Distressed Sov Debt Pitch
I am trying to learn how to pitch and think about stressed/distressed sovereign credits. Does anyone have any good resources (books/prior pitches) that would be helpful to learn from and reference as examples. I would love to learn how to think about the r/r and how to situate key macro drivers from a modeling perspective. Any help is appreciated, thanks!
what type of HFs trade sovereign credit? Macro/Distressed? Curious of examples of these trades.
Distressed HF. See Argentina, Ukraine etc.
Argentina understandable, but Ukraine must be a joke
what shops usually make these plays, and to what frequency? Are there PMs that specialize in sovereign credit?
Delete.
Bump, curious to learn.
Pressed for time but let me give it a shot
- risk/reward is straightforward...like other investments generate scenarios based outcome, probability weigh them and see if the return looks compelling on a risk adjusted basis
- analysis is a bit different than a corporate where in the corporate's case you'll be doing some kind of asset coverage analysis, but sovereigns can't gov bankrupt and be sold off for parts generally speaking so the way it typically works itself out is they will offer some kind of a new bond/instrument to existing holders
- the motivation for doing so is you can be shut out from international economic activity but there are rare cases where they just don't settle and you are subject to marks/supply & demand bond dynamics, and future speculation
- now how to figure out what the recovery value will be/what they will pay? 1.) theoretical is to figure out what they can pay on an NPV basis using macro input and compare it to restructured debt; and/or 2.) figuring out what a new bond i.e. coupon/haircut/timing would be worth relative to a par claim
not a lot of materials outside one off sellside docs but bedrock of modeling would be debt sustainability analysis so grab the IMF paper on that
Exercitationem corporis eos qui ut beatae. Ipsum quis sapiente quis corrupti.
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