Distressed debt exchanged and restructured made simple…
Assets Under Management
Secured and Non-Secured Public Debt
We navigate government debt (e.g., bonds) where a nation or municipality struggles to pay, differentiating between debt backed by assets (secured) and that relying solely on government promise (non-secured).
Secured and Non-Secured Personal Debt
This involves individual financial obligations (e.g., credit card debt, personal loans) where repayment is uncertain. We distinguish between debt backed by personal assets (secured) and those without collateral (non-secured).
Secured and Non-Secured Commercial Debt
This category covers business loans and financial instruments (e.g., corporate bonds) from companies facing financial distress, focusing on whether the debt is backed by company assets (secured) or not (non-secured).
Residential Property
This involves managing debt related to residential properties (e.g., mortgages) where the homeowner is in default or facing repossession, seeking solutions for both lenders and borrowers.
Commercial Property
We specialize in debt tied to struggling commercial real estate assets (e.g., office buildings, retail spaces), identifying opportunities in properties facing financial distress or foreclosure.
Financial Planning
This involves managing debt related to residential properties (e.g., mortgages) where the homeowner is in default or facing repossession, seeking solutions for both lenders and borrowers.
Potential sources of risk in distressed debt investing include:
Lack of access to financial information: If you’re aiming for secrecy, due diligence is limited to a company’s public records. This could lead to investment decisions based on an incomplete picture of a company’s finances.
Potential competition with other investors: Other distressed debt investors may be slowly buying the company’s debt over time and beat you to the majority share or gain seniority. When the restructuring process is triggered, these other investors become what Ivashina calls “accidental partners” in Alternative Investments. In this position, they may have the ability to block your efforts.
Future financial distress: Just because a company is restructured and you’ve gained an equity position doesn’t mean it’s guaranteed to do well financially in the future. This presents an added risk; even if your efforts pay off, the company could still fall into financial distress again.
Potential benefits of distressed debt investments include:
Seeing high returns through restructuring: This is the goal of distressed debt investing and the best-case scenario. If you’ve correctly assessed an opportunity, strategically purchased a controlling share of debt, and the restructuring process has been triggered, you can influence the restructuring process and become an equity or debt holder in the revamped company, setting you up for a return on your initial investment down the line.
Being paid out in the case of bankruptcy: If the company cannot be restructured and must instead liquidate assets and pay out stakeholders, debt holders are the first to be paid. While this isn’t the best-case scenario, you’ll still be paid out for your share, which you theoretically purchased when prices were low. In this case, your return on investment may not be astronomical, but it’s still a win for a distressed debt investor.
DDE Finance Brokers
Our specialist finance brokers will assist in advising and arranging buyer side secured promissory notes.
DDE Buy & Sell Side Brokers
Our buy and sell-side brokers apply diverse disciplinary techniques, offering distinctive, detailed, and careful attention.
DDE Business Legal Support
Our process applies varied disciplinary techniques, providing distinctive, detailed, and careful attention.
$15m+
Donated to Foundations in 2024
15+
New Program Beneficiaries in 2024
200+
World-Wide Official Affiliates in 2024
50+
Community Partnerships at year end 2024
★★★★★
We are a group of investors that focus on buying and managing distressed debt, potentially with the intention of restructuring the debt or participating in debt exchanges…
Arty Kowalski/
Distressed Debt Exchange Trust
Frequently Asked Questions
What is distressed debt?
Distressed debt refers to financial obligations of companies or individuals facing severe financial difficulty, often trading below face value due to default risk.
Why invest in distressed debt?
Investors seek outsized returns by acquiring assets cheaply, aiming for profit when the issuer recovers, debt is restructured, or collateral is liquidated.
What are the primary risks involved?
Key risks include potential for total loss, illiquidity, complex legal challenges, lengthy recovery timelines, and uncertain asset valuation.
Is it always secured by assets?
No. Distressed debt can be secured (backed by specific collateral) or unsecured (relying solely on the issuer’s promise to pay), each with different risk/reward profiles.
How is value recovered from distressed debt?
Value is typically recovered through corporate restructuring, bankruptcy proceedings, asset liquidation, or a successful turnaround of the underlying business.
Who usually invests in distressed debt?
Sophisticated investors, including hedge funds, private equity firms, specialized distressed debt funds, and wealthy individuals, typically engage in this market.
