[Help Needed] Case Study w/ Special Situations / Distressed Generalist
All: I have been prepping for a case study this weekend and could use a hand in how to best approach the material. There was no prior context given for the case study so am going solely on the focus area of the HF. Issue is, they do everything across the capital structure both private and public - as opportunistic as it gets.
I don't have a ton of experience working with distressed debt so am wondering if it would be worth while focusing on Moyer's Distressed Debt Analysis or looking at a spate of different special situations case studies to get reps with the modeling.
Happy to provide any addtl info but that's the gist of it. If anyone has any resources or an optimal way to approach please let me know!
Thanks in advance.
(Edit: spelling)
Have done several case studies across various distressed funds and haven't once gotten a case where the Company was already in bankruptcy. I think you should be fine focusing on business quality - ability to generate FCF / de-leveraging vs. leveraging story, asset coverage - i.e., where does value break through the cap stack and how covered are you, and liquidity - do they need it, are there non-core assets or other levers to pull or does it look like could file. Very fundamental credit stuff. Its possible they'll throw you something with a wonky guarantee structure or other idiosyncratic spin, but most of the fight is won by having a solid grasp on whether the credit is good or not.
Thanks for the reply - appreciate the help and additional color. The focus points you mention sound very much in line with what I've been reading in Moyer's. Will definitely give those areas more attention.
To tack on to my first post...since you said the fund plays all over the structure and both liquid and illiquid, they probably do a fair bit of preforming stressed investing in which case you can get some extra points by having a view on relative value. You may decide a bond at 75 is covered and has no bankruptcy risk, but the extra step would be to then say bond is wide vs. CCCs by xxxbps and X event should be catalyst driving spread compression to 85. This is a more accurate way, in my opinion, of framing upside vs. saying bond is at 75 and covered 2x so buy. 75 may actually be fair value.
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