hard · Corporate Credit Analysis cap-structure

Using a simple structural/waterfall lens with the market EV as the distributable value, which statement about the second-lien notes is correct?

1. The second-lien notes are the fulcrum security: value covers the first lien ($300m) fully and leaves $320m for the $400m second lien, so the second lien recovers 80% and the unsecured tranche recovers nothing
2. The second-lien notes recover the full 100% because the $620m enterprise value comfortably exceeds the combined $300m first-lien claim, and any shortfall is absorbed entirely by junior unsecured holders
3. The second-lien notes are the fulcrum security, recovering roughly 64%, computed as the $400m second lien's pro rata share of the combined $650m of total secured first- and second-lien debt claims outstanding
4. The second-lien notes recover about 45%, since the $620m enterprise value is assumed to be split pro rata across the entire $950m of total funded debt outstanding, giving second lien $400m/$950m of distributable value

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