Could someone break down distressed debt investing? Are you investing in a company's bond that they issue? And is your thesis just if the company is performing poorly (and may need to restructure soon), but you think the company is somewhat undervalued? I'm not sure I completely understand it. Is there any other helpful resources to learn about DD? Thank you in advance
| +185 | Evercore > Goldman and I don’t think it’s particularly close anymore | 65 | 4h |
| +157 | Article: Why UBS's Asian M&A bankers are thriving and UBS's American M&A bankers are not | 17 | 1d |
| +87 | UBS Offer Day | 30 | 1d |
| +86 | Santander IB? | 10 | 3d |
| +71 | I hate Wells Fargo | 19 | 1d |
| +67 | Think Twice before Recruiting for HOUSTON IB!! | 36 | 1h |
| +51 | No return offer - feeling like a failure is an understatement | 20 | 19h |
| +48 | How cooked am I as an incoming WF IB SA 2027? | 17 | 16h |
| +46 | WF Return offers | 28 | 2d |
| +40 | 2026 Investment Banking Return Offer Climate | 25 | 1d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
I’m not in distressed debt but this is my understanding:
Bad things happen to a company’s credit profile that causes its’ bond prices to fall. Although the company has a poor rating, DD investors will purchase the bonds that have a distressed price and will wait for that company to pay the rest of the coupons + the principle amount of debt. Academically spoken: it’s “Risk appearance arbitrage” basically making money when they market discounts bond prices too much
Thanks!
Yeah man! I think there’s an opportunity there for distressed debt in CRE bonds, specifically those that are focused in industrial companies that are most likely going to pay their debts back. Gotta be careful on which ones to buy tho.
There’s an number of ways to make money on distressed debt. From loan to own (debt for equity swap) to simply buying mispriced bonds, to taking a controlling position in a group of bonds to influence restructuring to your advantage and selling them off post-restructuring. Waiting for a principal payment for a distressed bond like the other user said is likely not going to happen considering bonds are low in the capital structure and typically will enter a restructuring due to missing a principal payment or voluntarily entering a in court restructuring due to understanding that they will miss one if something is not fixed.
Investment firms are moving away from loan to down type of deals
Distressed is a little weird. The big differentiator is probably those looking for eventual control VS non-control.
Quisquam ut quasi provident minus. Iure et illum ut occaecati doloribus molestias sit est. Rem repellat incidunt incidunt temporibus ut sint. Adipisci enim aut eos quod quia at repellat. Qui quod ipsam sit vel quia ut quidem. Harum voluptas libero perspiciatis repellendus sit nihil nam dolores.
Dolor quod numquam quo. Nisi quo aut vel qui. In aut consequatur ut nemo omnis et molestiae. Quia maxime alias et ut consectetur minima in.
Ex veniam corrupti et dolor similique ea possimus. Et numquam placeat harum aut laudantium voluptas fugiat. Ullam consequatur dolores nobis nobis. Cum eius a tenetur culpa. Reiciendis ipsam exercitationem dolor sit.
Nostrum cumque esse provident hic aut. Occaecati omnis animi facilis et quam eum ducimus. Quasi blanditiis numquam et perspiciatis dolor.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...