Distressed Investing Is Back. These Trades Are Defining the Game

Savvy investors seized tightening credit markets this year to reshape the distressed investing playing field just as more companies look destined for default in 2023.

Trouble hit U.S. corporate earnings, pressured by rising prices and shrinking margins, and some companies that began the year flying high found themselves stuck in quagmires of debt. The saga of Twitter Inc., for instance, exemplified the arc of credit markets in 2022, and Carvana Co. similarly went from tech darling to disaster in just a matter of months.

Creditor culture also took a turn as top investors seemed to reconsider the aggressive maneuvers characterizing so many recent corporate bailouts. All the while, a dubious source of opportunity bloomed in Europe, as wartime sanctions against Russia sent corporate and government assets there plunging and helped contribute to a surge in global distressed debt.

The pile of distressed bonds and loans tied to the Americas grew to a two-year high of $294 billion on Dec. 23, and the heap is poised to keep growing. Investors looking ahead to 2023 would be wise to soak up lessons learned during a whipsaw year.

It would be easy to let some of the action slip your mind. Here, Bloomberg recaps the developments that reshaped distressed debt investing this year.