distressed bonds are speculative or junk or better non-investment grade bonds (lower than BBB rated) where the issuer is in danger or bankruptcy or reorganization, you buy them hoping they don't default, so you take a high risk, for that the discount is large. if you loose and they default without assets than for gods sake the money is lost, its a nice niche but you need to know what you are doing

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You should also consider into your risk reward calculation that when you buy bonds at a discount, if they go up in value because they become less risky or as they appraoch maturity, that the profit will be considered capital gains which is taxed less than ordinary income from bonds