Many readers of Distressed Debt Investing have asked what books to read to get a better understanding of the principles behind distressed debt investing.
Now, as a personal disclaimer, I think the best way to learn about distressed debt investing is at a fund or a credit shop, getting your hands dirty in bankruptcy filings, talking to advisers, reading 10Ks, etc. One of the reasons I am so interested in this field, is that every situation is truly different. Judges vary on interpretation of law and due course, credit agreements and security documents are quite unique, and different creditor groups have conflicting agendas.
Now, I know that I have readers of varying interests / skill levels. That is why I am going to break this down into four different levels. I have read all these books, and recommend them all. If you are new to the field, start with the 101s. If you are experienced, start with the 301s. If you are John Paulson, skip the reading, and hire me.
Distressed Debt Investing 101
The Vulture Investors - While not technical in nature, this book gives you a very very good understanding of the qualitative aspects of distressed debt investing. It is a collection of "war stories" from the eighties and nineties featuring stars like Marty Whitman and Wilbur Ross.
Bankruptcy Investing - This is another good introduction to investing in distressed companies. It is very basic so possibly a good starting block for those VERY new to the game.
Distressed Debt Analysis - For those that have some familiarity with distressed debt, this would be my the choice of books to read. I think the author could of done a better job explaining certain concepts, but I enjoy some of his commentary. I have also heard him speak, and think him very competent in the subject matter.
Distressed Debt Investing 201
Bankruptcy and Related Law in a Nutshell - I refer to this book quite often when some lawyer is drawing some random bankruptcy provision out of thin air. It's not one of those "sit down and read for fun" books, but it is a great handy resource.
Buyout - You are probably asking yourself: "Why would a book about leveraged buyouts be in this reading list?" Well...for one, I loved the book. Two, a lot of bankruptcies are a result of LBOs. And three, it teaches you how to do an LBO model. BOOM.
Corporate Financial Distress and Bankruptcy - Some of my colleagues have never read an Edward Altman book. I call them failures. This book is stock full of historical data which gives the reader interesting context (relative to today). Plus, very heavy in terms of fundamental credit analysis which should be the black belt of a distressed debt analyst.
Distressed Debt Investing 301
Creating Value Through Corporate Restructuring: Case Studies in Bankruptcy, Buyouts, and Breakups - This was one of my favorite books on bankruptcies. It takes a behind the scenes look at the operations of a distressed organization and ways that advisers can unlock value. I think it imperative that investors understand the difference between a temporary and permanent problem and this book sheds the light on how to differentiate between the two.
Restructuring and Workouts - Pricey I know. And international in nature. Two quick turn-offs. But I enjoyed the text and found some of the examples enlightening.
Note: I have not had the time to read Marty Whitman's new book. When I do, I will post a thorough review.
Important: If you have a book that you think is interesting, please send me an email. This list above is far from exhaustive, and I am always looking for good summer time reading. Nothing like a tome on complex Chapter 11 proceedings to impress the ladies at the beach.
If you have any questions on distressed debt investing, or want to contribute, or have an idea for a story, or just want to get my opinion on a certain situation, please contact me: hunter [at] distressed-debt-investing [dot] com.