The financial policy highly leveraged firms (HLFs) commonly follow implies uncertain leverage. Explicit allowance for this characteristic leads to two complementary pricing models. A recursive formula for the value of HLF follows from applying the adjusted present value (APV) approach to uncertain tax shields. This formula is used to evaluate the robustness of the simple APV rule and other valuation approaches used in practice. The HLF equity is also modeled as a call option with uncertain exercise price, which provides a natural way of dealing with uncertain leverage and complements the APV approach. Both models require inputs that are usually observable. The models developed in this article apply to the valuation of firms undergoing financial restructuring, as well as to leveraged buyouts and project financing. In all these situations, firms deploy all or a significant portion of their free cash flow to debt reduction and their leverage ratio is uncertain.