Publications

Keeping Up With Distressed Debt Strategies

February 15, 2010
Buyouts

In the aftermath of the bubble economy of the mid-2000s, there exists a target-rich environment of companies with solid fundamentals that are, or will soon be, in distress due to debt burdens and other issues and, thus, are available for buyout shops to acquire at attractive prices.

Many of these companies will find themselves in the Chapter 11 process, forced to sell their businesses through either a so called “363 sale” or a plan of reorganization. Both processes are court-supervised and their intent is to maximize value for the company’s stakeholders by giving all interested parties a full and fair opportunity to bid for the business. However, a savvy investor, by obtaining a position in the company’s capital structure through the purchase of debt, can gain an inside track in the process. This article summaries the current treatment of some of the primary "loan to own" strategies that can be employed at various stages of a company's sale process.