Avenue Capital’s Marc Lasry Says He’s Not Nervous About Tesla Debt

(Bloomberg) -- Marc Lasry, chief executive officer of Avenue Capital Group, said he’s buying Tesla Inc.’s debt and isn’t worried about the carmaker’s immediate ability to pay.

“We’re factoring some of that paper. What I mean by that is people are coming to us and saying, ‘I don’t want to take the risk that I’m not going to get paid in 90 days,’” Lasry said Wednesday in an interview with Erik Schatzker on Bloomberg TV. The hedge fund manager said he’s buying the debt at about 95 cents or 96 cents on the dollar and will get paid 100 cents on the dollar in three months.

“So when you take a look at that, you’re getting massively overpaid for that,” he said. “Why? Just people are nervous.”

“From an economic standpoint, I would look at that company and say there’s nothing to be nervous about,” he said.

He said Tesla has about $40 billion of equity value, and “my kids are buying Teslas. I know what’s going on there. I look at the equity value but at the same time from a business standpoint, we’re making 10 to 12 percent on a piece of paper that we shouldn’t be.”

Lasry’s other comments:

  • On the distressed side, it’s the beginning of the cycle, he said, adding that the question is how long will it take to get to the middle innings.
  • Investors aren’t getting paid for risk. “Eighty percent of all the bonds that are being issued are covenant light," with lower coupons.
  • He’s buying in the power and retail sector, companies that are having issues because debt has to be restructured.
  • He’s not buying Sears Holdings Corp. He’s buying debt of J.C. Penney Co. and Neiman Marcus Group.
  • The economy is fine, he said. “As the economy is slowing down a little bit, people are going to get nervous, but we’ll be able to buy that debt.”

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