Distress Investing Principles and Technique

ISBN-10: 0470117672
ISBN-13: 9780470117675
Edition: 2009
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Description: An Introduction to Distress Investing is a comprehensive guide to distress investing around the world. Increasingly, corporate rehabilitation is more interesting than corporate liquidation to governments and capital markets. And increasingly a  More...

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Book details

List price: $47.50
Copyright year: 2009
Publisher: John Wiley & Sons, Limited
Publication date: 4/29/2009
Binding: Hardcover
Pages: 272
Size: 6.25" wide x 9.50" long x 1.00" tall
Weight: 1.254
Language: English

An Introduction to Distress Investing is a comprehensive guide to distress investing around the world. Increasingly, corporate rehabilitation is more interesting than corporate liquidation to governments and capital markets. And increasingly a mezzanine industry of mutual funds, hedge funds, and private investors has stepped up to fill the role of the traditional corporate lender. This book covers distress investing from theoretical underpinnings to practical applications. It features cases studies of some of the biggest distress investing situations including Kmart and Pacific Gas & Electric. From the recent changes to U.S. bankruptcy code to creditor rights to cash bailouts, readers will learn how to analyze distressed situations including pricing issues, arbitrage opportunities, political and tax disadvantages to deal expenses and reorganization funding plans. Written by the leading practitioner of distress investing and co-authored by teaching academics, this book is certain to become the bible on the topic for professional investors and students.

Whitman, CFA, Chairman of Whitman Heffernan & Rhein.

Martin J. Whitman is Chairman and co-CIO of Third Avenue Management LLC. He has taught courses in value investing and distressed investing for the past thirty years at the Schools of Management at both Syracuse University and Yale University. Whitman is also the author of the Wiley titles Value Investing and The Aggressive Conservative Investor.Fernando Diz is the Martin J. Whitman Associate Professor of Finance and Director of the Ballentine Investment Institute at Syracuse University. His research specialties are in the areas of trading, derivative securities, and value and distress investing. Diz has written for the Journal of Futures Markets, the Review of Financial Studies, and the Journal of Alternative Investments.

Foreword
Preface
Acknowledgments
The General Landscape of Distress Investing
The Changed Environment
Trends in Corporate Debt Growth and Leverage before the Financial Meltdown of 2007-2008
Junk Bonds and the Levering-Up Period
The Syndicated Loan Market and Leveraged Loans
Financial Meltdown of 2007-2008
Principal Provisions of the 2005 Bankruptcy Act as They Affect Chapter 11 Reorganizations of Businesses
The Theoretical Underpinning
What Market?
Toward a General Theory of Market Efficiency
External Forces Influencing Markets Explained
What Risk?
Capital Structure and Credit Risk
Valuation
The Company as a Stand-Alone Entity
Control and Its Vital Importance
The Causes of Financial Distress
Lack of Access to Capital Markets
Deterioration of Operating Performance
Deterioration of GAAP Performance
Large Off-Balance-Sheet Contingent Liabilities
Deal Expenses and Who Bears Them
Attorneys and Financial Advisers' Compensation Structure and the Distribution of the Fee Pie
Time in Chapter 11 and Number of Legal Firms Retained
Determinants of Legal Fees and Expenses
Determinants of Financial Advisers' Fees and Expenses
Can Professional Costs Be Excessive?
Appendix
Other Important Issues
Management Compensation and Entrenchment
Tax and Political Disadvantages
The Five Basic Truths of Distress Investing
No One Can Take Away a Corporate Creditor's Right to a Money Payment Outside of Chapter 11 or Chapter 7
Chapter 11 Rules Influence All Reorganizations
Substantive Characteristics of Securities
Restructurings Are Costly for Creditors
Creditors Have Only Contractual Rights
Restructuring Troubled Issuers
Voluntary Exchanges
Problems with Voluntary Exchanges
The Holdout Problem Illustrated
Making a Voluntary Exchange Work
Tax Disadvantages of a Voluntary Exchange versus Chapter 11 Reorganization
A Brief Review of Chapter 11
Liquidations and Reorganizations
Starting a Case: Voluntary versus Involuntary Petitions
Forum Shopping
Parties in a Chapter 11 Case
Administration of a Chapter 11 Case
The Chapter 11 Plan
The Workout Process
Parties and Their Differing Needs and Desires
Types of Chapter 11 Cases
Leverage Factors in Chapter 11
The Investment Process
How to Analyze: Valuation
Strict Going Concern Valuation
Resource Conversion Valuation
Liquidation Valuations
Due Diligence for Distressed Issues
Distress Investing Risks
Risks Associated with the Alteration of Priorities
Risks Associated with Collateral or Enterprise Valuation
Reorganization Risks
Other Risks
Form of Consideration versus Amount of Consideration
Cases and Implications for Public Policy
Brief Case Studies of Distressed Securities, 2008-2009
Performing Loans Likely to Remain Performing Loans
Small Cases
Large Cases
Capital Infusions into Troubled Companies
A Small Case: Home Products International
The Early Years
Growth by Acquisitions
Retail Industry Woes
The Fight for Control
Amendment of Indenture and Event of Default
The Decision: Prepackaged Chapter 11
Treatment of Impaired Classes under the Plan
Financial Means for Implementation of the Plan
Going-Concern and Liquidation Valuations
A Large Reorganization Case: Kmart Corporation
Landlords and Unexpired Leases
Vendors and Critical Vendor Motions
Management and KERPs Pre-2005 BAPCPA
Fraudulent Transfers
Subsidiary Guarantees and Substantive Consolidation
Chapter 11 Committees and Out-of-Control Professional Costs
Blocking Positions
Buying Claims in Chapter 11
Debtor-in-Possession Financing
Kmart's Plan of Reorganization and Plan Investors
Investment Performance
An Ideal Restructuring System
Feasibility and Cash Bailouts
Good Enough Rather Than Ideal
Highly Beneficial Elements in the U.S. Restructuring System
Goals of an Ideal Restructuring System
Suggested Reforms
Notes
About the Authors
Index

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