Strategies · Library · Distressed assets
§15.2.1Event-driven
Planning a reorganization
A variant of §15.2 Active distressed investing
A large debt holder files its own reorganisation plan in court to win a seat in management and lift the firm's value. Plans from big creditors tend to be more competitive.
- Asset class
- Distressed assets
- Held for
- Years
- Data
- Needs data ARCANE lacks
- Symphony
- Cannot be built as a symphony
The rule
- Signal
- Size of the investor's debt holding and quality of the plan
- Entry and exit
- Submit the plan during the bankruptcy; hold until the plan is confirmed and the firm recovers
- Sizing
- Single concentrated position
How it fails
- Plan may be rejected
- Legal cost
- Illiquid
Data it needs
- court filings
- creditor structure
No court or creditor data.
How ARCANE uses it
Only a background example for a Call about a bankruptcy outcome. Paper only.
Requires legal action and private claims.
Filed under the event-driven card
US stocks have tended to rise in the 24 hours before scheduled Fed decisions, whatever the decision. ARCANE’s rule goes further than the paper: position before a dated event only when Alpha’s chance differs from the market’s by a stated margin, and close once the outcome is public.
A paper plan from this card holds 1 to 30 days, stops at 1.5× the expected move and uses at most 50% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §15.2.1, p. 109 of the SSRN version. Described in our words. Event-driven is ARCANE’s filing, not the book’s.