The Top Restructuring and Distressed Debt Books in 2020
You could spend a lifetime reading books on traditional investment banking and value investing. There may not be endless quantities of quality books on those topics, but there are endless quantities nevertheless.
In the world of restructuring and distressed debt, there are truly only a handful of books that matter. Luckily for those interested in these fields they are incredibly well-written and worth the time of anyone curious about how these fields operate.
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If you're looking for a thorough education on restructuring and distressed debt, here are the seven books you need to know:
- Distressed Debt Analysis - Moyer
- The Art of Distressed M&A - Nesvold, Anapolsky, Lajoux
- Quantitative Analytics in Debt Valuation & Management - Guthner
- A Pragmatist's Guide to Leveraged Finance - Kricheff
- The Vulture Investors - Rosenberg
- Distressed Investing - Whitman, Diz
- Creating Value through Corporate Restructuring - Gilson
Note: Here at Restructuring Interviews, we've compiled questions and answers created as a result of going through all of these books and much more. If that's something that might interest you, you can check it out here.
This is the Bible of the world of restructuring and distressed debt. Moyer walks you through how hedge funds think about dealing with truly distressed companies that are almost certainly going to go through bankruptcy.
Moyer covers the legal analysis, the financial analysis, and the psychological analysis that traditional distressed debt funds go through on every deal.
While nearly every young restructuring banker of distressed analyst will read Moyer, or at least have his book on their shelf, it is worth mentoring it is nearly two decades old now.
Much as M&A activity fundamentally changed in the 1980s and 1990s - becoming much more commoditized and normalized - so too has restructuring and distressed debt deals over the past decade.
For this reason, Moyer sets a solid foundation, but misses some critical elements surrounding out-of-court restructuring work that has become much more popularized recently.
Moyer also focuses very much on traditional distressed debt hedge fund tactics - revolving around taking appropriate positions in the capital structure prior to a Chapter 11 - as opposed to doing lending or out-of-court exchanges with distressed companies.
PE funds that have huge credit arms - like Apollo, TPG, Blackstone, and KKR - all operate in a fundamentally different way. All will actively look to place favorable new capital in distressed companies in the form of term loans of secured notes.
In the world of restructuring and distressed debt you can really break things down into three categories:
- Chapter 11s
- Out-of-court restructurings
- Distressed M&A (either in-court or out-of-court)
There is only one truly good book on distressed M&A and that is The Art of Distressed M&A.
The book is not overly old and covers things from a practitioners viewpoint, not an academic one. As a result, you get good coverage of out-of-court asset M&A and in-court M&A.
Note: In-court M&A is really just 363 asset sales in reality.
It is important to note (because many without practical experience assume otherwise) that "traditional" M&A activity in the distressed space is rather infrequent.
...This is partly because if you imagine a distressed company, there are obviously onerous liabilities that the purchaser does not want to assume. However, if they don't assume those liabilities (e.g. do an asset sale) then that leaves behind a rather decrepit, toxic shell.
This is why asset sales normally go through an in-court process where there are more protective elements.
Of all the books I've listed, this one by Guthner is the most academic.
An incredibly important element of restructuring and distressed debt is bond math. This is the singular best book on the subject that has good coverage of distressed debt.
When in restructuring investment banking or distressed debt you're looking at capital structures all day. What sets MDs and partners apart from analysts and associates is that the former have the contextual understanding to figure out why term loans are trading at 84 while senior notes are trading at 73 and if that is an appropriate spread (see my other post on the characteristics of a distressed company).
I wouldn't recommend reading Guthner cover-to-cover and taking meticulous notes. That may be more appropriate for when you have a garden leave period between two jobs. However, breezing through the book looking for key words for restructuring and distressed debt like "term loans", "covenants", and "notes" is worth doing.
As previously mentioned, understanding capital structures is incredibly important.
Kricheff was formerly a MD at Credit Suisse where he focused on high yield strategy.
As you can tell from the picture above, the book is slim. Indeed, if you go to Amazon one of the top reviews is that this book is "overly simplistic".
Many of those who are not practitioners far overstate just how academic all of finance is. Practically speaking, much of the academic literature around finance - regardless of if it's M&A, distressed debt, or bond trading - is far too theoretical. Finance is a practical discipline and the work can often appear simplistic on first blush.
Kricheff has written a great, accessible book that coves what you need to know for the job. I highly recommend it and do not recommend listening to those who say it is overly simplistic.
First of all, this book has long since been out of print. You'll have to try to scrounge up a used copy somewhere.
The Vulture Investors tells a series of stories from the 80s about distressed debt investors and how they maneuvered to get absolute windfalls. It's a fun, in-depth read that will help you contextualize RX deals.
It's an old book and it won't necessarily teach you the way that Whitman or Moyer do. However, it is the singular best book out of all of those on the psychological aspect of distressed debt investing.
- How do you know how other funds are thinking about the company?
- How do you know how holders will vote for the plan of reorganization (POR)?
- How do you know how to buy up a blocking position without others hearing about it?
These are as much questions of psychology as they are finance or law. The Vulture Investors helps you understand that through a series of incredibly fun stories.
Martin Whitman is the legendary hedge fund manager behind Third Avenue Management.
In this book, written shortly after the great financial crisis, he delves into the practical realities of being a traditional distressed debt investor.
This is by far the most practical, pragmatic book on distressed debt investing.
Whitman discusses out-of-court positioning, in-court arguing, and how it all ties together to produce spectacular successes and failures.
While it doesn't have the depth of Moyer or Gilson, it is the perfect book for those curious about the practical realities of investing in companies on the precipice of collapse.
This is the largest book - by topics covered and pages - that I've listed here. It's not for the faint of heart and it's worth reading specific chapters of it as opposed to diving head first into it.
Gilson has produced the best work that bridges academia and industry together when it comes to corporate restructuring (in particular for Chapter 11).
It's worth reading when you have the time, but the most important elements do have coverage via Moyer, Kricheff, Whitman, and Nesvold.
These seven books will give you a well-rounded and thorough education on distressed debt and restructuring.
Unfortunately, there isn't that much literature in the world of RX and distressed debt. That's why these books span nearly three decades in terms of when they were published.
If you're looking for a practical rundown of how restructuring investment banking works - perhaps because you're gearing up for interviews - then be sure to check out the Restructuring Interviews Course here. It distills all the key lessons from these seven books, provides actual deliverables you'll create on the job, and comes with a nearly 100-page guide.
As always, feel free to leave a comment or send me an e-mail if you have any questions.