Last week we wrote that several large hedge funds are getting out of the distressed debt markets.
We spoke to David Young of Courage Capital to gauge his opinion of the health distressed debt market.
He says that the low hanging fruit, the very cheap bank debt that investors bought from companies that were actually very good (that’s why it’s called cheap), is more or less gone from the market.
But Young told the Business Insider that there’s no need to worry that anyone missed the once in the lifetime bond rally. The great distressed debt rally of last year is not over.
Of course last year, healthy companies had distressed yields. The market was averse to risk.
That was a huge opportunity, but it was not really distressed investing – it is an investment opportunity made from unprecedented concern in the market, Young says.
There are still plenty of opportunities left in another part of the distressed debt market, like middle market distressed debt.
And distressed debt opportunities are building inside companies that don’t have to deal with their over-leveraged balance sheets just yet, but will soon find themselves in trouble.