Distressed Debt AnalysisFree Financial Model Download

Distressed debt analysis values bonds or loans of companies in financial distress by projecting recovery under various restructuring scenarios. The model maps the current capital structure (secured debt, unsecured bonds, equity) and calculates how much each class recovers under a base-case enterprise value scenario, a stress case (lower exit value), and an upside case. The recovery waterfall follows strict lien priority: secured assets are distributed first, operational improvements or asset sales generate additional proceeds, and remaining recovery is allocated down through the stack to junior creditors and equity.

The model assigns probability weights to each scenario (e.g., 40% base, 35% stress, 25% upside) and computes expected recovery per dollar of investment. Investor returns are expressed as IRR on the path from current market price to restructured exit value, typically over a 2–4 year resolution horizon. Key inputs include current debt price (often traded at steep discounts), assumed exit enterprise value, and recovery timing. The workbook flags situations where junior creditors receive zero recovery, allowing you to eliminate false-hope investments.

This template is suitable for credit funds, hedge funds, and restructuring advisors analyzing investment opportunities in broken companies or sectors experiencing temporary distress.