6. “A Primer on Distressed Debt Investing” (Study Session 8)
a) explain factors that promote the growth of the distressed debt market;
b) explain the investment objectives of distressed debt investors (vultures);
c) describe the bankruptcy process and explain its relationship with distressed investing;
d) explain how to use LBO (leveraged buy-out) firms’ distressed debt to recycle private
equity;
e) describe the process for investing in distressed buyouts;
f) explain how to convert distressed debt to private equity in a prepackaged bankruptcy;
g) describe how to use distressed debt for a takeover;
h) explain how to profitably invest in distressed debt as an undervalued security;
i) explain how a distressed debt arbitrage is constructed;
j) assess the effect of event risk on the skewness and kurtosis of the return distribution
of distressed debt;
k) discuss the major risks in distressed debt investing;
l) compare private equity investing to distressed debt investing.
Guideline Answer:
Part A
Note: The first factor in the Template for Question 11-A is completed as an example.
Judge whether each of the
factors researched by
Vinepal is likely to decrease,
have no effect on, or
increase the size of the
Support each of your responses with
Factor
marketability discount
one reason
associated with the Rucoin
family’s plan to sell its
Easton shares
(circle one)
Example:
Bạn đang xem 6. - L3 MOCK SAMPLE EXAM CFA LEVEL III GUIDELINE ANSWERS 2005