Mitt Romney's investments and the connection to "distressed debt"

So I was browsing Mitt Romney's connections on the Muckety website when I came across a company called "Elliott Associates, LP."


I Googled the company, not expecting to find much. To my surprise, it has a Wikipedia page and is a New York hedge fund.

http://en.wikipedia.org/wiki/Elliott_Associates

A small portion of Elliott's portfolio is dedicated to distressed sovereign debt, most recently that of Argentina and the Republic of the Congo. Elliott is well known for its purchase of Peruvian sovereign debt. Elliot purchased debt with a face value of $20 million for $11 million. After extensive and costly litigation and numerous attempts at reaching a settlement, the court awarded $58 million to Elliott, including past due interest. More recently, Elliott has exposed serious corruption in Congo-Brazzaville in its efforts to enforce judgments totaling more than $100 million in defaulted bank debt. Elliott has been called a vulture fund due to its actions against the Peruvian government (amongst others)

And this article:

Amidst the millions of dollars worth of blue chip stocks, precious metals and high yield Goldman Sachs holdings listed on GOP frontrunner Mitt Romney's financial disclosure forms is a $1 million-plus investment in a hedge fund called Elliott Associates, LP.

While the investment is unlikely to provoke much reaction on Wall Street, the name is instantly recognizable in Republican political circles as that of the multi-billion-dollar hedge fund run by one of the most sought after, undecided GOP donors in the United States -- Paul Singer.

"He's an immensely powerful person given his stature in the financial world and politics, given that he has been willing time and again to put his money behind candidates," said Sheila Krumholz, who tracks campaign money for the Center for Responsive Politics.

http://abcnews.go.com/Blotter/mitt-romney-investment-handled-paul-singer-gop-whales/story?id=14311042#.UC8eOaPF98E

Now, what Elliott Associates specializes in is "Distressed debt" deals.

Hedge funds can generate massive returns in relatively short periods of time, and they can also go into financial crises just as quickly. What kind of investments can produce such diverse returns? One answer is distressed debt. The term can be loosely defined as the debt of companies that have filed for bankruptcy or have a significant chance of filing for bankruptcy in the near future.

You might wonder why a hedge fund - or any investor, for that matter - would want to invest in bonds with such a high likelihood of defaulting. The answer is simple: the more risk you take on, the more reward you can potentially make. Distressed debt sells at a very low percentage of par value. If the once-distressed company emerges from bankruptcy as a viable firm, that once-distressed debt will be selling for a considerably higher price. These potentially large returns attract investors, particularly investors such as hedge funds. In this article we'll look at the connection between hedge funds and distressed debt, what ordinary investors can do to get involved and if the risks are really worth the rewards.

Many would assume that collateralized debt would be immune from becoming distressed due to the collateral backing it, but this assumption is incorrect. If the value of the collateral decreases and the debtor also goes into default, the bond's price will fall significantly. Debt such as mortgage-backed securities during the U.S. subprime mortgage crisis would be a great example.

http://www.investopedia.com/articles/bonds/08/distressed-debt-hedge-fund.asp#ixzz23s3CVcTa

Now, there may not be any significance to any of this. But somehow, something about this smells fishy....profiteering off of economic misery, perhaps?