What is a Distressed Security?
Distressed securities are investment opportunities associated with an entity that is either going through a difficult time financially or projected to shortly enter a period of being non-profitable. Both governments and businesses may find their securities distressed by adverse conditions. As a general rule, investors tend to evaluate the situation thoroughly before choosing to purchase a distressed security. There are several sets of circumstances that indicate that a security is currently under duress and may not be a wise investment option. Companies which are currently in default on a number of financial obligations will quickly find their stock offerings are not as strong as they were previously. In the event that the company seeks bankruptcy as a means of ironing out current financial difficulties, there is a good chance that investors will not purchase shares in at least the short term. Even if there are indications that a company is about to enter a period of insolvency, invest
