What is a desperate debt?

Sometimes it is called Vulture Capital or desperate securities, desperate debt includes bonds and other forms of securities associated with the company that undergoes bankruptcy or is probably in the near future. In many cases, the purchase of these tools is expected to emerge from its financial affliction and will be profitable again. Provisional debt purchase allows new shareholders or bond holders to actively participate in the process of reorganization of the company because it is trying to stand up to return to profitability.

Less commonly, buying a desperate debt is a strategy used by corporate robbers. This is often the case where the unsuccessful company owns a number of assets that are believed that robbers can be sold for much more than the money invested in the purchase of shares and bonds issued by the company. After obtaining control of the company, the robbers can force the sale of any remaining, gains full control and begins to dismantle business. As part of this disassembly with assetsThey sell to repayment of the company's debts, while the remaining profit goes directly to the robbers.

In fact, it is to earn a lot of money by raising a desperate debt. As with any type of investment process, investors are preparing to fail before attempting to purchase shares and bonds issued by companies. This includes an understanding of what is happening on the market with similar companies, the reasons why the company cannot make a profit and what can be done reasonably to save the company and restore it to profitability. Assuming that the investor feels that there is a great chance that the company can be stored and again profitable can be an investment in a desperate debt by a wise decision.

There are risks associated with szzíský desperate debt. One of the most obvious is that the expected performance of the company will not occur. In this case, shares and bonds can become less value than the investor originally for them, which mA result of loss. If he has a plan to obtain a desperate debt, then enforce the sale of any remaining shares and bonds to the corporate raider, there is always a chance that the remaining shareholders will be afraid, which effectively causes the plan to stop. At this point, Raider must decide whether to hang up or sell them, often with loss, shareholders who will not sell their investment in a desperate company.