U.S. ABL Facilities Demonstrate Full Recovery in Bankruptcy

According to a new Fitch Ratings report, U.S. asset-based lending (ABL) facilities present in a defaulted issuer’s capital structure demonstrated complete recoveries in a bankruptcy scenario.

Fitch reviewed 12 recent U.S. bankruptcies – five liquidations and seven reorganizations – where the debtors’ pre-petition capital structure included ABL facilities. The outcomes validate full recovery prospects for ABL facilities regardless of whether resolution occurred via a liquidation or going-concern route.

Fitch attributes these recovery outcomes to a mix of three key factors:

  1. The over-collateralized status of pre-petition ABLs;
  2. A security interest in liquid collateral that was much sought-after by debtor-in-possession (DIP) lenders as well;
  3. Lender dominion over cash which helped reduce the ABL balances (or claim size). The report also delves into related themes such as the role of liquidators that submit equity-bids in bankruptcies and the unique advantages bestowed by the cash dominion feature both before and following a bankruptcy event.


The cases covered by the Fitch report included:

  • Liquidations: The Bombay CompanyCircuit City StoresEddie Bauer HoldingsGottschalks, and Linens ‘N Things.
  • Going Concerns: Boscov’sDelta AirlinesVisteonSpectrum BrandsNebraska Book CompanyDelta Petroleum and Source Interlink Companies.

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