Fitch: US TMT Companies Lower Reorganization Multiples in Bankruptcy Compared to Other Corp Sectors
NEW YORK--(BUSINESS WIRE)--U.S. companies in telecom, media and technology (TMT) sector that defaulted between 2008-2013 reorganized at a median 5.6x enterprise value to EBITDA multiple, which is lower than the cross-U.S. corporate sector median of 6x, according to a Fitch Ratings report. More than two-thirds of the sample of TMT reorganizations were completed in the 4x-7x range.
For the 42 TMT companies in Fitch's comprehensive TMT bankruptcy valuation and recovery case study report, the average span from bankruptcy filing date to plan confirmation date was seven months, compared with an average of 11 months in a broader cross-sector group of 119 U.S. corporate bankruptcy cases analyzed by Fitch. In several pre-packaged instances, the business was fundamentally sound, but capital structure problems could not be resolved out of court.
Twenty-five of the 42 TMT bankruptcies occurred in 2009 or 2010. Declines in advertising prices and volumes drove the broadcasting and advertiser defaults in these years. In other cases, defaults occurred due to more permanent secular declines in various businesses. Cyclical and secular challenges were compounded by high leverage and adverse credit markets.
Nearly half of the first-lien debt issue had recoveries of at least 91%, while recoveries for the more junior debt issues were widely dispersed and relatively mediocre. The average first lien issue recovery was 76%.
Fitch summarizes FCC licensing issues that can have an effect on reorganizations in the sector and identifies potential future defaulters based on low debt prices and wide spreads in this special report.
The full report 'Telecom, Media and Technology Case Studies in Bankruptcy Enterprise Values and Creditor Recoveries is available at 'www.fitchratings.com.' This is a continuation of a series of periodic reports examining bankruptcy and recoveries across various U.S. corporate sectors.
These case study reports as well as other Fitch Leveraged Finance commentaries are also available on the Fitch website.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: Telecom, Media and Technology Bankruptcy Enterprise Values and Creditor Recoveries (Fitch Case Studies - Edition V of a Recurring Series)