median Recovery Rates the most likely recovery rate for a randomly selected issuer.
Issue-Weighted Mean They are estimated using recovery rates for each issue and taking the average of all issues.
Recovery Rates While this measure is widely reported, it is useful only for predicting the average recovery rate
on a portfolio of default bonds diversified across issues but without reference to issuer or
issue size.

Credit Loss Rate Calculations

Moodys credit ratings are opinions of relative expected credit losses. Credit losses are therefore a
function of both probability of default (PD) as well as the severity of default (LGD). The expected
credit loss rate for rating category i is calculated as the product of the T-horizon average issuer-
weighted default rate and the T-horizon average issuer-weighted senior unsecured loss severity rate
(where r(T) is the average senior unsecured recovery rate at horizon T):

li (T ) = D i (T ) (1 r i (T ))

CAP Curve and Accuracy Ratio

In addition to assigning low ratings to issuers that ultimately default, the effectiveness of a rating
system depends on its ability to assign high credit ratings to issuers that do not default. In other words,
an efficient rating system is able to separate the low credit risks from the high credit risks. A metric
designed to measure this aspect of ratings performance is the cumulative accuracy profile (CAP)
plot.17 The CAP plot graphs the cumulative proportion of defaults from a portfolio (the y-axis)
against the proportion of issuers exposed to the risk of default (the x-axis), sorted by riskiness. A rating
system that randomly identified defaults from non-defaults would plot a line directly on the 45-degree
line. The more powerful the discriminatory power of the rating system, the further the CAP curve
bows toward the top left corner.

CAP curves are powerful tools for visualizing rating performance, but can be unwieldy from
making comparisons over many time periods. A summary measure of rating accuracy that can be
derived from the CAP curve is the accuracy ratio (AR). The accuracy ratio is the ratio of the area
between the CAP curve and the 45-degree line to the total area above the 45-degree line divided
by survival rate (i.e. 1-default rate). A rating system that perfectly differentiates defaults from non-

16
This table is derived from Moodys Special Comment Recovery Rates on Defaulted Bonds and Preferred Stocks, December 2003
17
For a more detailed discussion of rating accuracy metrics see Moodys Global Credit Research "Measuring the Performance of Corporate Bond Ratings", November
2006

64 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

defaults would score an AR of 100%, while a rating system that had zero predictive ability would
score 50%. 18

Data Sources

Moodys bases the results of this study on its proprietary database of ratings and defaults for both
financial and non-financial corporate bond and/or loan issuers. Sovereign and sub-sovereign debt
issuers, structured finance securities, private placements, and issuers with only short-term debt ratings
are excluded unless otherwise noted. In total, Moody's data covers the credit experiences of
approximately 20,000 corporate issuers that sold long-term public debt at some time between 1920
and 2010. As of January 1, 2010 roughly 5,000 corporate issuers held a Moodys long-term bond,
loan, or corporate family rating.

Moodys database of corporate defaults covers approximately 5,000 long-term debt defaults by issuers
both rated and non-rated by Moodys. Additional data sources, such as Barclay Fixed Income Index
data, supplemented Moodys proprietary data in the construction of the aggregate dollar volume-
weighted default rates. Defaulted debt pricing data was derived from Bloomberg, Reuters, IDC,
Markit, and TRACE. The majority of these market quotes represent an actual bid on the debt
instrument, although no trade may have occurred at that price. Over the 1982-2010 period, the
dataset consists includes post-default prices for roughly 6,000 defaulted instruments issued by over
2,700 defaulting corporations. Moody's makes the 1970-2010 credit rating, default, and recovery rate
data used in this study available through its Default and Recovery Database (DRD).

18
The accuracy ratio possesses the same information about discriminatory power as the area und the receiver-operator characteristics curve (AROC) and the Gini
coefficient. Each measure quantifies rank rather than scale.

65 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010
 GLOBAL CORPORATE FINANCE

Report Number: 131388

Author Production Associates

Sharon Ou Wendy Kroeker
Joaquin Jimenez

2011 Moodys Investors Service, Inc. and/or its licensors and affiliates (collectively, MOODYS). All rights reserved.
CREDIT RATINGS ARE MOODY'S INVESTORS SERVICE, INC.'S (MIS) CURRENT OPINIONS OF THE RELATIVE FUTURE
CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MIS DEFINES CREDIT RISK AS THE
RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY
ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK,
INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS ARE NOT
STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS DO NOT CONSTITUTE INVESTMENT OR FINANCIAL
ADVICE, AND CREDIT RATINGS ARE NOT RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES.
CREDIT RATINGS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MIS
ISSUES ITS CREDIT RATINGS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN
STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE
OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED,
DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN
PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODYS PRIOR WRITTEN
CONSENT. All information contained herein is obtained by MOODYS from sources believed by it to be accurate and reliable. Because
of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided AS IS
without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of
sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources.
However, MOODYS is not an auditor and cannot in every instance independently verify or validate information received in the rating
process. Under no circumstances shall MOODYS have any liability to any person or entity for (a) any loss or damage in whole or in part
caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the
control of MOODYS or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation,
analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special,
consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODYS is advised
in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial
reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be
construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each
user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding
or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY
MOODYS IN ANY FORM OR MANNER WHATSOEVER.
MIS, a wholly-owned credit rating agency subsidiary of Moodys Corporation (MCO), hereby discloses that most issuers of debt
securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have,
prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to
approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MISs ratings and
rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between
entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted
annually at www.moodys.com under the heading Shareholder Relations Corporate Governance Director and Shareholder
Affiliation Policy.
Any publication into Australia of this document is by MOODYS affiliate, Moodys Investors Service Pty Limited ABN 61 003 399 657,
which holds Australian Financial Services License no. 336969. This document is intended to be provided only to wholesale clients
within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you
represent to MOODYS that you are, or are accessing the document as a representative of, a wholesale client and that neither you nor
the entity you represent will directly or indirectly disseminate this document or its contents to retail clients within the meaning of
section 761G of the Corporations Act 2001.
Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moodys Japan K.K. (MJKK) are MJKKs current
opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, MIS in the
foregoing statements shall be deemed to be replaced with MJKK.
MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moodys Overseas
Holdings Inc., a wholly-owned subsidiary of MCO.
This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or
any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision
based on this credit rating. If in doubt you should contact your financial or other professional adviser.

66 FEBRUARY 28, 2011 SPECIAL COMMENT: CORPORATE DEFAULT AND RECOVERY RATES, 1920-2010