At a glance
- The 43% level was the lowest in Fitch's 2016–25 dataset and well below the period's 62% average.
- Bates cites a J.P. Morgan average recovery of 33% as of July 31, 2026, and writes that first-lien recoveries averaged 61% over the past 25 years.
- For advisors holding senior-secured loan funds, the number to test is the recovery assumption behind a fund's yield.
Fitch Ratings found that first-lien recoveries for companies with at least $100 million of first-lien term-loan and bond debt that emerged from bankruptcy in 2025 averaged 43%, weighted by debt principal. The 43% level was the lowest in Fitch's 2016–25 dataset and well below the period's 62% average. Morningstar — Financial Advice reported the figure on Nov. 13, 2026, citing an Oct. 8 article by Shiloh Bates, a partner and chief investment officer at Flat Rock Global.
Bates cites a J.P. Morgan average recovery of 33% as of July 31, 2026, and writes that first-lien recoveries averaged 61% over the past 25 years. The two levels are not directly comparable: Fitch's sample covers bankruptcy emergence and includes bonds alongside first-lien loans.
For advisors holding senior-secured loan funds, the number to test is the recovery assumption behind a fund's yield. Bates traces the erosion to the loan market's own growth: the US leveraged loan market expanded to roughly $1.5 trillion by the end of 2025 from about $500 billion in 2010, giving borrowers more negotiating power. That competition, he writes, produced capital structures leaving senior lenders less protection beneath them and loan agreements giving lenders fewer chances to intervene before a borrower deteriorates. He recalls that an expected recovery of about 80 cents on the dollar was a reasonable starting point when he began working for collateralized loan obligation managers in 2000.
Reported by the Products & portfolios desk from Morningstar — Financial Advice. Published . Corrections