Episode 42 – Fixed Income – Investing in Distressed Credit
July 2, 2020

Episode 42 – Fixed Income – Investing in Distressed Credit

Geoff Castle joined by Parul Garg and Amar Pandya discuss the current market conditions that have led to some interesting opportunities in distressed credit.

Subtitle: Has this ship sailed or are we just warming up?

In this episode Geoff Castle, Fixed Income Portfolio Manager, is joined by Parul Garg, Associate Portfolio Manager of the Pender Corporate Bond Fund, and Amar Pandya, Associate Portfolio Manager on the equity team. They discuss the current market conditions that have led to some interesting opportunities in distressed credit. They look back at prior dislocations, including 2016, as well as the risks associated with investing in distressed credit

“This podcast was recorded on June 24, 2020. As anticipated, Chesapeake filed for Chapter 11 on June 28, 2020.”

Key Takeaways

[01:45]Amar and Geoff begin the discussion by reviewing the impact of the global economic shutdown on several sectors, and their rebound potential.
[05:20]Geoff asks Parul if the ship has sailed in terms of getting involved in this distressed credit cycle post March.
[13:30]Amar shares a study by Ed Altman which details what investors could expect in the long-term when investing in distressed and defaulted securities.
[16:07]Geoff asks Amar to discuss Hertz and the impacts on its business “from the point of view of a distressed credit investor”.
[20:22]Parul details on the situation for Chesapeake, as Pender is now participating for the second time in Chesapeake as a distressed security - once in 2016, and now.
[30:06]The conversation closes with a recommendation for a book by Ed Altman, “the founder of the school of thought that you need to go beyond ratings”, best known for the Altman Z-score.