Within the junk heap of distressed debt are bonds of companies that turn themselves around and get out of distress. Those bonds re-enter the non-distressed ranks, rewarding holders with big price gains on top of the super-high yields earned along the way.
When the King of Bankruptcy Wilbur Ross and Donald Trump negotiated the terms of a distressed-bond settlement, Ross’ knowledge of the casino operator’s ability to pay helped him win the deal.
Artificial intelligence has caused this company’s revenues to plummet – the price of its bonds to fall. Now, it’s fighting back, by flipping the story and using AI to create a better product. Whether or not it succeeds, investors will very likely get paid anyway.
Financial distress persists even when the S&P 500 and other indications seem to be emphatically signaling prosperity – and why this could mean more opportunities to earn excellent returns in coming months.
The distressed-bond universe exhibits a rare market condition that in the past has produced an average annual return of 73%. On the face of it, as we discuss in this issue, this condition could prove to be an excellent time to be buying distressed debt.
In this issue, we recommend the stock and bond of a company that has moved itself from a financially precarious position to a secure one… but the market doesn’t yet appreciate this new reality.
Owing to an oversupply of office space, the bond price of this commercial real estate company has declined as if a bankruptcy is likely. In this issue, we will show you why we think the bonds are worth more than that – possibly much more.
We have found one bond among more than a dozen issued by these two newly merged companies that we consider well very protected from the financial perils that the new company might experience. And because of this, it has an extra high yield, which can lead to extra high profits.
In the midst of the market tumult and a broken merger, this company’s bonds felt a sharp decline in price. For analyst Martin Fridson this distress has created a very appealing new opportunity.
This issue features of one of the largest and best-known online education companies in the world. The bonds declined 75% from their highs as the business stagnated in 2023 but now offer good value. As we detail in the analysis, these are speculative bonds with a meaningful chance of gain, a possibility of bankruptcy, and a real chance of loss.