This study investigated the determining factors that contribute for project distressed and thernmeasure taken to recover the project from failing. The study aimed at examining factors affectingrnproject performance that related with project distress, investigating the contributed factor fromrnproject management and project financer, Identifying rehabilitation mechanisms to reduce thernlevel of distress and enhance project recovery. The study adopted a descriptive research method.rnThe descriptive research design helped in observing the relationship between projectrnmanagement specific factors and prevalence of default on loan recovery ; project financerrnspecific factor and the prevalence of default on loan recovery; external factors and thernprevalence of default on loan recovery ; default on loan recovery and project distress. The studyrnutilized the interview to obtain relevant information from Elsi Addis Industrial plc andrnDevelopment Bank of Ethiopia representatives. The sampling technique used was judgmentalrnsampling technique which endeavors to get an example of components in light of the judgment ofrnthe researcher. The data from the interviews were analyzed using a qualitative approach. Thernstudy revealed that lack of prudent due diligence assessment , weak project appraisal practicernand owners equity requirements, poor communication management , delay on disbursement ofrnthe loan , Stringent procedure of the Bank in utilization of loan were from Financer specificrnwhereas the project management specific include factors related with triple constraintsrnconnected with cost overrun , schedule delay , scope creep as well as project sponsors ethicalrnissues , and poor communication culture are categorized as project management specific . Asrnexternal factor Currency fluctuations, Environmental conditions, Customers and Suppliers issuesrnare the most determinant factors for Elsi Addis Industrial project distress. The study concludesrnthat defaulting on loan repayment negatively affects a project successful performance , it isrnrecommended that the management of financer banks should develop strategies to reduce levelrnof default on loan recovery and project distress by performing prudent project sponsorsrnidentification on large project credit financing .