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This chapter provides a toolkit for valuing financially distressed companies when failure risk is central rather than peripheral. It contrasts two coherent approaches—survival-weighted discounted cash flow and adjusted present value—and warns against double-counting distress. The method builds survival curves from hazard rates tied to observable drivers (liquidity, covenants, refinancing), and couples a liquidity view with longer-term normalization. It constructs recovery values under a going-concern reorganization versus liquidation. It then allocates value via a priority waterfall to identify the fulcrum class, validates terminal assumptions against sustainable economic principles, and explains why intangibles collapse in liquidation.

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Default and Turnaround Valuation: How Do Investors Price a Crisis?

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  • 发表日期：

    2026年

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  • Roberto Moro-Visconti

摘要

This chapter provides a toolkit for valuing financially distressed companies when failure risk is central rather than peripheral. It contrasts two coherent approaches—survival-weighted discounted cash flow and adjusted present value—and warns against double-counting distress. The method builds survival curves from hazard rates tied to observable drivers (liquidity, covenants, refinancing), and couples a liquidity view with longer-term normalization. It constructs recovery values under a going-concern reorganization versus liquidation. It then allocates value via a priority waterfall to identify the fulcrum class, validates terminal assumptions against sustainable economic principles, and explains why intangibles collapse in liquidation.