Is predatory bond buying a thing?
Example, the company is skirting with bankruptcy, (debt topping 2b, maturities coming up in 2018) weighed down by high exposure to mineral/steel business,shares are trading at 0.015c down from a "high" of $5ish about 6 yrs ago. The assets of the company are worth more then the total debt if all was liquidated, so if I was to buy bonds in the company at a fraction of their value because the "threat" of default, does one stand to make money on this form of "predatory" bond buying if the company does infact go bankrupt and the liquidators come through?
>>1103670
Bond investors wouldn't be selling the bonds for less than the assets that the company is worth.
If they were mistakenly doing so, then yes, but you could also be over estimating the value of their assets and lose money.
Where are you getting the asset value from? If its from their balance sheet then its bullshit. If they are tanking with the commodity sector then all their assets are probably valued at levels they were when commodities were valuable. The assets will be written down and a iron mine that was valued at 100mil in 2011 will be written down and be worth 10mil in liquidation.
>>1103702
Subsidiary of the company is currently trying to be offloaded by ubs & lazard to cover the value alone of this sale will wipe 90% of their debt. Further sales of business ventures wil EASILY cover remaining debts.
>>1103711
If the sale doesn't go as well as you think it will, then you will lose all of your principal.
The market has priced the bonds where they think the true value is at. A lot of smart people doing this for a living have reached the price point. If they are wrong and you are right, then yes you will make money. But how confident are you in this?
>>1103670
>Is predatory bond buying a thing?
Yes, but it's called distressed debt trading. It's a multi-billion dollar market.
>>1103702
>Bond investors wouldn't be selling the bonds for less than the assets that the company is worth.
Yes they would. Bonds are typically unsecured debt, and the secured lenders may have claims that encompass much or all of the estate.
Not to mention, sometimes the goal is to get equity in the reorganized company. Sometimes the goal is to influence the direction or even success of the bankruptcy. It's not always about buy low-sell high.
>>1104308
>But how confident are you in this?
An amateur playing in today's distressed debt market is going to get anally raped by the pros. There are ways for a random amatuer to make money off bankruptcy cases, but debt trading isn't one of them.
