With the United States real estate corporate default rate likely to rise, a growing number of investors may be wondering what they should do if their real estate bond issuer is unable to repay its debts. Unfortunately, the answer isn’t always straightforward. There are, however, several things real estate corporate bond investors should know regarding real estate corporate bonds (and corporate bonds from companies in other industries besides real estate).
Reasons leading to a real estate corporate bond default may differ and can affect the restructuring and repayment process. What real estate corporate bond holders receive after the default and when they receive their payment can vary significantly. Recovery proceeds may come in different forms, including as a newly issued real estate corporate bond, cash, real estate investment trust stock, or some combination of the three, and the process can take anywhere from a few months to several years. Below we will discuss what investors need to know when a corporate bond they own defaults.