Andrew Milgram

i don't know that there's even the beginning of the political will or discussion to do that at the moment so i go to the meander solution is way this probably goes where we just slowly work through this over time and we solve problems one by one it's a good time to ask for your definition of distressed investing

It's a great question.

Like distressed investing covers a lot of things.

The term has been, I would say, abused in recent years.

When I got into the business, it meant buying the debt stock of an individual company and then exercising the rights and remedies under the credit agreement to drive an outcome that generally involves some amount of operational improvement.

Back when I got into the business, credit agreements were tighter.

And so companies got themselves into tougher spots

in a narrower range the covenants were such that if your performance started to decline you bat it back into the middle of the fairway or deal with the problem today covenants are much wider and as a consequence when you violate a covenant or get to a place where you need to restructure one way or another

The business is just worse off generally and needs a much bigger operational reworking.

So when we think about distressed investing, it is provisioning capital into difficult situations that are capital constrained.

Now, some people look at distressed investing as when the market pukes out, we're going to step in and buy.

and watch it ride back up.

That happens.

Every 10 years, there's a big puke out.

That's a tough investment strategy to prosecute.

The reality is that the data is pretty clear.

In each and every year, there is some portion of the economy that is running at a two to three times the average default rate in the system.

So that is to say there's

Several sectors, a handful of sectors that have a much higher than average default rate.

That can be as a consequence of sector risks or some sort of factor input that impacts broadly across that sector.