Creation value concept in distressed valuation
Is anyone familiar with the "creation value" concept in distressed valuation? Ie. if the current capital structure is 500 senior secured term loan, and 500 of unsecured subordinated notes.
Say you purchase the notes for $0.50 on the dollar. Often it is referred to as creating the enterprise value at 750, ie. the 500 of debt that is senior to you and the 250 that you put in to purchase the subordinated debt.
Anyone familiar with the implications and uses? Any color helpful.
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