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Buyside Focus

stock market

How to Value Distressed Debt – the Practical Guide to Distressed Investing

By | Investment Process | 19 Comments

I was excited but anxious when I first joined the Special Situations Group at J.P. Morgan. It was 2008, at the height of the financial recession, and distressed investing sounded intense. To value distressed debt seemed arcane and complex. I knew financial modeling and I was hungry to learn, but what if I didn’t cut it for the job?

I felt the intensity when I took on my first project: value Chrysler’s distressed loans. I spent a year in investment banking prior to joining Special Situations, and I knew how to project financials and value a company. But how would I find out whether a distressed debt is cheap or expensive?

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How do I value distressed debt?

By | Investment Process | No Comments

Distressed debt valuation is about asset coverage. You want to find out whether high yield debt is covered by the company’s enterprise value for the base case, and covered by the liquidation value of the company’s hard assets in a downside case. When a company files for Chapter 11 restructuring, debt is usually restructured based on the company’s enterprise value, which is typically valued using EV/EBITDA. This is the base case. In a downside case, the company files for Chapter 7 liquidation, in which the company sells its hard assets at a discount to pay back creditors…

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stock market

How to Switch from the Sell Side to Buy Side – Interview

By | Career Insights | No Comments

Many analysts aspire to switch from the sell side to buy side. The work is similar, but the buy side offers more rewarding work, a portfolio to measure your performance, and a higher compensation trajectory. Making this switch is competitive, especially if you have a perceived weakness going into recruiting season.

When I walked into each buy side interview, I was always ready to talk about my college major. I pursued a computer science degree and had no finance-related extracurricular activities or internships in college. I had to sell my passion for investing to each interviewer…

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hedge fund interviews

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