A hedge fund is considering a credit bidding strategy to a take control of a distressed company that is being sold through a 363 Sale. The hedge fund believes that, once restructured, the company has an enterprise value of $350 million. Claims against the company are as follows:

1st Lien Debt	$400 million
2nd Lien Debt	$250 million
GUC Claims	$65 million

Currently, the 1st Lien is trading at $0.64, the 2nd Lien at $0.19 and the GUC's at $0.03.

What is the best strategy for the hedge fund to pursue?

Choices

Buy 51% of the 1st Lien

Buy 30% of the 1st Lien and 21% of the 2nd Lien

Buy equal tranches of all three classes of claims

Buy 51% of the GUC Claims

Do nothing

Answer rating: 100% (QA)

Given the information provided the hedge fund can pursue different strategies to take control of the ... View the full answer