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High Leverage Drives Bankruptcies in U.S. Gaming, Leisure, Lodging and Restaurant Sector
Recent bankruptcies in the U.S. gaming, leisure, lodging, and restaurant (GLLR) sector reflect elevated leverage, higher borrowing costs, persistent cost inflation and softer discretionary consumer spending, Fitch Ratings reported. Pressures have been most acute for highly leveraged companies, particularly those serving more budget-constrained consumers.
Leveraged loan default activity in GLLR increased between 2022 and 2024 after remaining consistently below 0.5% since 2015. Issuers in the sector account for 6.8% of Fitch’s U.S. High Yield Default Universe and 6.0% of its U.S. Institutional Leveraged Loan Default Universe.
Most first-lien lenders fared well in GLLR bankruptcies. Among the 84 issuers analyzed, median and average recovery rates were 88% and 71%, respectively, while recoveries on second-lien and unsecured claims were more varied. GLLR bankruptcies also produced above-average exit multiples compared with the cross-sector median in Fitch’s U.S. corporate bankruptcy database.
Of 59 GLLR case studies compiled by Fitch, 56 remain going concerns and have avoided liquidation.
- ◦Sale/Acquisition
- ◦Financing
