The downturn may spell misery for employees and business owners, but it offers a “once-in-a-lifetime opportunity” for debt investors, who can do “extremely well” making loans to companies that falter, says Marc Lasry, the billionaire co-founder and chief executive of hedge fund Avenue Capital, which specializes in investments in distressed businesses.
“I know you're not supposed to say this, but it's a once-in-a-lifetime opportunity,” says Lasry, also the co-owner of the NBA’s Milwaukee Bucks. “You're not going to see this again: Where you've actually got an economy that's fine, and you've got a Fed pumping trillions of dollars in.”
Avenue Capital, which says it manages about $10 billion in total assets, has invested in struggling brands like Macy’s (M) and J.C. Penney, Lasry said. The firm can issue senior debt that takes priority when a company begins to pay off its loans or cede ownership, Lasry added in the newly released interview, taped on June 29.
“For us, you've got an opportunity to invest at a senior level and do extremely well,” Lasry says. “So you'll either get paid out, or you're going to end up owning the equity of this company.”
Chapter 11 bankruptcy filings rose 26% over the first half of this year, compared with the same period last year, the Wall Street Journal reported. In all, 3,604 companies filed for chapter 11 protection over the first six months of this year, the report found.
“You've got a lot of companies that are in trouble,” Lasry says, comparing the current debt investment opportunity to what happened during the Great Recession.
“It’s a once in a lifetime, but it happened 10 years ago, also,” he says.
Lasry made the remarks in an episode of Yahoo Finance’s “Influencers with Andy Serwer,” a weekly interview series with leaders in business, politics, and entertainment.
Twenty-five years ago, Lasry co-founded Avenue Capital with his sister Sonia Gardner, who serves as the firm’s president and managing partner. In 2014, he and investor Wes Eden bought the Milwaukee Bucks for $550 million, and within four years the value of Lasry’s stake had doubled.
Lasry has an estimated net worth of $1.8 billion, according to Forbes.
The pandemic has divided the business landscape into “the haves and the have-nots,” Lasry says.
“The haves are the companies who have liquidity who have been able to borrow money, so for them, they've got the ability to wait this virus out until people come back,” he says.
“Have-nots are companies like a J.C. Penney, like Hertz,” he adds. “They've got to end up filing so that they can end up having a stay, and they don't have to pay their debts while they're working out a restructuring.”
“So for us today, huge amounts of opportunities,” he says.
Correction: An earlier version of this story stated that Avenue Capital manages $14 billion in assets. The firm’s website says it manages about $10 billion in assets, as of June 30. It also inaccurately stated that Lasry purchased the Milwaukee Bucks for $550 billion. He bought the team for $550 million.