Distressed Debt

In addition to your class tuition and study materials, you will receive the following:


Case Study

• Case study material

Exercises

• Course exercises

Other Extras

• Certificate of attendance

Level: Introductory


Synopsis:
This course provides an insight into what distressed debt is, who the market participants are and the dynamics of a typical case.


At the end of the course participants will be able to: Understand what distressed debt is . Learn the key loan workout phases . Apply distress prediction models . Understand how operational restructuring can help the distressed company . Discuss different financial restructurings . Understand distressed investment strategies: understanding of risk and return .


Prerequisites:
None


Suitable For:
Individuals wishing to obtain a general understanding of what distressed debt is and get an insight into who is involved in these distressed situations.


Importance of capital structure

• Debt vs equity - Optimal and target capital structure - theory and actual
• Credit analysis
• Distressed companies and distressed debt - what is distressed debt? How to detect distressed companies
• Differentiating distressed debt from other alternative asset classes (funded vs capital commitments)
• Why do institutions invest in distressed debt?
• Industry overview and segmentation
• Distressed debt's role in modern capital markets

Risk and return

• Definition of risk
• In-depth understanding of exposure
• Return characteristics linked to risk

Distressed securities

• Current pay vs trading without
• Fixed income securities
• Bank debt
• Unfunded commitments (bank lines of credit)
• Secured claims (mortgages, equipment)
• Restructured equity
• Default risk and recovery rates

Distressed debt valuation

• Relative valuation models
• Discounted Cash Flow methods
• Liquidation values

Restructuring / work out process

• In court (chapter 11 or 7 bankruptcy)
• Out of court restructuring
• Strict priority and value leakage
• Original holders vs. acquired in the secondary market
• De-leveraging
• New variants of subordinated debt
• Debt for equity swaps
• Trading in distressed debt - Capital structure arbitrage