As investors continue to unload loans to risky companies, pushing prices into distressed territory, those still holding these investments are increasingly looking the other way. They continue to value the loans on their books at par, even when the loans change hands in the secondary market at prices far below face value.

Typically, loans that trade below 80 cents on the dollar are considered to be distressed. At this point, market participants come to an agreement about the level of risk involved in holding the loan, and potential buyers demand representations and warranties from the seller before purchasing it.

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