Comments on Distressed Debt Investing: Advanced Distressed Investing Concept

Very interesting post. I had some experience with...

2010-03-04T13:50:14.439-05:00

Very interesting post. I had some experience with these issues in the last bankruptcy cycle and my thinking is that most decisions will come down that code rights aren't waivable.

The agreements between the 1st and 2nd lien lenders may be useful as negotiating points once bankruptcy arrives, but I would generally put little faith in them as a tool for generating higher returns.

If the code provides an advantage to either party over inter-party agreements, I would assume that party will choose to use code provisions. I simply don't think any creditor will consent to a non-code cramdown unless its enforced by the court, and the record of that, is as you say, spotty.

Perhaps that leaves another cause of action, but the return on that cause would have to be very high for it to be worthy of further investment, I'd think.

Could the estate pay for some of it? I admit I don't know.

You're obviously a credit lawyer. I'm abou...

2010-03-03T17:42:49.896-05:00

You're obviously a credit lawyer. I'm about to join a firm (from a clerkship) and rotate through a credit group. Want to make a good impression. Can you recommend any materials to put me ahead of the pack? Any advice for a newbie?

Great post. I hope buyers of GVR 2nd lien don'...

2010-03-02T10:29:44.077-05:00

Great post. I hope buyers of GVR 2nd lien don't read this and continue to think they can jam up the first lien lenders.

Thank you very much--very informative. I am curio...

2010-03-01T15:33:18.618-05:00

Thank you very much--very informative.

I am curious about how you would handicap this risk--i.e., uncertainty about current legal consensus.

I can see it going both ways. #1--If a 2nd lien is priced far below the 1st lien, and a given judge is more likely than not to disallow pre-bankruptcy waivers, that would be a boon for the security. Of course, the decision could always be overturned on appeal, right?

#2--On the other hand, if the 1st and 2nd lien are priced too closely, and a given judge would likely allow the waivers, that would be a bane.

Seemingly sharp analysis could yield an advantage, but ultimately only offer very thin margins, given the uncertainty.

Are my perceptions right or wrong?

In other words, do such situations (#1 or #2, e.g.) produce investment opportunities in their own right, or more just as an added kicker?