Distressed Debt Investors Club FAQ

This post will serve as the running FAQ for the Distressed Debt Investors Club (URL soon to follow). There will be a link on the new site, pointing back to this post for easy updating / commenting.

Overview/Application Process

What is the Distressed Debt Investors Club (DDIC)?

The Distressed Debt Investors Club is a community of buy side and sell side professionals that focus on distressed, high yield, credit, fixed income, and special situations. For too long, most investing forums / sites have overly relied on equity driven ideas. Our site will be the first focused on the fixed income aspect of the investment business which, by our estimation, is far larger than the equity markets.

What are the benefits of the DDIC?

Currently, idea generation in the fixed income world really boils down from sell-side recommendations and building a community of like minded professionals. This, in my opinion, will be the strongest community out there.

In addition to the ideas presented to the site, the member forum will be a place for members to share their thoughts on current happenings in the credit / fixed income markets.

And finally, going forward, I am going to post case studies exclusively to the DDIC. The blog will be a place where I discuss current events as well as value investing and distressed debt concepts (don't worry ... more Seth Klarman content will be coming). But full blown case studies will solely be found on the DDIC. That being said, I expect to post more frequently to the blog, with richer content, upon the launch of the site.

How does one become a member of DDIC?

Members will be chosen via an application process. Potentials members will submit an idea that they find particularly compelling, current and relevant. Myself and two of my colleagues will go through each application. If we have questions on the idea, we will email you and wait for a response back. If you are accepted, you will be given membership access to the site as well as the member forum. If you are not accepted, your status will be set to "guest" until you submit another application.

How does one become a guest of DDIC?

Guests will apply in the same fashion as potential members, except for submitting an idea, they will simply write a note in the text fields that they are applying as a guest. Guests will not be approved until after Jan 1, 2010. In the future, guests will be set on a 50 day delay. This means that when a member submits an idea, guests will not see the idea or the comments of the idea until 50 days after the idea has been posted. Guests will also not be able to access the forums on the site.

Do I have to provide my real name or firm on the site?

Yes. But no users will be able to see this information. I am collecting this information for book keeping purposes. Users will only be identifiable via their user name (i.e. mine is Hunter) The Distressed Debt Investors Club is committed to protecting your privacy. We will not sell, trade or rent your personal information to other companies or third-parties.

What type of ideas are considered "fair game" on the site?

In no particular order:

• High Yield
• Distressed/Bankruptcy
• Investment Grade
• Agency / Government Securities
• Structured Product
• Equity or Credit Short
• Post Reorg Equity
• Undervalued Equity
• Special Situation

I thought you said this site was fixed income focused? Why allow any type of equity?

There comes a time in any fixed income professionals life where he/she finds an equity situation that is too good to pass up. We do not want to handcuff our members in the chance they find a particularly compelling opportunity. Further, and we will expand on this below, but each user must submit 1 idea per every half year (in addition to their application that will also be visible to users once accepted), but undervalued equity will not count towards this total.

How many members will be admitted?

For 2010, the number of active members will be capped at 250. In the future, this may decrease or increase depending on how the user base is interacting and whether a solid community is already functioning. If we feel we can handle more users, then we may accept another 50 in 2011 for example.

What is the format of the application / idea submission?

The two main components of the application are the "Synopsis" and "Investment Write-Up." The Synopsis is no more than 4 sentences explaining why this is a particularly compelling investment. In the synopsis you should include your target price and potential IRR on the investment. The synopsis is your "elevator pitch" if you will.

The Investment Idea Write Up section is the meat of the thesis. This is where you will expand and defend your synopsis. The site will enable (90% of the time) to cut and copy from word with near exact formatting.

In addition to the Synopsis and Write Up, you may attach a file to each idea (no larger than 300kb). You should reference this file in your write-up if you feel it is justified.

How long between application and decision on membership?

In the first few weeks, expect at least 4 or 5 days. In the future, I expect applications to come in at a slower pace, and therefore status could be decided that same day. Also -if you have no received an email yet, check your Spam filter.

How much does it cost to be a member?

The annual cost for 2010 is $49.95 dollars. No fees will be collected until January 2010 to give users and members a chance to see the benefits of the site. Therefore, no money is required up front in the application process. If you do not like the site and want to revoke your membership, all you have to do is contact me. In the future, fees will be collected via PayPal.

How much does it cost to be a guest?

Guests will not be charged an annual fee in 2010.

What if I become a member, and decide this boondoggle is not for me?

I, more so than most, know how busy and time consuming the investment world is today. If you feel you cannot contribute enough to the site to remain a member, or feel that you just are not deriving any value from the site, you can contact me to change your status to a guest. Please make this decision prior to January 2010, as 2010 refunds will be given after that time.

Site Navigation

How do I submit an idea?

In the upper right of the member page, you will see the Submit an Idea button. Here you will see something similar to the application page, with synopsis and write-up text. Fill those out and add an attachment if you see fit (remember 300 kbs). You then will preview the idea. Make necessary changes and then submit the idea.

The formatting is showing up all strange when I preview the idea...

Unfortunately, web based editors sometime like to make me angry and you will see certain errors (like ";nbsp") throughout your idea submission. To offset this, open up WordPad or another simple text based editor, and copy your idea into WordPad (from Word for example). Then from WordPad cut and copy right back into the DDIC. This has been the reason the site has been delayed for two weeks and there are still kinks. If you are completely frustrated, email me and I will help you out.

Can I edit an idea after I have submitted it?

Yes. You are able to edit your ideas in the future if need be.

Can I comment on/ rate other users' ideas?

Yes. Ideas are scored on a 0-5 basis with the site aggregating the best ideas on a weekly / monthly and yearly basis. To see the best ideas from the week, simply click "Last 7 days" ... to see the most recent ideas, ranked in chronological order, click "Recent." On the right rail, you will see a section for Highest Rated Investment Ideas. Currently, that section will feature the highest rated ideas ever submitted to the site.

In terms of commenting, all members may comment on one another member's ideas. Comments should be tasteful and more than likely, pose questions to the original author of the idea.

What is the User Profile?

Admittedly a work in progress. In the future, this section will be a place where users can send messages with one another. Currently, messaging is delivered via the member forum.

How will the Search Function Work?

The search function is VERY robust. You can find a needle in a haystack with that thing. You can search anything ranging from company name, idea/synopsis text, rating, date, etc.

Tell me about the Forum

The forum will be a place where members can discuss whatever they please. Whether it be concepts, news, passing around hedge fund letters, idea discussion, making fun of me, setting up meet and greets, etc. While it will not be a lawless wild west, I will be more apt to be a "hands off referee." Users can also let me know if they want new forums set up, or other taken down, etc.

Other General Questions / Info

What are the "rules" of membership?

Each user will be required to submit an idea for their application. If approved, this idea will go into the database and count as one idea for the site. Each member thereafter will be required to post 1 idea per half year, as well as rate 15 ideas per half year. I do not want a situation where everyone is submitting 2 ideas at the end of the year and hence have split the requirement into half year increments.

Why are you doing this?

I have been absolutely humbled by the response to Distressed Debt Investing. I have always been awed by the success of other investment club websites yet feel like one devoted solely to credit and fixed income would be an invaluable tool to its members. The credit markets are so deep and wide that the diamonds in the rough are countless: you just have to know where to find them. And I know that this site will accomplish that goal. That means a lot of people are going to make a lot of money from the ideas presented on the site.

So I ask you: Why wouldn't I be doing this?

Last Updated: 10/27/2009