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Industry study 04 of 22 · Private Equity Research Companion

Distressed Investing and Special Situations

~8,000 words · 2 technical exhibits

Distressed investing means buying the securities or assets of companies in or near financial distress, usually debt trading below ~70–80 cents on the dollar or yielding more than ~1,000bp over Treasuries, in order to profit from recovery, restructuring, or control. Special situations is the wider bucket of complex, event-driven, capital-structure-sensitive investments: rescue financings, DIP loans, liability-management transactions, orphaned assets, litigation-driven claims, and structured equity for stressed companies. These strategies are counter-cyclical, legally intensive, and, in the hands of experts, among the most consistently profitable in private markets.

What the study covers

  1. 1Overview
  2. 2How it works
  3. 3Economics and key numbers
  4. 4Key players and landmark situations
  5. 5Risks and pitfalls
  6. 6How an expert thinks about it
  7. 7Glossary
  8. 8Related sections

Technical exhibits

Worked examples, checklists and case studies included with this study.

Loan to Own Fulcrum Worked Example

A full recovery waterfall, fulcrum-security identification, rights-offering and backstop economics, and returns

Chapter 11 Process Primer

US Chapter 11 from filing to emergence: key code sections, timelines, voting math, cramdown, and recent case law