Distressed debt investing involves purchasing the debt of financially troubled companies to achieve a financial return. Investors, categorized as either passive or active, often engage directly in bankruptcy proceedings or restructuring processes to enhance recovery outcomes. This investment strategy has been shown to improve the likelihood of successful financial recoveries, benefiting creditors, shareholders, and the distressed company itself.

1. HOW do you invest in it?
It is a strategy in which an investor purchases debt
of a financially distressed or insolvent company
with the hopes of realizing a financial return.
DISTRESSED INVESTMENTS INCLUDE:
Investors buy debt instruments
issued by a financially distressed
or insolvent company from its
early creditors and debt holders,
or on the secondary market.
DISTRESSED DEBT
INVESTORS ARE
CHARACTERIZED AS EITHER
PASSIVE OR ACTIVE.
WHAT difference does it make?
Recent studies have shown that when a hedge fund is involved in a bankruptcy
proceeding or restructuring, there is a greater probability of a successful financial
recovery with benefits to creditors, shareholders, and the company itself.
DISTRESSED DEBT INVESTMENT CAN HELP PROVIDE:
COMPANY
DEBT
LOANS &
BONDS
VENDOR &
TRADE CLAIMS
Investors buy debt
instruments in the hope
of realizing a return
through price appreciation
determined by the actions
of others.
Investors participate in the
restructuring or bankruptcy
process, working directly
with company management
or other creditors to ensure
a successful outcome.
The majority of investors involved in
distressed debt strategies are part of the
alternative investment industry.
THESE INVESTORS OFTEN WORK
ALONGSIDE THE FINANCIALLY
DISTRESSED COMPANY TO EXECUTE
A SUCCESSFUL RESTRUCTURING OR
BANKRUPTCY PROCEEDING.
LIQUIDITY
BALANCE OF
POWER DURING
THE BANKRUPTCY
& RESTRUCTURING
PROCESS
BALANCE OF POWER
DURING THE
BANKRUPTCY AND
RESTRUCTURING
PROCESS
HIGHER DEGREE
OF DEBT
RECOVERY
HIGHER PROBABILITY
OF COMPANIES
EMERGING FROM
BANKRUPTCY
POSITIVE IMPACT
ON OVERALL
COMPANY VALUE
RELIEF OF
FINANCIAL
CONSTRAINTS
DEBT INVESTING
Want to know more?
ACMEACME
ACME
ACME
PASSIVE ACTIVE
visit managedfunds.org
ACME
WHAT IS distresseddebt investing?
WHO invests in distressed debt?
CAFE
@MFAUpdates