Distressed Debt Pioneer Altman Shows More Firms Fail After Swaps

To creditors, the pitch is framed as a win-win. Take some losses now, troubled companies say, and you’ll give us a chance to turn things around.

These highly leveraged firms are pushing to swap out liabilities they can’t repay in favor of a lighter debt load. They argue creditors only stand to benefit if the company survives.

Edward Altman

Source: Edward Altman

But more often than not, companies that undergo distressed debt exchanges are left worse-off than before, often going on to failures within two years, according to a new paper from Edward Altman, emeritus professor of finance at the NYU Stern School ...