Distressed securities: Distressed securities are stocks, bonds, or other claims on the assets of a company, in, or about to enter or exit, a situation of significant financial distress. This may involve reorganizations, bankruptcies, distressed sales, or other corporate restructurings. Such distress frequently causes the securities to fall in price, and distressed investing strategies look for situations, broadly speaking, where the security undershoots the true value of the company. Distressed securities strategies seek to capitalize on the knowledge, flexibility, and patience that a distressed securities fund manager has that the creditors of a company often do not have. Moreover, distressed securities strategies benefit from the inability of most institutional investors to hold below investment grade debt. Their need to sell anything that is downgraded below BBB can sometimes depress prices substantially.
