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Distressed-Debt Investors Send Out Their Own Distress Signal

  • Some $95 billion for beaten-up securities are sitting unused
  • Easy-money policies mean fewer companies head into trouble

When distressed-debt investor Mudrick Capital Management bet on an aviation startup in December, it was a sign that opportunities have dried up in one of the most lucrative corners in finance.

Despite pandemic woes and market turmoil, investors that trawl for beaten-up credit are struggling to put a glut of money to work. The unused capital for buying under-water loans and bonds surged 58% in the course of the pandemic to $95 billion in 2021, according to investment-data company Preqin.