Working paper series // HfB - Business School of Finance & Management 73
During the past two years, private equity funds have acquired substantial portfolios of nonperforming loans from banks in Germany. Typically a private equity investor does not commit funds unless exit strategies are clearly defined. The usual exit strategies for distressed debt investors are fix it (restructuring and turnaround), sell it (sale of debt or equity), or shut it down (liquidation). A new alternative exit strategy for NPL investors considered here is the transfer of credit recovery risk.
Focus diversification specialization monitoring bank returns bank risk Non Performing Loans Distressed debt investing Synthetic securitization Collateralized debt obligations Credit risk transfer Credit derivatives Credit default swaps Credit recovery swaps Credit portfolio management Credit portfolio risk Credit portfolio returns Efficiency of credit risk portfolio allocations Learning effects