This debt fund highlighted the gap between the “haves” and “have-nots”

Canyon Distressed Opportunity Funds II sent its third-quarter letter to investors last week. The fund has been winding down its portfolio and will continue to do so in the coming months. Canyon issued its first two capital distributions in July and August and started its harvesting period on Sept. 1.

Winners and losers

The fund said its biggest detractors during the quarter were its positions in offshore drilling, which came under pressure due to increasing concerns about the pace of recovery in the industry. Some offshore drillers have more flexibility built into their capital structures, which the Canyon team believes should help mitigate any delays in recovery. They believe these drillers' debt securities should be covered by asset value and offer...