Distressed debt (otherwise known as vulture capital) meaning

Distressed debt (otherwise known as vulture capital) describes the purchase, usually at a discount, of corporate bonds, loans or other claims against companies that are insolvent, in default or likely to become so. It is a descriptive market term, not defined in legislation or case law, and its usage is broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland. Investors (often hedge funds or specialist credit funds) buy on the secondary market to realise value through restructuring or enforcement. Typical instruments include publicly traded bonds, syndicated loans, non‑performing loans and trade or litigation claims. Strategies include influencing creditor committees, proposing or voting on schemes of arrangement, restructuring plans (Part 26A Companies Act 2006), company voluntary arrangements, and appointments of administrators or receivers; in Ireland, examinership and schemes under the Companies Act 2014 are common tools. “Loan‑to‑own” and debt‑for‑equity swaps are frequent outcomes. Key legal issues include priority and subordination under intercreditor agreements, security enforcement, acceleration and standstill, insolvency set‑off, and risks of challengeable transactions (preferences, transactions at undervalue, unfair prejudice). The term “vulture capital” is colloquial and sometimes pejorative, but commonly used in restructuring and insolvency practice.