Distressed Debt Investing

Discussion in 'Trading' started by FCXoptions, Jan 28, 2016.

  1. Not distressed per se, but bond trading idea:
    When a bond goes from BBB to BB, investment grade fund managers must sell. But there are relatively few buyers ---> buy when oversold!
     
    #102     Jul 25, 2017
  2. I got really lucky with timing on a few positions last year where things lined up just right and it had a quick selloff basically a day or two before I found them if I recall correctly. It was a ratings downgrade and some negative news. Jumped in and worked out well.
     
    #103     Jul 25, 2017
    Chuck Krug likes this.
  3. newwurldmn

    newwurldmn

    When I was in college, I took an MBA course on financial statement analysis. We were shown a paper that studied this phenomenon and the conclusion was that the fixed income markets would typically have already priced in the downgrade; the equity markets typically did not and the stocks would sell off.

    The paper was pretty old so it may not apply anymore.
     
    #104     Jul 25, 2017
  4. Hey guys,

    Anybody looking at anything interesting in the distressed debt world? I've been out of the loop pretty much since my last post on this thread. Spent a little time perusing this afternoon, but haven't come across much.
     
    #105     Mar 27, 2018
  5. LGCY is only 15-20% yield, not distressed enough probly. Some of the SHLD debt is pretty badly off, Toy's R Us unsecured at 5-10c on the dollar. Not recommending of course, esp the retail ones.
     
    #106     Mar 27, 2018
    FCXoptions likes this.
  6. Yeah a lot of what I saw wasn't that distressed when looking at the yields. I've surprisingly just stayed away from Sear's, I never really looked far into them I guess because I just felt like they were in a never ending downward spiral.

    I almost bought Toy's R Us a year or so ago, but thankfully had a friend talk me out of it at the time. I haven't read into their plan for bankruptcy yet, I'll take a look.
     
    #107     Mar 27, 2018
  7. Sig

    Sig

    The CEO of SHLD has got to be the worst leader in a major CEO position today. They're also playing some weird games with their debt, some of it is in technical default in order to refi other debt, so they're already playing junior holders against senior and they're supposedly still solvent. I watch their stock which does occasionally go through a short squeeze, may be interesting to short the stock while buying the bonds during one of those pops if the bond prices remain relatively constant.
     
    #108     Mar 27, 2018
  8. JSOP

    JSOP

    Mattel ones would be better in terms of distressed I would imagine.
     
    #109     Mar 27, 2018