- Distressed-debt investors have been aggressively raising money since the effects of the pandemic on the global economy became clear in the spring.
- The equity markets’ bounce back has not taken away opportunities, according to legendary distressed investor Marc Lasry.
- Lasry, the owner of the Milwaukee Bucks and a big fundraiser for Joe Biden, said on a webinar Thursday he expects to see between $500 billion to $1 trillion in opportunities worldwide over the next year.
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Distressed-debt investors have been waiting for a recession after more than a decade of a relentless bull market.
Even though the equity markets have bounced back since the initial crash from the coronavirus pandemic — shocking and confounding many hedge-fund managers — there is still money to be made for distressed-debt investors. By Marc Lasry’s count, between $500 billion and $1 trillion in opportunities.
“The biggest opportunity today is investing in companies that are in bankruptcy or going through a restructuring,” said Lasry, the billionaire founder of $9.7 billion Avenue Capital, on a webinar with Skybridge Capital managing director Anthony Scaramucci Thursday morning.
Read more: POWER PLAYERS: Meet the bankers, traders, investors, and lawyers seeing huge opportunities in a wave of corporate distress and bankruptcies
The difference between now and 2008, he said, is that people know in two years everything will come back in some sense. In 2008, he said, people didn’t know if there would even still be a financial system.
What that means is companies with the liquidity to ride out the crisis are going to be in good shape, and those that were already saddled with debt are being forced to file for bankruptcy because no one is willing to lend them more money. But once they file, Lasry said, the tone of the investing world changes — he used Hertz as an example, since both its stock and bonds have quadrupled or quintupled since the company filed for Chapter 11 protection.
The change is because the company now has the liquidity to weather the storm, and investing in a company going through the liquidation stage can lead to serious returns, he said.
“If I could get in at the liquidation level every time today, I would,” he said.
Within different sectors and geographies, he mentioned the massive retailers that have gone bankrupt as targets, and is optimistic about opportunities in Europe and Asia because there’s less competition from other distressed investors. While energy companies can be a good bet if oil prices rebound, he admitted that “you’ve got to pick the survivors, and that’s gotten a lot harder.”
“Energy’s been a bloodbath,” he said.
But in lightning Q&A at the end of webinar, the Milwaukee Bucks owner and fundraiser for Joe Biden had two words for the distress landscape: “Massive opportunities.”