Timing Is Everything
We believe now is an opportune time to invest in distressed credit
- Short-term interest rates have been near zero since Dec 2008 driving an over-reliance on debt by companies
- Investors during this time have increasingly lowered lending standards in a “chase for yield”
- The Fed’s recent rate increases have driven up corporate borrowing costs which will increase credit downgrades, covenant breaches, and defaults
- Fewer distressed funds in the market mean fewer natural buyers of defaulted debt leading to better prices for remaining players
