Distressed Debt
Also called: distressed investing, loan-to-own, vulture investing
Distressed debt investing buys the obligations of troubled companies at deep discounts, betting the recovery exceeds the price. It's fundamentally a legal analysis rather than a financial one: what matters is where a claim sits in the waterfall and what the collateral covers. The loan-to-own version deliberately buys the fulcrum security — the tranche that converts to equity in a reorganisation — to end up owning the business.