Fitch: US Auto Cos Had Lower Reorganization Multiples in Bankruptcy Compared to Broader Corp. Sector

CHICAGO--()--U.S. automotive sector companies included in Fitch Ratings' analysis that defaulted between 2005 and 2013 reorganized at a median 4.3 times (x) median enterprise value to EBITDA multiple, lower than the cross-U.S. corporate sector median of 5.9x, according to a new Fitch report.

The lower auto sector median reflects the deep sector distress experienced during the auto default wave, combined with uncertain timing and the speed of recovery when many of the auto enterprise valuations were completed. The filings were concentrated in the late 2007 - 2009 period.

The key drivers of automotive sector bankruptcies were consistent across many companies during the recession, namely declines in vehicle demand and high raw material and labor costs. Furthermore, adverse credit markets made financing difficult for car buyers and created liquidity problems for manufacturers.

The median ultimate recovery rate for first-lien debt claims in the auto sector cases analyzed by Fitch was 76%, which is close to the long-term rate across all corporate sectors. First-lien recoveries held up well despite the adverse operating and market environment at the time of many of the reorganizations. Conversely, many of the junior debt claims sustained significant losses. Creditors lower in the capital structures bore the brunt of losses resulting from constrained valuations and high pre-petition debt leverage.

The industry has demonstrated broad but considerable improvement since the start of the economic recovery. Fitch's 2015 rating outlook for the U.S. automotive industry is positive.

The full report 'Automotive Sector Bankruptcy Enterprise Value and Creditor Recoveries' is available at 'www.fitchratings.com.' This is part of an ongoing series by Fitch's U.S. Leveraged Finance team analyzing bankruptcies and recoveries across various U.S. corporate sectors.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: Automotive Sector Bankruptcy Enterprise Value and Creditor Recoveries (Fitch Case Studies -- Edition VI)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=787428

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Contacts

Fitch Ratings
Sharon Bonelli
Managing Director
Leveraged Finance
+1 212-908-0581
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
John Shen-Sampas
Director
+1 212-612-7881
or
Stephen Brown
Senior Director (U.S. auto sector lead)
+1 312-368-3139
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com

Contacts

Fitch Ratings
Sharon Bonelli
Managing Director
Leveraged Finance
+1 212-908-0581
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
John Shen-Sampas
Director
+1 212-612-7881
or
Stephen Brown
Senior Director (U.S. auto sector lead)
+1 312-368-3139
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com