Distressed Debt Investing: Career Path for Undergrads

When a company runs into trouble, its loans and bonds start trading at prices that reflect what lenders expect to get back, and distressed debt investors earn their returns by working out which of those prices are wrong. Undergraduates can get into this work directly, but only through a handful of fund programs with small classes, so the clearest pipeline is two years as an analyst in a restructuring group at a bank first. Choosing between those routes early shapes when and where you recruit from sophomore year on.

Distressed credit funds are the most common exit for restructuring analysts, because those analysts already know how to value a struggling company's capital structure and run recoveries through it. By the end of this guide you'll know what the job involves, how the four routes in compare, which funds hire students directly and when they recruit, what each stage pays, and what to do each semester starting sophomore fall.

What a Distressed Debt Analyst Does

A distressed debt analyst studies the capital structure of a struggling company to work out how much its lenders and bondholders could recover in a restructuring, and whether the debt is worth buying at today's price. The job involves digging through credit agreements and bond indentures. If the company has filed for Chapter 11, analysts also review the bankruptcy filings and lay out the company's capital structure to estimate how much each class of debt could recover under different scenarios.

That last step is called a waterfall, and it finds the fulcrum security: the most senior class of debt that is not expected to be fully repaid in a restructuring and will likely receive equity in the reorganized company. Owning the fulcrum can give a fund real influence over the restructuring plan. The analyst then writes a memo that says what the claim trades at, what it should recover, and what would break the trade, and defends it to the portfolio manager.

Reviewing the debt agreements is as important as the financial model. These documents show where each creditor stands in the company's capital structure and whether any restrictions or covenants limit the company's ability to take on more debt. An analyst on a distressed debt trading desk, interviewed by Mergers & Inquisitions, describes spending "a lot of time reviewing credit agreements and loan covenants."

The Main Routes Into Distressed Debt, Compared

Of the four routes in, restructuring at a bank connects most directly to distressed funds, because distressed credit funds are the most common exit for restructuring analysts.

Route	When you recruit	What you learn	How it connects to distressed funds
Restructuring group at a bank	Summer Analyst recruiting in sophomore year, then two years full time	Recovery waterfalls, credit documents, the Chapter 11 process	Distressed credit funds are the most common exit for restructuring analysts; funds recruit them during the analyst years
A fund's own undergraduate program	Varies by firm: sophomore fall to the summer before senior year	The fund's own investing process from day one	Direct entry, but only a handful of programs, each with a small class
Leveraged finance, credit, or distressed trading at a bank	Summer Analyst recruiting in sophomore year	Credit analysis and how loans and bonds are priced	A strong fit for credit and direct lending funds; distressed funds are a harder move without bankruptcy experience
Turnaround and restructuring consulting	Varies by firm	Cash flow forecasting and operational fixes from inside the company	A related path; WSG couldn't find reliable data on how often it leads to a distressed fund

Restructuring banks: the major restructuring firms are PJT Partners, Houlihan Lokey, Evercore, Lazard, Moelis, Guggenheim Securities, and Perella Weinberg, and the top ones "place well into distressed credit and special situations roles," according to IB Interview Questions. Boutiques lead this work because they don't lend to the companies they advise. Goldman Sachs, Morgan Stanley, and JPMorgan do have people who work on restructuring situations, but their lending creates conflicts, so they're nearly absent from in-court restructuring, which makes the boutiques above the main places to look for a restructuring internship.

Leveraged finance, credit, and trading: Mergers & Inquisitions calls credit hedge funds, direct lending, and distressed private equity good fits for leveraged finance analysts, but says distressed debt hedge funds are "less likely than the others" because they require "knowledge of the bankruptcy and restructuring processes." A bank's distressed trading desk is another way to work on distressed names straight out of school; the analyst in the M&I interview joined his desk full time after a sales and trading internship.

Why Funds Recruit From Restructuring

Funds hire restructuring analysts because they can already value a struggling company's capital structure and run recoveries through it. Restructuring bankers advise stakeholders on possible outcomes, while distressed investors evaluate securities to earn a return. Funds tend to favor analysts who have worked on two or three substantive restructurings, and in interviews the thing that sets candidates apart is discussing those cases from an investor's point of view, saying what you'd buy and why (IB Interview Questions).

The timing of the move depends on the fund. Large credit platforms recruit on a set cycle and can extend offers long before the start date, while smaller distressed funds more often hire off-cycle, whenever a seat opens. Some large firms are pushing their cycle later: in October 2026, Bloomberg Law reported that Apollo told incoming bank analysts it would wait until they are "closer to completing one full year of professional experience" before interviewing them.

Which Funds Hire Undergrads Directly

Oaktree's Special Situations internship and Davidson Kempner's Rotational Analyst Program are the most distressed-focused undergraduate programs, and each recruits on its own schedule. The table also includes credit programs at Sixth Street, Blackstone, and Apollo. It isn't an exhaustive list of every fund, and these were checked on October 30, 2026. Programs repost each year, so confirm the current dates on the firm's careers page or job board before you plan around one.

Firm	Program	Who can apply	How close to distressed	Pay (from the posting)
Oaktree	Undergraduate Intern, Special Situations, Los Angeles	The 2026 posting asked for a 2028 graduation date, so the summer after sophomore year	Special Situations makes "control-oriented debt and equity investments in middle-market companies"	$43 an hour in the 2026 posting
Davidson Kempner	Rotational Analyst Program, two years, New York	Rising seniors apply the spring or summer before senior year and start after graduation; minimum GPA of 3.5	First-year rotations include Long/Short Credit and Special Situations	$125,000 base for the 2027 class
Sixth Street	Summer Internship, 10 weeks	Rising seniors, for the summer before senior year	Credit investing; interns "may be considered for full-time opportunities"	Not published
Sixth Street	Early Insights, three days each spring	First- and second-year undergraduates	An introduction to a credit investor	Not applicable
Blackstone	Summer Analyst Program, typically 10 weeks	The summer after junior year; postings go up as early as January through March, and US interviews start in February for programs starting the following year, so apply in the winter or spring of sophomore year	Credit investing through Blackstone Credit & Insurance; no distressed-specific student role found	Not published
Apollo	2027 Summer Analyst, Credit Trading, New York	Class of 2028, for the summer before senior year	A credit trading desk; adjacent to distressed investing	Not clear from the posting

Oaktree's internship is the most directly distressed role on the list, and it recruits early. The 2026 posting closed on September 19, 2025, which means it recruited in the fall of sophomore year. If you're a sophomore reading this after mid-September, this cycle's posting has likely closed, so focus on the restructuring applications. First-years should check Oaktree's careers page, which sends applicants to its Workday job board, at the start of sophomore fall.

Davidson Kempner is a full-time program, and it recruits before senior year starts. The 2027 posting didn't give dates, but the 2025 class's posting asked for resumes by June 21, 2024, with a program event that July, so expect to apply in the spring or summer before senior year.

For the many distressed hedge funds without a student program, most hiring is for experienced analysts. Mergers & Inquisitions notes that only about 20% of hedge fund recruiting is on-cycle.

What Each Stage Pays

A restructuring analyst is paid like any other banking analyst, and Davidson Kempner's $125,000 base is the only published full-time salary among the direct programs above; its bonus isn't disclosed.

Stage	Pay	Source
First-year banking analyst (New York)	$100,000 base at the bulge brackets; $110,000 at Goldman Sachs and some elite boutiques; bonus of $70,000 to $100,000	Wall Street Prep salary guide, updated November 19, 2024
Davidson Kempner rotational analyst	$125,000 base	2027 program posting
Oaktree Special Situations intern	$43 an hour	2026 internship posting

Pay for an analyst who joins a distressed fund after banking isn't published, and the figures on forums are self-reported, so treat any single number with caution. Ask the analysts you network with how compensation is structured at their fund.

A Preparation Roadmap From Sophomore Fall

The plan below assumes you're a sophomore aiming for a Summer 2028 internship.

Sophomore fall: apply early and build your first waterfall. Apply to restructuring Summer Analyst roles as each bank posts, because the windows are spread out. Extern's Summer 2028 guide, last updated October 9, 2026, lists Evercore as open from September 9 to November 15, 2026, and expects Houlihan Lokey in November 2026, Lazard in December 2026, and PJT Partners in January 2027. Apply to Oaktree's Special Situations internship too, which is for the summer after sophomore year, if this cycle's posting is still open; last cycle's closed in mid-September. Before the first interviews, pick one recent Chapter 11 case, build the capital structure table from its first-day declaration, run a few enterprise values through it, and find the fulcrum. Restructuring interviews test whether you can follow a capital structure, and a case you've worked through gives you a specific answer when you're asked why you want restructuring. Prepare the standard banking technicals too, because restructuring Summer Analyst interviews have historically "deviated little from M&A interviews," according to Wall Street Prep.

Sophomore winter and spring: deepen the restructuring knowledge. Work through two more cases and practice explaining each one out loud, since interviews run through this period. Stephen Moyer's Distressed Debt Analysis is a useful companion here, because it lays out the bankruptcy process and how distressed claims are valued. Apply to Sixth Street's Early Insights program, which runs each spring for first- and second-year students, and watch for Blackstone's and Apollo's summer analyst postings. Sixth Street's summer internship is for the summer before senior year, the same summer as a restructuring internship, so treat it as another application for that summer when it posts.

Junior fall: learn to read the documents. Once the model makes sense, move to the documents that decide who gets paid. Public companies file material contracts, including credit agreements, as Exhibit 10 to their SEC filings, and the exhibit index in a company's 10-K lists them. Read one credit agreement for a company you follow and find what it lets the company do without lender consent. If you don't have a bank offer yet, keep applying as late postings appear.

Junior spring and summer: apply direct and make the internship count. Apply to Davidson Kempner's full-time program when it posts, as a second route alongside your bank's return offer. On your restructuring internship, ask to work on recovery analysis and to read the credit agreement on each deal, because those are the skills a fund will test. A return offer gives you the two years of restructuring experience distressed funds recruit from, and fund recruiting can start within your first year as an analyst, so keep in touch with the fund analysts you met while networking. For the questions credit funds ask once you get there, see our private credit interview questions.