OREANDA-NEWS. Fitch Ratings has updated its Road to Recovery Ratings report, examining the key drivers of debt issue Recovery Rating (RR) estimates for U.S. Leveraged Finance issuers.

The report deconstructs enterprise valuation (EV) analyses by separating the key input assumptions, including going-concern (GC) EBITDA estimates and EV multiples for hypothetical reorganization scenarios. Fitch analyzes the effects of capital structure and leverage on RRs for the debt instruments of 211 U.S. issuers.

'Fitch's recovery expectations on unsecured debt issues improved this year with fewer 'RR6' ratings (10% or less or par value) and more 'RR4s' (31% - 50%),' said Sharon Bonelli, Senior Director of Leveraged Finance. 'This is likely due to lower total leverage ratios, expectations of higher enterprise valuation and modest increases in going-concern EBITDA assumptions.'

However, first-lien issue recovery prospects deteriorated slightly with fewer concentrated on the 'RR1' end of the scale as first lien leverage increased.

Fitch believes most U.S. companies would maximize recovery values by continuing to operate as GCs following emergence from bankruptcy. GC valuations were higher than liquidation values in 85% of the RR analyses in this year's report. This is consistent with actual outcomes of Chapter 11 cases.

The full report, 'U.S. Leveraged Finance: Road to Recovery Ratings - Cross Sector Analysis of Recovery Assumptions and Results,' is available at www.fitchratings.com.