Access to information in distressed debt
Can somebody help me understand how access to information work in distressed debt? Unlike in the equity market, are a limited number of investors/creditors given access to nonpublic material information, creating an information edge?
You can jump the wall but once you do you become restricted. Access to information in distressed scenarios is not equal among investors. It also may be a strategic choice to opt out of having access to nonpublic info so as to not "restrict" yourself. The below quote is from Moyers Distressed Debt book, which you should read as it goes further into explaining this.
"there will be two different levels of information access: restricted nonpublic information and publicly available information. Banks and bondholders involved in negotiations with the issuer will, after signing appropriate confidentiality agreements, be given material nonpublic information such as more detailed operating data or management projections. Investors with this information are allowed, with proper notice, to continue to transact in the securities."
To tack on to this, there can be a negative feedback loop affecting security pricing once groups get restricted. Since they can still sell with big boy letters, if blocks start to trade the rest of the market can overreact since they think the sellers know something they don't. Also, people who are restricted themselves and have the MNPI can freak out also because they think the seller also knows something they don't. Banks with prop desks used to be able to stem this problem
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