Fitch: Higher-Than-Average Multiples, Stronger Recoveries Amid Industrial/Manufacturing Bankruptcies
By Business Wire News
Industrial- and manufacturing-sector bankruptcies are characterized by high valuation multiples relative to the cross-sector corporate average, according to Fitch Ratings’ latest bankruptcy enterprise valuation and recovery case study report.
The median multiple of reorganization enterprise value/forward EBITDA forecast for industrial and manufacturing companies was 6.3x, modestly higher than the 6.0x cross-sector corporate average. Among Fitch’s sample, 39% of industrial/manufacturing cases reorganized at a multiple above 7x.
First-lien recoveries among industrial/manufacturing bankruptcies were also significant, averaging 82% of par value. In addition, 68% of first-lien debt claims received distributions of 91% or more of par value.
“The industrial and manufacturing sector is generally comprised of a diverse set of companies with a variety of business risks and commodity exposures that led to bankruptcies for idiosyncratic reasons,” said Sharon Bonelli, Senior Director, Leveraged Finance.
Prominent bankruptcy drivers in Fitch’s sample included flawed business models, production problems, accounting issues, high-cost raw material, market access issues, and downturn-induced declines in demand. More than 50% of Fitch’s sample defaulted during the recessionary period 2008-2010. Many (85%) of these cases had assets of $1 billion or less and were unable to access new capital to sustain their highly leveraged capital structures during the downturn.
The full report, ‘Case Studies in Industrial and Manufacturing Bankruptcy Enterprise Value and Creditor Recoveries,’ is available at www.fitchratings.com. The report analyzes 27 industrial and manufacturing bankruptcies.
Additional information is available on www.fitchratings.com.
Industrial and Manufacturing Bankruptcy Enterprise Value and Creditor Recoveries (Fitch Case Studies – Edition IX)
Fitch Ratings, Inc.
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New York, NY 10004
Alyssa Castelli, +1 212-908-0540