The Vulture Investors: The Winners and Losers of the Great American Bankruptcy Feeding Frenzy

by Hilary Rosenberg

A look at vulture investors--the investors who capitalize on bankruptcy by feeding on businesses in trouble--presents anecdotes on such big-time investors as Mary Whiteman, revealing their secret dealings and schemes. 20,000 first printing. National ad/promo.

Genres: Finance, Business, Nonfiction

402 pages, Hardcover

First published June 30, 1992

Reviews

[Matthew · Rating 3 out of 5]

A highly educational read. The structure differs from that of the Market Wizards, in that although Rosenberg runs through a gamut of high-profile distressed debt investors, techniques and anecdotes, the book is not a series of interviews but rather a series of blow-by-blow cases. There is a lot to take away, in terms of a broad feeling for the issues involved in corporate bankruptcy and exchange offers, or for how capital structure, collateral, bargaining position, etc, can affect a position. However, it is far from a textbook -- the issues are covered on an anecdotal basis, as per case study, rather than in a theoretical and comprehensive manner.

I also think the book could have benefited from clearer presentation of financial information -- Rosenberg describes in some detail the financial structure of each target company, but it would have been much clearer to show a simplified snapshot of the balance sheet before and after the restructuring, to give readers a better of sense what exactly happened; possibly the info was not available in every case, but if demonstrated in even a few cases it would enhance the learning value immensely.

The largest takeaway for me is perhaps a sense of how involved and time-consuming vulture investing is. Virtually all of the investments involved days of 24-hour, down to the wire style hard-headed negotiation, in some cases over a period of years. Managing the position seems an extremely activist task next to investing in investment grade or even high yield but liquid bonds. As with many other roles in finance, your personality has to suit your style.

It is also interesting to observe how a shrewd and large investor may take positions across different parts of the capital structure, in order to influence a bankruptcy process in a certain way. It puts paid to the notion that just because you are senior debt, you will have seniority; many cases involved neat tricks of corporate finance that benefited the equity holders or junior bondholders over the senior; capital structure is not straightforward in bankruptcy.

(The last point makes me slightly cautious of, for example, the current case where Carl Icahn is taking a position in RIG and calling for a reinstatement of dividend; this would weaken the company financially if it is not yet in a position to pay out cash; however, Icahn may have a position in the debt structure, and depending on his price could benefit from a restructuring; someone holding just an equity position may like the dividend but not realise his risk is asymetrical, while Icahn could benefit either way. Generally speaking Icahn doesn't come off very well in the book -- he is acknoledged as highly succesful but a real hard-driving asshole.)

[Mark Kasson · Rating 5 out of 5]

My absolute favorite book. I read this first in the 1990's. It was a pick up from The Strand bookstore in NYC. What more fitting than a distressed book on distressed investing?!? This is the book that sparked my passion and career path.
It tells several stories while imparting some technical knowledge about the bankruptcy code such that even a young future distressed investor got the feel. It covers the (then) players, some of whom I wound up interacting with.
I've read a lot of books about investors and/or distressed investing and this is still the pinnacle to me.
It is mostly narrative, so this isn't the place to learn the bankruptcy code about debt and priority but it will give a layperson the rough lay of the land in an enjoyable manner. An experienced pro might well find it enjoyable.

[Matt · Rating 3 out of 5]

It wasn't terrible, it was just repetitive. If you read maybe two of the cases in the book then you've pretty much read them all. The writing gets a bit formulaic and repetitive as well...."Thing XYZ may also happen, for example Person Y called Company Z to exchange some of their debt for equity". Having said that, the cases are interesting, particularly if you pick a couple out. I wish there was more commentary on the culture; the author touches on this briefly in describing the different kinds of vultures. There was also not much 'background flavor' as to what was going on in the economy for the different cases, often it was a snippet here or there in a 50 page case study.

Overall not a bad read, but just long in the tooth.

[Jon Anderson · Rating 3 out of 5]

Interesting collection of stories. I think the book is worth reading to get a Birds Eye view of the types of negotiations that take place in these bankruptcy deals, but the commentary stays at a very high level. I enjoyed reading about the different characters, capital structures, and bargaining positions at play in these deals. However, we’re often told by the author what happens but not necessarily how or why. I’d like more details about the business fundamentals and how the investors arrive at their assessment of value for the various securities.

[Andy Jay]

This is not a good introduction to bankruptcy practice. You really need to read a primer first and then read this to appreciate all the shenanagins, strategies and tactics laid out.

[Jonathan Beigle · Rating 3 out of 5]

I was recommended this book by someone because I loved the Masters of Private Equity and Venture Capital. However, I didn't like this one nearly as much. This was much more dry and didn't share much on each individual's strategy. I also thought there was a lot of unnecessary language in the book.