Changing macro indicators globally and their impact on distressed investments

  • This suggests significantly higher defaults, assuming a similar rate on a larger amount of debt
  • Little competing capital, with only USD60bn+ of dedicated distressed debt dry powder currently
  • Global central banks have far less flexibility to use monetary policy to dampen the cycle
  • China’s growth engine is no longer a source of dependable secular growth
  • Market infrastructure, such as dealers, is limited in its ability to provide liquidity to holders of credit, which are larger than ever, creating even more opportunities for distressed debt investors
  • Stay senior in the capital structure, sticking to quality and diversifying holdings
  • Target companies that have the best staying power and the liquidity to weather the storm
  • Avoid fulcrum securities (focused on debt that will stay debt)
  • Seek returns through capital appreciation as opposed to debt that would provide a claim on assets through a potential restructuring, although restructuring opportunities are likely down the road and investors would be ready to take advantage of them when the time is right

--

--

--

We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

༺ Capitalism or Economic Failure? (II) ༻

A Layman’s Introduction to Blended Finance: Five Questions about Mobilizing Private Capital for…

The Global Leadership Conundrum

The Need for Agent-Based Modeling in Economics

3. The perpetual growth problem under capitalism

How to build trust in the Middle East

Prosecutors Representing the U.S.

SAVE MONEY 🍿

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Acuity Knowledge Partners

Acuity Knowledge Partners

We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/

More from Medium

What Color Are the Clouds? Not White or Shades of Gray but Green.

Mental, Behavioral, & Brain Health Startups: Q1 2022 Market Update

Striving for Sustainable Agriculture

Startup Reboot, Part I: When the Music Stops