Introduction
The recovery deck is the comprehensive valuation and recovery analysis presentation that restructuring investment bankers produce throughout every restructuring engagement. The deck integrates enterprise valuation, claims quantification, recovery analysis, sensitivity testing, and methodology disclosure into a single document that anchors plan negotiation, mediation sessions, expert testimony, and ad hoc group internal deliberations. Producing recovery decks is one of the highest-volume activities in restructuring practice, with junior bankers spending material time on iterative deck production while senior bankers use the work product to drive case strategy and negotiate with stakeholders.
The standard format has evolved through decades of practice and is well-established across the major restructuring banks. Houlihan Lokey, PJT Partners, Evercore, Lazard, and Moelis all produce recovery decks following broadly similar structures, with each firm having its own conventions on visual presentation, methodology weighting, and emphasis. Houlihan Lokey's Financial Restructuring segment is particularly known for the rigor of its recovery deck work, with the firm's expert testimony practice (over 1,200 financial professionals across the firm) supporting deck-based testimony in major contested cases. The other major restructuring banks have developed similar capabilities, with the recovery deck being a defining work product of the practice.
This article walks through:
- the standard recovery deck structure
- the production process that produces the deck across multiple iterations
- the use cases that drive how the deck gets deployed
- the strategic considerations that distinguish well-produced decks from poor ones
What the Recovery Deck Actually Is
- Recovery Deck
The comprehensive valuation and recovery analysis presentation produced by restructuring investment bankers throughout a Chapter 11 case or out-of-court restructuring. The standard format runs 30-100+ pages and integrates enterprise valuation across multiple methodologies (DCF, comparable companies, precedent transactions, asset-based for liquidation context), claims quantification by class, recovery analysis with low/mid/high enterprise value sensitivity cases, par-vs-recovery tables showing class-by-class recovery percentages, Chapter 7 liquidation comparison for Section 1129(a)(7) demonstration, form-and-timing detail for each class's recovery, and methodology appendix documenting all assumptions and inputs. Used across the case lifecycle: plan negotiation, mediation sessions, expert testimony at confirmation hearings, ad hoc group internal deliberations, and as exhibits to disclosure statements. Produced by RX banks (Houlihan Lokey, PJT, Evercore, Lazard, Moelis on the largest cases) with iterative production typically running 5-15 versions across the engagement.
The Standard Deck Structure
The standard recovery deck follows a consistent structure across major restructuring banks.
| Section | Typical Page Count | Content |
|---|---|---|
| Executive Summary | 2-5 | Key takeaways: fulcrum class identification, mid-case recoveries, plan-vs-Chapter-7 comparison, recommended path |
| Situation Overview | 3-7 | Company history, financial deterioration timeline, distress catalysts, current status |
| Capital Structure | 2-4 | Detailed listing of all funded debt, lease obligations, pension obligations, contingent liabilities; par amounts and security characteristics |
| Financial Projections | 5-10 | Five-year P&L, balance sheet, cash flow projections; multiple scenarios (management, creditor, downside) |
| Valuation Summary | 5-10 | DCF, comparable companies, precedent transactions, asset-based methodologies; weighted enterprise value range |
| DCF Analysis | 5-10 | Detailed DCF model output with discount rate buildup, terminal value calculation, sensitivity analysis |
| Comparable Companies | 3-5 | Public peer multiples, distress-factor adjustments, applied multiples and resulting EV range |
| Precedent Transactions | 2-4 | Distressed M&A precedents (where available), transaction multiples, applied to subject company |
| Asset-Based / Liquidation | 3-5 | Asset categorization with OLV/FLV recovery percentages; total liquidation value |
| Recovery Analysis | 5-10 | Par-vs-recovery table with class-by-class recovery percentages; low/mid/high cases |
| Chapter 7 Comparison | 3-5 | Section 1129(a)(7) liquidation analysis at creditor level; comparison to plan recoveries |
| Form and Timing | 2-4 | Detail on each class's recovery (cash, debt, equity, warrants, deferred); pricing and economic terms |
| Methodology Appendix | 3-7 | Documentation of all valuation assumptions, comparable companies selection, discount rate components |
| Sensitivity Analysis | 3-5 | Recovery percentages across enterprise value, discount rate, multiple, and projection sensitivities |
The total deck typically runs 40-80 pages for mid-cap engagements and 80-150 pages for complex large-cap engagements with contested valuations.
The Production Process
Recovery decks are produced through an iterative process across the engagement. The typical sequence runs through several distinct stages.
Initial diagnostic deck (Weeks 1-4)
The RX bank produces an initial valuation and recovery analysis based on management projections, public capital structure data, and preliminary diligence. The first deck is typically used internally and for early discussions with major stakeholders. Usually 30-50 pages.
Refined valuation deck (Weeks 4-12)
After management diligence and stakeholder outreach, the deck expands to incorporate refined projections, multiple valuation methodologies, and detailed recovery analysis. Used in pre-petition negotiation and DIP shopping. Typically 50-80 pages.
RSA-supporting deck (Weeks 8-20)
The deck supports the restructuring support agreement negotiation, with detailed recovery analysis under the proposed plan terms and sensitivity cases showing how plan economics vary. Often forms the basis for the disclosure statement valuation analysis.
Disclosure statement valuation (Months 4-9 post-petition)
The deck is formalized into the valuation analysis included in the disclosure statement. The presentation is more conservative than internal decks because it is filed with the bankruptcy court and subject to creditor review.
Plan confirmation expert deck (Months 6-12 post-petition)
For contested cases, the deck is formalized further into expert testimony materials that the bank's senior banker uses to support the valuation at the plan confirmation hearing. Includes detailed methodology disclosure, response to opposing experts, and rebuttal sensitivity analysis.
Mediation and negotiation deck variants (Throughout case)
Specific deck variants are produced for mediation sessions, ad hoc group internal meetings, sale process discussions, and other case-specific needs. Each variant is tailored to the specific audience and purpose.
Use Cases Across the Case Lifecycle
Recovery decks serve multiple purposes throughout the case:
- Plan negotiation. The deck is the primary substantive basis for plan-economics negotiation. Senior creditors, junior creditors, equity, and the debtor each use the deck to advocate their preferred outcomes, with the multi-scenario framework giving each constituency analytical support for different positions. Negotiations typically converge around the mid-case recovery levels with adjustments based on each party's negotiating leverage.
- Mediation. Court-appointed mediators (often retired bankruptcy judges) use recovery decks to evaluate the parties' positions and facilitate convergence. The mediator typically reviews the decks of all major parties, identifies the substantive disagreements (usually concentrated around enterprise value), and pushes the parties toward a compromise that the multi-scenario framework supports.
- Expert testimony. At plan confirmation hearings (and in some Section 363 sale hearings), the bank's senior banker testifies on the valuation work documented in the deck. The testimony is subject to cross-examination by opposing counsel, with the methodology, inputs, and conclusions all open to challenge. Sophisticated testifying experts (commonly Houlihan Lokey managing directors, similar at PJT/Evercore/Lazard/Moelis, plus dedicated valuation firm partners at Stout, Duff & Phelps, AlixPartners) maintain extensive case files supporting their testimony.
- Ad hoc group internal deliberations. Creditor-side ad hoc groups use recovery decks to align internally on plan strategy. The deck shows what recovery the group's members can expect under different plan structures, supporting the group's negotiating position and helping individual members evaluate whether to support or oppose specific proposals.
- Disclosure statement attachments. The valuation analysis section of the disclosure statement is typically a condensed version of the recovery deck. The deck content is reformatted for the disclosure statement audience (creditors deciding how to vote), with methodology disclosure expanded to support the "adequate information" standard under Section 1125.
Black-Scholes Valuation of Plan Warrants and CVRs
Recovery decks frequently value option-like instruments distributed under plans: equity warrants to fulcrum-adjacent classes and CVRs tied to litigation or milestone events. These are out-of-the-money or contingent at issuance, so intrinsic-value methods value them at zero; bankers use Black-Scholes-Merton (warrants) or binomial-tree/Monte Carlo (path-dependent CVRs) to estimate time value.
| Input | Typical Range for Plan Warrants |
|---|---|
| Spot (S) | Implied per-share equity value at confirmation |
| Strike (K) | At-the-money to 25% out-of-the-money |
| Tenor (T) | 5-7 years |
| Risk-free rate (r) | Treasury yield matching tenor |
| Implied volatility (σ) | 45-70% (from comparable-company option markets) |
Typical plan-warrant time value runs 8-15% of implied per-share equity, with the percentage depending on moneyness, tenor, and volatility. CVR payoffs (litigation thresholds, asset-sale targets, EBITDA milestones) require path-specific probability modeling rather than closed-form Black-Scholes. The CVR's expected value is the probability-weighted sum of payoff scenarios, discounted to the effective date.
The Mallinckrodt 2020-2022 plan, Tribune Media plan, and Purdue Pharma's revised 2025 plan (with up to $500 million in contingent international-pharmaceutical-sale proceeds) all required option-pricing valuation in the recovery deck. The inputs are heavily contested: recipient classes push for higher volatility and longer tenors; opposing classes push for the reverse.
Strategic Considerations
Several specific considerations distinguish well-produced from poorly produced decks:
- Methodology rigor. Well-produced decks use multiple valuation methodologies (DCF, comparable companies, precedent transactions, asset-based) with explicit weighting and reconciliation. Poorly produced decks rely on a single methodology or use multiple methodologies without explaining how they reconcile.
- Assumption transparency. Well-produced decks explicitly document all key assumptions (discount rate buildup, comparable companies selection, projection adjustments, terminal value methodology) so that opposing parties can evaluate and challenge specific inputs. Poorly produced decks bury assumptions or use undisclosed analytical shortcuts.
- Sensitivity comprehensiveness. Well-produced decks include sensitivity analysis across all key value drivers (revenue growth, margins, discount rate, multiple, terminal value, projection adjustments) with the resulting recovery percentages. Poorly produced decks include only single-point estimates or limited sensitivity ranges.
- Visual clarity. Well-produced decks use clear visual presentation (consistent tables, color coding for sensitivity ranges, executive summaries with key takeaways) that makes the analysis accessible to non-specialists. Poorly produced decks bury key conclusions in dense tables or unclear visualizations.
- Internal consistency. Well-produced decks ensure that all sections tell a coherent story (the executive summary matches the recovery analysis matches the methodology appendix). Poorly produced decks have internal inconsistencies that opposing parties exploit during negotiation or testimony.
The recovery deck is the central analytical work product of restructuring investment banking and a defining feature of the practice. Building, refining, and presenting recovery decks is what RX bankers do; understanding the standard structure, the production process, the use cases, and the strategic considerations is essential foundational knowledge for the practice. The deck is also the most visible output of the work, with senior bankers' careers built on the quality of the recovery decks they produce and present.
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