FICC Focus State of Distressed Debt: Axar’s Axelrod Keeping Loan-to-Own Alive
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Aug 8, 2025 Andrew Axelrod, Founder and CEO of Axar Capital Management, discusses his firm's investment strategies in distressed corporate credit. He explains how focused buyers like Axar help stabilize troubled loans while emphasizing the 'loan-to-own' approach and the necessity of diligent capital commitment. Axelrod shares insights on identifying effective management teams and adhering to a strategic process during economic shifts. The conversation also touches on notable distressed cases, including the challenges faced by companies like Claire's and CommScope.
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Price Surprises, Cut Losses Quickly
- When undisclosed liabilities or surprises appear, reprice exposures, buy cheaper paper, or charge more for rescue loans.
- If the core investment thesis is wrong, cut losses fast and liquidate assets to recover capital.
Direct Lending Lacks A Sell Catalyst
- Direct lending lacks regular mark-to-market trades, so holders have little catalyst to take big write-downs.
- That absence of a trading exit creates wider bid-ask spreads and fewer forced sellers for distressed buyers.
LMEs Reward Delay Over Pain Upfront
- Liability management exchanges (LMEs) often benefit sponsors by buying time while lenders accept staggered concessions.
- Axelrod argues incentives on both sides make bleeding it out preferable to taking all the pain up front.