CHAPTER 3

Stressed and Distressed Investing

The stressed and distressed markets have many unique features that can catch inexperienced investors by surprise. Understanding the causes of distress (financial versus operational), the bankruptcy and reorganization process, and the motivation of the parties involved are crucial in successfully evaluating stressed and distressed opportunities in credit. We will also discuss the types of strategies and the risks in distressed hedge funds. The chapter will conclude with a discussion and key questions for the most popular strategies in distressed investing.

To begin the discussion, which of the options in Table 3.1 is the more attractive investment?

Table 3.1 Comparison of Two Investment Opportunities ...

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