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Chaney Sheffield, Partner at Canyon Partners, on identifying opportunities in distressed investing


Giovanni Amodeo hosted an ION Influencers fireside chat with Chaney Sheffield, Partner at Canyon Partners, to delve into the intricacies of distressed investing. Sheffield, who co-leads Canyon’s dislocation and distressed efforts, shared his extensive experience and insights on identifying opportunities in distressed markets. Here are the key topics discussed:

Background and Career Journey: Chaney Sheffield began by outlining his career trajectory, starting from Morgan Stanley’s investment banking department to his current role at Canyon Partners. He highlighted his early exposure to distressed investing during the restructuring of Trump’s Atlantic City casino bonds and his transition to Canyon Partners during the 2008 financial crisis.

Observing Market Cycles: Sheffield discussed the various market cycles he has witnessed over the past two decades, comparing the 2004-2008 period to the current economic environment. He noted similarities such as rising interest rates and inflationary pressures, but also pointed out differences, particularly the swift interventions by central banks to maintain liquidity.

Preparing for Economic Scenarios: The conversation shifted to how Canyon Partners prepares for different economic scenarios, including soft and hard landings. Sheffield emphasized the importance of underwriting every scenario and constructing a resilient portfolio that can withstand economic fluctuations.

Industry Expertise and Flexibility: Sheffield highlighted Canyon’s specialization in complexity and the advantage of having deep industry expertise. He explained how Canyon’s analysts stay on top of their sectors, allowing the firm to act quickly during market disruptions and move up and down the capital structure as needed.

Identifying Distressed Opportunities: The discussion covered how Canyon identifies distressed opportunities, focusing on signals such as credit downgrades and industry-wide issues. Sheffield stressed the importance of being deeply informed and maintaining strong relationships across management teams, advisors, and other intermediaries.

Impact of Technology: Sheffield acknowledged the role of technology, including tools like ChatGPT, in enhancing analysts’ efficiency. However, he emphasized that the complexity of distressed investing often requires personal relationships and deep industry knowledge that technology alone cannot replace.

Origination Process: Sheffield described Canyon’s origination process, which leverages the firm’s long-standing relationships and brand reputation. He noted that most of Canyon’s talent is homegrown, with a culture that encourages entrepreneurial spirit and solution-oriented approaches.

Future of Distressed Investing: Looking ahead, Sheffield predicted an increase in distressed opportunities due to high interest rates and unsustainable capital structures. He also discussed the evolving role of CFOs and the continuous need for sophisticated financial strategies.

Conclusion: The fireside chat concluded with Sheffield reflecting on the dynamic nature of distressed investing and the importance of staying adaptable and informed. His insights provided a comprehensive overview of the strategies and considerations involved in navigating distressed markets.

Key timestamps:

00:08 Introduction to Distressed Investing
02:15 Historical Context of Distressed Markets
04:19 Preparing for Economic Scenarios
05:28 Industry Comparisons in Distressed Investing
07:42 Canyon’s Unique Approach to Distressed Investing
08:59 Identifying Signals in Distressed Credits
10:44 The Evolving Role of Analysts
11:53 Origination Process in Distressed Investing
13:12 Talent Requirements in Distressed Investing
15:27 Evaluating Team Performance
16:50 Market Behavior and Investment Timing
17:55 Understanding Complexity in Capital Structures
21:17 Capital Structure and Restructuring
21:59 Advantages of Industry Specialization
22:35 Investment Across the Capital Structure
23:23 Impact of High Interest Rates
24:07 Market Sentiment on Interest Rates
25:00 Changing Role of CFOs
25:33 Navigating Investment Challenges