Investing in Distressed Debt
Distressed securities may be an attractive investment option for sophisticated investors who are looking for a bargain and are willing to accept some risk. Distressed debt investing combines the best of both worlds — the cash flow of debt investments with the appreciation potential of stocks. While there is no hard and fast rule for what makes a “distressed” investment, it’s generally accepted that distressed debt trades at a huge discount to par value because the borrower is under financial stress and at risk of default. Distressed securities are debt securities; most often corporate bonds, of companies that are in some sort of distress.
We have identified a medium term A- rated Morgan Stanley bond denominated in the Brazilian real and are targeting a better than 10.50% yield for our clients.
The global bond market offers US-based investors the opportunity to add both higher yields and diversity to their fixed income portfolios. With current US Treasuries and Bank CD’s yielding returns that are lower than than even the current inflation rate, income investors are increasingly being forced to either continue losing buying power “safely,” or to hunt for alternate (added risk) fixed income investments in a jungle of choices. When you add together the US dollar’s declining value against other currencies and the Federal Reserves tremendous increase of money supply, mix in the friction and fighting by both political parties over what should be agreed upon as a “workable plan” to start addressing this nation’s large and growing debt woes, here at Durig Capital we have good reason to believe that acquiring global debt instruments with significantly higher yields may be a vital ingredient to help reduce risk by providing some unique diversification while being likely to greatly enhance fixed income cash flow. This is especially applicable if all of a person’s net worth (i.e., their income, business, home, car, etc.) is based solely in US currency.
A new Sovereign Fiscal Responsibility Index has been established by the Stanford Institute for Economic Policy and Research, at Stanford University. With the recent financial crises and escalating deficits, with the many issues of fiscal responsibility of countries, Stanford created a Sovereign Fiscally responsible Index (SFRI). Many people want to know how many global countries compared to their peers. The study measured government in 5 areas Fiscal Space, Path, Rules, Transparency and enforceability. The country rankings and our bonds placements are believe the complete study is available here. The rankings are: More »