A Global Distressed Debt Hedge Fund
Distressed Debt 1 LP
Distressed Debt 1, LP is a Delaware limited partnership that searches the global bond markets looking to buy deeply discounted or defaulted debt for pennies on the dollar, from issuers that appear likely to restructure or settle the debt and still return significantly higher returns than are normally associated with high yield junk bonds. Many of these companies may be in a technical or selective default, and some of them will continue to pay interest income at very high rates while seeking better terms with existing debt and bond holders. Consequently, we seek to achieve a cash flow average above 15% while waiting for companies to improve balance sheets and negotiate more favorable terms with creditors.
Distressed Debt 1’s unique expertise is in very early identification of companies from around the world executing superior business turnarounds, where Wall Street has priced the stressed bonds for default. Good businesses can be mismanaged or become over leveraged. However, companies with monopolistic or essential industries in their own country often can have less direct competition, so a new turnaround plan along with new management could prove to be the key to a full and complete recovery. Through our highly selective process, we have acquire for pennies what others originally paid dollars for. Our goals is to not only forecast a possible debt recovery, but more importantly, we often find companies with distressed debt valuations, where a recovery is highly probable.
We search out for unique or lesser known issuers that are in trouble because of a onetime black swan event, which has resulted in its bonds being jettisoned or shunned by the majority of the marketplace because of the sudden failure to meet minimum criteria written in the prospectus of many bond funds.
The time to buy companies is when others may be forced to sell
We typically watch companies for many months after the default or black swan type of vent to evaluate whether a new management team or the operations situation has changed in any way that would offer good reason for increased value for debt purchasers. If the debt has been reduced by 70-90% or more as a result of lower bond prices and the stock or equity holders have essentially lost control, because of the risks involved, large institutional investors that may try to influence the process of reorganization are usually the major buyers of distressed securities. For sophisticated investors who understand investing in distressed securities and are willing to accept the risks, these rare situations can be extremely attractive bargain opportunities.
Black swan events hurt most investors, but a few know how to take advantage of troubled companies. Shouldn’t you?
Often when a default or position close to default is realized, many large bond funds and institutions are forced to sell within a very narrow time frame. This often send bond prices into a steep decline, ending at pennies on the dollars very quickly. If we are not already familiar with the issue, this is the signal for us to start investigating whether it will meet the criteria for portfolio of distressed debt. When bonds trade at default pricing, we ask:
Is this a good company operationally ?
Does it have limited direct competition ?
Was this default caused a onetime black swan event ?
Was the company simply over leveraged?
If these answers are mostly yes, we will dig much deeper into the company and the situation surrounding its demise.
Over leveraging happens for a variety of reasons to companies, even those with good operations. Why not learn to take advantage of it?
When much of the lower tiered debt and stockholders are eliminated or substantially reduced, many of these company stand to experience the Phoenix effect and rise from the ashes. Our challenge is to utilize and refine the best criteria when sorting through these ashes, to achieve a maximum return relative to the perceived risk in companies most likely to fly again.
Distressed Debt 1, LP is managed by Durig Capital, Inc.
Management Fees .30 Quarterly which equates to 1.20% a year.
20% shared profit.
Distressed Debt 1, LP
Columbia Bank, Custodian
TD Ameritrade, Prime Broker
First Trust Company of Onaga, for IRA’s and Qualified Plans
Distressed Debt 1, LP
c/o Durig Capital, Inc.
11600 SW 69th Ave.
Tigard, Oregon 97223
Durig Capital Inc. is A Registered Investment Advisor Founded in 2001
Distressed debts could involve higher risk and liquidity requirements.
Please inquire with us for further details.