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Marc Lasry, co-founder and head of hedge fund Avenue Capital Group, believes that the biggest opportunity for investment right now is in bankrupt companies or those that are restructuring, otherwise known as distressed debt.

Lasry, who made the comments during a SALT Talks webinar, pointed to Hertz Global Holdings (ticker: HTZ), the car rental chain that filed for bankruptcy protection in May. No one was willing to lend them more money. All their collateral was in bonds, Lasry said during the webcast. Avenue Capital does own some Hertz debt, Lasry told Barrons.

Hertz had $18 billion in debt when it filed for chapter 11 on May 22. Its stock closed at 56 cents the day it filed for bankruptcy and then saw its shares increase tenfold, closing at $5.58 on June 8, according to a June 11 bankruptcy filing. This spurred Hertz debtors to ask a bankruptcy judge on Thursday to allow the rental company to take advantage of the trading and sell 246.8 million shares through Jefferies, the filing said.

The sale would allow Hertz to raise capital on terms that are better than any debtor-in-possession financing it could get, Hertz debtors said, and the company could use the proceeds for general working capital purposes. The Delaware bankruptcy court on Friday granted Hertz debtors motion to sell shares, according to a bankruptcy filing. Hertz can sell no more than 246,775,008 shares valued at up to $1 billion. Hertz didnt return calls for comment.

Hertz selling shares is better for debtholders, Lasry said. Hertz wouldnt need to pay interest on the equity the way it would for a debtor in possession, or DIP, loan, he said. We own bonds and debt, any equity that is put in is beneficial because its always junior to me, Lasry said. That means I get paid first.

Avenue Capital, of New York, invests in distressed debt and other special situations. It manages an estimated $9.7 billion in assets as of May 31. The firm typically invests in companies when they file for chapter 11, Lasry said. The Covid-19 recession has pushed many companies, including Golds Gym, J.Crew, and J.C. Penney (JCP), into bankruptcy.

Bankruptcies represent good opportunities to buy from noneconomic sellers or people who need to sell, Lasry told Barrons. This means firms like Avenue Capital can buy debt assets at a discount, he said. If things turn out, I will do exceptionally well. If a company has to liquidate thats OK, because Ill make money on the liquidation, Lasry said during the webinar. Lasry, who is Avenue Capitals chairman and CEO, said he considered distressed debt a massive opportunity, estimating the global market opportunity at from $500 billion to $1 trillion.

The SALT Talks webinars feature Anthony Scaramucci interviewing business leaders and policy experts. Scaramucci is the founder and co-managing partner of SkyBridge Capital, the hedge fund, and the chairman of the SkyBridge Alternatives Conference, or SALT.

The Avenue Capital CEO said he feels more confident investing today, than he did 12 years ago when the country was suffering during the great financial crisis. Lasry said his biggest worry in 2008 was whether the banks could survive that recession. By comparison, the biggest issue facing companies today is whether they will have enough liquidity to survive until people return, he said.

Lasry made the comments as U.S. businesses are beginning to reopen. States, including Alabama, Alaska and Arizona, have lifted their stay-at-home orders that were put in place earlier this year to stop the spread of the virus. People, in some states, are turning out to restaurants and bars.

Today we all know something, Lasry said during the SALT webinar. We will be fine in two years. People will be back out, there will be a vaccine. The question is how long will it take to get back to normal.

Write to Luisa Beltran at luisa.beltran@dowjones.com

Original post:

Bankruptcies Like Hertz Are a Great Investing Opportunity, Hedge Fund Head Says. He's Not Talking About Its Stock. - Barron's