Paper On: Trading In Distressed Debt
I know several of you are interested in buying distressed debt. Particularly, those of you which follow Seth Klarman, Marty Whitman, and other deep value investors. Here’s an article on distressed debt. It was originally submitted to the New York Law Journal and it’s worth a read for the savy investor. Click Here To Read About Trading in Distressed Debt
Paper Introduction (Via Harvard Law School)
2009 undoubtedly will be a year of severe economic challenges. Analysts believe that the deepest recession since World War II will continue and worsen in the United States. Unemployment may well exceed 10%. With major financial institutions de-levering their balance sheets, credit was constricted for much of 2008 and likely will remain so for an extended period. Partly as a result, entire industries, from automobile manufacturing to retailing, are facing extreme contraction and even the prospect of collapse.
My partners Richard G. Mason, Steven A. Cohen, Ian Boczko, Sarah A. Lewis, and I have prepared a memorandum concerning the possession and use of information when buying and selling distressed debt (an abridged version of which was published in The New York Law Journal), which may be of use during the coming year. The rules and customs of the distressed debt market are somewhat different from those that govern other trading markets, and it is important to be careful with information to avoid a problem. This note is meant as a general guide, and particular circumstances will require more detailed analysis. Moreover, prudent investors would be well-advised to have their specific trading policies and procedures reviewed for regulatory compliance and tailored to reflect not only generalized “best practices” but the specific context and framework in which each investor operates.
