The recovery rate is the estimated percentage of a loan or liability that will still be repaid to creditors in the event of a default or bankruptcy.
In a firm’s capital structure, the recovery rate on senior secured debt will often be the highest recovery rate, while shareholders can often expect a recovery rate close to zero.
After the wave of defaults that followed the 2008 financial crisis, the estimated debt recovery rate was around 49.5%, lower than the 51.1% recovery rate seen in the previous decade.