Fulcrum security

The layer of the capital structure at which the recovery value runs out, and therefore the claim that converts into the equity of a reorganised company.

With an enterprise value of ₹3,200 crore, ₹1,800 crore of secured debt and ₹900 crore of senior unsecured debt above it, the next ₹500 crore layer is partly covered and everything below it is worthless.

Identifying it is the central task in distressed investing, because buying the fulcrum at a discount is how the equity of the restructured business is acquired cheaply.

Build the stack in rupees and mark where the value stops.