Bankruptcies-Like-Hertz-Are-a-Great-Investing-Opportunity,Hedge-Fund Head Says -- Barrons.com
Dow Jones
Gonna open Monday at today's high around $3.50
Additional shares will NOT be added for a while
5:28 pm ET June 12, 2020 (Dow Jones) Print
By Luisa Beltran
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 Barron's.
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 didn't return calls for comment.
Hertz selling shares is better for debtholders, Lasry said. Hertz wouldn't 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."
Bankruptcies represent good opportunities to buy from noneconomic sellers or people who need to sell, Lasry told Barron's. 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 that's OK, because I'll make money on the liquidation," Lasry said during the webinar. Lasry, who is Avenue Capital's chairman and CEO, said he considered distressed debt a "massive opportunity," estimating the global market opportunity at from $500 billion to $1 trillion.
P.S. JMO: Yes this is a huge opportunity or gamble however U see it, why play with penny stocks with you have one of the nation's premier car rental and sales co's with 102 years of history behind it? The bounce will probably not stay but it'll stay well above min's for NYSE.
It's "just money," enjoy it but can't let being upset about losing sometimes get in the way of enjoying your life.
