...Low Recovery Infrequent: Fitch Ratings identified 13 defaulters with bankruptcy reorganization (or liquidation) plans that provided first-lien issue distributions of less than 30% of par value among 181 Fitch bankruptcy case studies. Data was gathered from U.S. bankruptcy court docket filings. This range is equivalent to Fitch's two lowest Recovery Rating categories, RR5 and RR6. Another 12 defaulters had issues with recovery rates of 31%¡50%. Fitch studied these cases to focus on the drivers of low first-lien issue rates. Superior Recoveries the Norm: The benefits from a first-lien pledge of assets and relatively senior position within capital structures provide claimholders with strong recoveries in most bankruptcies, averaging about $0.80 over the long term. Fitch delves into the drivers and patterns of the atypical outlier issues that realized poor recoveries. Most of the weakest recoveries were driven by several of the negative factors listed below: cyclical trough, effective subordination,...
