Credit Investment Approach
Drum Capital programs invest through an actively managed, diversified pool of highly sought after managers and co-investments. Our managers seek to gain control in distressed and underperforming companies and add value through operational and financial improvements. Drum Capital invests across three broad strategies: Control, Non-Control and Opportunistic
A distressed debt for control strategy builds a controlling position in the fulcrum security (usually bank debt or senior obligations) of an underperforming company, allowing the manager to act as the senior creditor and influence the outcome whether the restructuring is in a court or out of court. In a restructuring, the fulcrum security is the debt obligation that is anticipated to be exchanged for equity in the reorganized company upon emergence from bankruptcy, resulting in a change of control of the underlying business.
In a non-control investment approach, the manager will purchase a significant amount of the corporate bonds or bank debt that is generally trading at a yield to worst (greater than 1,000 basis points) in order to gain a seat on the creditor’s committee during a restructuring proceeding. Non-control positions are usually monetized soon after a restructuring to capture the value generated as a result of the process. When investing in non-control strategies, our team pursues investments senior in the capital structure that provide downside collateral protection secured by the property, plant and equipment.
Opportunistic investments are generally value oriented and are made across a broad spectrum of securities, ranging from liquid debt and equity securities to less liquid “hard asset” and other control oriented equity investments.
Drum Capital invests in teams that have demonstrated expertise in fundamental credit and collateral analysis, deep experience working through bankruptcy processes and a long track record of value added investing. Similarly, Drum Capital’s in-house team of credit specialists and business operators continue to manage a portfolio of direct companies toward successful exit.