Fulcrum analysis and implied returns
Which class is the fulcrum, and what it returns.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: fulcrum analysis and implied returns.Updated 1 October 2026
Part of credit and restructuring models, with the models, labs and guides around it.
What it does
Recovery by class turned into a decision. The fulcrum security is the most senior class not paid in full; it moves down the capital structure as value rises, and it is the class that receives the reorganised equity. Dividing each class’s recovery by its market price gives the return implied by buying it today, and comparing that across the value range shows which value the market is pricing and where the asymmetry is.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 12–15: First lien, Second lien notes, Senior unsecured notes, Subordinated notes
- Returns, rows 6–11: First lien, Second lien notes, Senior unsecured notes, General unsecured claims…
- Returns, row 14: Fulcrum security: the most senior class not paid in full
- Returns, rows 17–20: First lien, Second lien notes, Senior unsecured notes, Subordinated notes
- Returns, rows 23–24: First lien: value at which its collateral alone pays it in full, Second lien: value at which collateral alone reaches through its lien
- Summary, rows 5–12: Enterprise value, EV / EBITDA, First lien recovery, Second lien recovery…
- Summary, rows 15–16: First lien recovery, low case, Second lien recovery, high case
What a reviewer looks for
- A fulcrum named at one value only.
- Returns quoted without the time to emerge.
- A class called the fulcrum when a more senior class is also impaired.
Learn it, then build it
Vocabulary: Fulcrum Security, Cents on the Dollar, Distressed Debt.