Distressed debt investing has become an increasingly popular alternative investment strategy in recent years. As companies and individuals face financial difficulties, their debt can be purchased at a discount by sophisticated investors who aim to profit when the issuer’s situation improves. While promising high returns, distressed debt investing also comes with significant risks and is suitable for experienced investors only. For those looking to learn the fundamentals and best practices of distressed debt investing, books are an invaluable resource. Here is an overview of some of the top distressed debt investing books recommended by experts in the field.
The Art of Vulture Investing by Hilary Rosenberg
Considered a modern classic, The Art of Vulture Investing provides a comprehensive overview of distressed debt investing. Author Hilary Rosenberg draws on her decades of experience in the field to explain the different categories of distressed debt, valuation techniques, bankruptcy claim rankings, and how to identify lucrative investment opportunities. The book covers a variety of strategies including loan-to-own, activism, and hybrid hedge fund-private equity approaches. With detailed case studies, sample documents like claim forms and engagement letters, and advice on managing litigation risk, it is one of the most practical guides available.
Distress Investing: Principles and Technique by Martin J. Whitman
Martin J. Whitman is a legendary distressed investor who helped shape the field through his decades of experience. In Distress Investing, Whitman explains his safe and cheap approach to distressed investing that protects principal while targeting 20-50% returns. The book covers Whitman’s concept of collateral-based lending, workouts, and securities analysis based on balance sheet calculations rather than earnings forecasts. With numerous case studies illustrating how distressed investors make decisions during various stages of the bankruptcy process, Distress Investing provides a masterclass in navigating complex restructurings and reorganizations.
Distressed Debt Analysis: Strategies for Speculative Investors by Stephen G. Moyer
For investors new to distressed debt, Distressed Debt Analysis is an excellent introduction to the asset class. The book provides clear explanations of basic concepts and terms while also offering sophisticated valuation frameworks like Black-Derman-Toy for analyzing default risk. Moyer draws on his background as a banker and distressed investor to illustrate strategic thinking and risk management best practices through comprehensive case studies. The book also covers distressed debt participants, capital structure claims, and security types. Especially useful are the questions to ask management, documentation checklists, and key indicators of pending bankruptcy.
The Vulture Investors by Daniel A. Strachman
In The Vulture Investors, Strachman provides an engaging insider’s perspective on the risky world of distressed debt investing. Blending colorful anecdotes with detailed explanations, the book covers the origins of the distressed debt market, strategies used by specialist firms, and profiles of top investors like Wilbur Ross, David Tepper, and Paul Singer. Strachman draws on his professional experience to illustrate how investors analyze and value distressed companies ranging from airlines to retailers. Especially useful for those new to the field are the sections explaining how to identify a company in distress, interact with management, and common causes of business failures.
For investors looking to succeed in the complex world of distressed debt investing, books written by industry experts provide invaluable insights and learning tools. The Art of Vulture Investing, Distress Investing, Distressed Debt Analysis, and The Vulture Investors are among the most highly recommended books covering valuation approaches, bankruptcy claim rankings, strategic frameworks, and risk management best practices.