...Unsecured-Like Recovery Rates: Recovery rates for second-lien debt issues averaged 45% and had a median rate of 34% according to Fitch Ratings' analysis of 62 issue recovery outcomes in bankruptcy cases filed between 2006 and 2013. These rates are close to average recoveries on unsecured debt and well below historical norms for first-lien debt. There was a wide dispersion around the 45% mean, as recoveries tended to be either very strong or quite poor: 33% of the issues recovered 91% or more of their pre-petition debt claim amount and 34% received less than 10%. Highly Leveraged: Second-lien financing is a tool favored by more aggressively leveraged companies. The inclusion of a junior-lien tranche enables companies to maximize secured debt. Total debt to LTM EBITDA-based leverage for the 28 second-lien issuers included in Fitch's capital structure analysis averaged 9x. Median leverage ratios through the first-lien and second-lien debt levels were 3.5x and 5.3x, respectively. Average second-lien...
