Here's what distressed investing is and how it works. See why distressed debt has been a very lucrative investment over history.
Investing in distressed debt can be extremely lucrative for people and companies that know what they're doing. Oaktree (NYSE:OAK), one of the top-flight distressed debt managers, has generated impressive returns in its distressed debt funds, earning a 17.1% internal rate of return for its investors since its inception in 1995. Distressed debt investing combines the best of both worlds -- the cash flow of debt investments with the appreciation potential of stocks. While there is no hard and fast rule for what makes a "distressed" investment, it's generally accepted that distressed debt trades at a huge discount to par value (think $400 for a $1,000 bond, for instance) because the borrower is under financial stress and at risk of default. The risks are certainly high, but those who manage their risks well have put up incredible returns over history. Distressed debt investors typically seek to make money in one of two ways: investing in turnarounds and participating in lend-to-own situations. Read Article: https://www.fool.com/investing/general/2015/05/19/how-distressed-debt-investing-works.aspx Comments are closed.
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AuthorJoshua Nahas Archives
May 2017
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