Distressed securities

Distressed securities are like the toys in the toy store that nobody wants to buy because they are broken or damaged. Just like those toys, some companies also become broken or damaged and their stock prices fall down. When this happens, some people might still want to buy those stocks because they think that the company will eventually fix its problems and make a lot of money again.

Sometimes, people buy these distressed stocks because they want to try and help the company get better. This is like when you see your friend feeling sad and you try to cheer them up by doing things with them that you know they like. These people who buy distressed stocks are called distressed investors. They hope that by buying the stocks, they can help the company raise money to pay off its debts and find ways to make money again.

Distressed securities can also refer to bonds that a company owes to its investors. Just like when you borrow money from your parents, companies borrow money from investors when they need extra cash. Sometimes, a company might have a hard time paying back that money because they are not making enough money. When that happens, the bondholders might be willing to sell their bonds for less than what they are actually worth. This is called a distressed debt.

Overall, distressed securities are like broken toys that some people still want to buy and fix up because they think they can be valuable again in the future. And just like when you see your friend feeling sad, some people buy distressed securities because they want to help those companies get better.