When investing in distressed debt, be very selective about which distressed bonds you buy. Buying a market basket of assets – a quick, efficient way of adding to equity holdings – is not a smart alternative with distressed debt.
The media likes to guess how the outcome of the U.S. presidential election will play out in the financial markets. Here, Marty Fridson analyzes past distressed-debt data to discover if it actually matters who wins on November 5: Donald Trump or Kamala Harris.
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.
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.
Non-bank direct lenders, which normally concentrate on small-to-medium enterprises, are now playing in the big leagues. A big question is whether these non-traditional lenders will continue to keep a lid on defaults when the U.S. economy eventually hits a rough patch.
Because distressed-debt investing can be risky, this month’s update focuses on proper position sizing within a portfolio, plus some recommendations for investors new to this sector.
Right now the bond market is not sending very many distress signals. But if the mood shifts, we could suddenly have many more bonds trading at yields that make them appealing to investors with the appetite for high risk/high reward.
For distressed-debt investors, knowing about bankruptcy is critical. In this month’s update, we will tell you how bankruptcy works, and explain why it’s important for bondholders to know the ins and outs of the process – and to realize huge gains when bonds emerge from a troubled state.
There haven’t been many defaults in corporate bonds recently. But in the hard-landing scenario playing out for next year, there will be many more distressed bonds to choose from than there are now.