Stephen Moyer is a Director of Tennenbaum Capital Partners. Formerly, he was Director of Research for Imperial Capital, LLC, a boutique investment bank specializing in distressed debt investment opportunities.



The market for distressed securities is less efficient than other markets,enabling skilled investors to earn superior risk-adjusted returns. - page 32

The rating from an agency is essentially its best estimate of the probability of default (meaning a failure to make contractually spesified interest and/or principal payments) and says nothing about the relative value of the security at any given trading level.Thus, a firm that has a high probability of not being able to meet its financial commitments (which, of course,could lead to a bankruptcy filling) would have all of its debt downgraded to very low levels even though some of it may be well secured with a very high probability of recovering all principal and any pre- and even postpetition interest.- page 165  

.....generally,under basic contract law or the absolute priority rule of chapter 11 reorganizations,the sub debt would not be entitled to any recovery unless the senior debt is paid in full.
......if the sub debt is at 20 ,does that not imply that the stock is worth zero ?Probably so, but the stock is assumed (and in real world would be ) trading at a positive value.Otherwise one could apply the logic in reverse and ask:if the equity really has positive value,isnt the implication that the bonds (both senior debt and sub debt)
should recover 100?- page 51 

The reasons why the investor may expect the bond to increase in value can vary......It may be that he or she believes other investors are mistaken concerning ceratin structural aspect of the bond....It may be that the underlying business is cyclical and the implied ,,market,,  valuations fails to take this into account.....It may be that the investor believes will attempt to delever by repurchasing its bonds at a discount and such activity will drive up prices....-page 222

From the perspective of the smaller scale distressed debt investor,periods when there are an above average number of large scale bankruptcies can particularly opportune because the larger situations often draw the attention of bigger distressed fund managers,who either overlook,are too busy,or intentionally avoid many attractive smaller situations-page 19/20

However, the point at which these managers begin selling the dead angel just to get it out of their portfolio can be the prerfect opportunity for the distressed investor.- page 18