Creativity boosts distressed returns


Still waiting for the market to crack, managers turn to activism and private equity

Just a glimpse of the ongoing battle over bankrupt autoparts supplier Delphi and its major stakeholders - Appaloosa Management, Cerberus Capital Management and Highland Capital Management - points up one fact very clearly: The playing field for distressed debt has shifted dramatically as conventional workout opportunities dried up. To rake in big returns, distressed funds have had to turn to more creative, aggressive strategies - be it activism, private equity, direct lending, covenant arbitrage or any combination thereof.

Today's historically low