Investing in Distressed Securities….

Introduction to USA Debt Markets
Michael Michelini

Agenda Different Classes of Debt Corporate High Yield Distressed Interdesk Transfer New Issues Corporate High Yield. LBO Distressed .

leverage buyout Distressed is normally arrived when it comes from the above 2 desks corporate or high yield.Image of Trading Floor Normally a company raises capital on the corporate level Healthy financial status History of receiving sales. (as all issues in USA are well covered / known) . doing business Sometimes on the high yield level LBO .

pay X. get x x (principal) + y % back .Corporate Bonds • Safer investments • True “fixed income” investments.

lower credit rating • Has to pay high interest to attract investors .High Yield Bonds • Company is under heavy debt.

Distressed Debt (Junk) • Company is filed Ch. . and bondholders seize company to get assets back. 11 bankrupty • Common shares are 0 (normally).

Interdesk Transfer • US financial markets well regulated • As the credit ratings drop. trading desk) change. yields increase • Different investors (customers. . the bond pricing drops.

Corporate • Normally where most companies go for raising capital by issuing debt • Low coupon rate • Company is high quality – Solid sales – Low debt / equity ratio .New Issue .

New Issue – high yield • Company raising capital in high yield market must be in financial distress • Or taking on a heavy debt load • Common for LBO market – leveraged buyouts – as its debt intensive .

. so cannot receive capital • On secondary market. are trading wide spreads • Only type of “new issue” is one when it emerges from bankruptcy and is issuing new shares / bonds to the market – Example – airlines.distressed • Company is in bankruptcy. shed legacy costs.New issue . customers.renegotiate with unions. traders. file bankruptcy. re-issue shares.

Conclusion • USA debt market is very mature • Well structured • Companies are tracked well from the beginning. • Does debt market exist in China? . with corporate grade issues as their first relationship with debt markets • Asia is a whole different world.

com +86 755 3320 1171 @michelini .Question & Answer Michael Michelini mike@shadstone.

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