Distressed Debt

Distressed debt refers to corporate bonds issued by companies that are experiencing a troubling financial situation. Companies that offer these securities have either filed for bankruptcy or appear likely to do so in the near future. Investors look to buy distressed debt in order to take advantage of cheap par values. In the event that the company does go bankrupt, distressed debt holders typically have the leverage they need to control reorganization efforts or liquidation procedures. Investing in distressed debt can prove to be very lucrative and is sometimes categorized as a form of private equity investment.