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Galia Velimukhametova By Beverly Chandler, Opalesque London:
Galia Velimukhametova, Portfolio Manager at GLG, managing distressed strategies has written a paper entitled 'In times of stress, get distressed; the asymmetric return profile of distressed securities.’
Velimukhametova defines 'distressed investing’ as the purchase of securities in corporations that are unlikely to meet their debt obligations. Depending on the level of distress in the companies, from bankruptcy to near bankruptcy, the securities often trade at a significant discount to their par value which makes them an attractive investment proposition as substantial profits can be raised through receipt of a higher settlement during the liquidation process or by accepting a stake in the restructured business.
"Investing in a business that is close to bankruptcy does not sound
like a particularly intuitive strategy. However, as Alumni Award
Winner Charles Gradante once observed, "The key to distressed
companies is that they all have bad balance sheets, but they could
have either good or bad business models". Consequently, an
important aspect of the distressed philosophy is to recognise that
companies with unsustainably weak balance sheets, stemming
from financial mismanagement, can actually be operationally sound
and potentially profitable businesses" writes Velimukhameto...................... To view our full article Click here
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