Milwaukee Bucks' Owner on Investing (w/ Marc Lasry & Marc Levine)
Marc Levine: Maybe to get started, maybe go back to where all this kind of began, and so, you’re born in Morocco? Marc Lasry: Yeah, I mean, I was born in Marrakesh. It's a great city. You're happy to leave, I think. We went to live in Paris for a while. And then, I think, when I was seven, we moved to Hartford, Connecticut. So Marrakesh, Paris, Hartford… they're sort of all-- it's all the same. And then I grew up in Hartford, went to college on scholarship. When I was in law school, I'd done really well, and I got a job. I got recommended to work for the Chief Bankruptcy Judge of the Southern District of New York. So I went to work there for about a year. And then what ends up happening is if you work there, the offers you get when you graduate from law school are obviously in bankruptcy. It's just because you worked for a judge. So it wasn't like I went to law school thinking, oh, I really want to be a bankruptcy lawyer. I went to law school not really knowing what I wanted to do. One thing led to another. So I practiced law for about a year. And then I got out to go work at an investment firm that specialized in distress. ML: So which one was that? ML: It was R. D. Smith-- so this guy Randy Smith. I did that for about a year. I made him $25 million my first year. That's when $25 million was huge amounts of money-- so big. And at the end of the year, he gave me-- you get your bonus. So what do you think you would ask as a bonus? You know, I thought, oh, half of 1%; 1%. That would be great. And I got $10,000. That was my bonus. And that's when I decided it was time to leave. ML: Yeah, well, good for you. So Randy Smith may be regretting that compensation call. ML: Yeah, probably. ML: So $25 million bucks-- so were you principaling? ML: We were just investing money. They had a fund at the time. So we were investing the firm's capital. And then he was managing a fund. So you know, we did it in different companies like storage technology, Manville. And then I left there to go to Cowen and Company where we ran partner's capital. They gave us $25 million. We did about 60% a year for about two years. And then I left there in '88 to go join the Bass brothers-- so Robert Bass group. And so here's-- so we started running money. They gave me $150 million in 1988. At the time, that was the largest distress fund in the world-- $150 million. ML: And how old were you? ML: I was 28. Yeah. So it was fun. Yeah, you think back and-- did that for a couple of years. And then I left to manage my own money. It wasn't a lot, but you sort of thought, oh, I'd be great-- manage your money. And we did really well. We sort of doubled the money every year for about five years. So we would just invest in one or two things. And that's how we started Avenue. We started Avenue in '95. ML: So was there any one particular deal that kind of-- just give a taste of kind of what you were working on. ML: It was interesting. You know, back then there was no internet. There was a company, Smith International, which was in California. It was in Newport Beach. So you'd fly out. And if you flew out, you got to see the docket every day. Because most people, there's no-- the docket got sent at the end of the week to people. And you had to pay a fee to get it. So really what we did is, or what I did is, I went out there. And you would see as claims ended up getting approved, you would actually contact the people who had those claims and try to buy those claims at a pretty big discount. And back then, people sort of viewed companies in bankruptcy-- it's got no value. But in Smith International, you were getting paid somewhere around, on the restructuring, $0.75 on the dollar. And you could buy those claims for anywhere between $0.10 to $0.50 on the dollar. So we just kept buying. And really, you had to call individual creditors. I mean, there was no exchange. So you would contact individual creditors. And you would negotiate with everybody, and you'd buy claims one by one. And that's how we made a lot of money back then. Really the overriding concern was people didn't understand bankruptcies. So they didn't want to be involved. So you'd have a plan that was filed that said, we're going to pay you X. So let's say, we'll pay $0.75. And you would contact people and say, well, look the plan's got to get approved. You're going to have this. You need that. I'll give you cash today of $0.30, or I'll give you cash today of $0.40. And people would rather have that. They didn't want-- they didn't want to wait the six months or a year for everything to work itself out. You gotta remember, back then, the only people who had capital where these wealthy families. So it was the Pritzkers; it was the Bass family. Like, an investment bank didn't have real capital. So, you know, when I ran money for Cowen, the firm had $100 million of capital. So I didn't-- look, I'm sure Bear Stearns was higher or Lehman or everybody else. But the people who had real money was families. So what you had, I think, was some of the best and brightest people would go work there because you were given a lot of capital. And so you sort of found on the real estate side Tom Barrack who's formed Colony and did a phenomenal job, David Bonderman who created TPG, Jim Coulter who's part of TPG. You had a lot of really talented people who were there. And then over the years, people moved on because you were able to raise capital from others. You know, when we first raised capital in-- our first fund in '88 was a $120 million fund. I mean, today, you've got investors who are giving you $250, $500, sovereign wealth funds-- here's a billion. I mean, getting $10 million from one investor who was a big deal back then, and that's not that long ago. That's 30 years ago. So the families who were worth billions of dollars had a huge edge in attracting talent. ML: So Avenue really started -- it sounds like you made a few bucks with Cowen, with Bass, you started running your own money. You brought your sister in. ML: Is that normal? [laughs] ML: I think it's the first thing to you. It's like, I love my sister to death; I'm not going into business with her. But how does that work with the two of you? ML: I think a lot of it ends up being, how well do you get along with your sister or brother? I think for me, when we came to the United States, my sisters and I shared a room till I went to college. So you either hate each other or you get along extremely well. It's one of the two. I mean, it's not… going through puberty with your siblings in a room that isn't that big causes a lot of different issues. And I think for Sonya and I, she-- we both went to the same college. We went to different law schools. When I started, she came in house as our in-house lawyer. We were just doing-- buying trade claims. And then as the business grew, she started focusing on the operations of the business-- the legal side of the business, the compliance side. So it became a great partnership. I could do the investing, and Sonya could manage everything else. So it turned out to be a great partnership because she had no interest in doing what I wanted to do. And I had no interest in doing what she wanted to do. And I think that's why it works. ML: And still works today. ML: Yeah, it still works today. It hasn't changed. ML: OK, so really interesting. So you grew up, you're sharing a bedroom with your sister. And now here you are. You own a large institutional investor. You own the-- part owner of the Bucks. And you've got five kids. They're not-- I assume that your sons and daughters aren't sharing bedrooms and-- ML: They were when they were little. We wanted them to. I think it-- people feel really close. Like, I'm-- whatever. I think it's really-- family is a really big deal. And if people are sharing rooms, it sort of develops-- you either really like each other or you don't. And I think it's-- you have to learn how to deal with people. You don't have your own space. So our boys shared a room. Although we could afford for everybody to have a room, I wanted the boys to share a room. The girls-- we had three girls. The girls all shared a room. And it's-- and look, as people got older, they wanted their own rooms, obviously. And that was fine. But I think in the beginning, you have this bond because you're all together. And I think it's interesting to see, whereas I think families today-- you're not trying to have as strong a bond. I don't know. It worked for us. ML: Avenue today, and for a while now, is a heck of a lot different than Marc Lasry managing-- ML: I think a lot of it-- you know, when you're managing your own money, friends, institutions, people you know-- everybody comes to you and says, hey, can I give you money? And I didn't want to manage anybody else's money in the beginning because the only way you can sort of double your money every year is we would buy one or two things a year. So if I said to you -- you know, think of your job where you are. If I said, look, give me money. I'm only going buy one thing a year. You're like, OK, I don't need you. Just tell me what it is. If I want it, I'll buy it. It's like, I don't need you. I'm not going to pay you all this money to go do that, to buy one or two things a year. So you had this huge amount of freedom to do what you wanted and to take whatever risk you wanted because it's your capital. So as the capital grew, you know, we all get to that point where in the beginning, you're saying to yourself, well, I'm going to take a lot of risk. And then as you make more and more money, now it's less about risk, but more about preservation. We all become the person we swore we never would be. That's really it. We all said, look, I'm always going to be the risk taker. I'm always going to do this. And you sort of find, as you progress in life, OK, it's fine if I make 10%. It's fine if I make 15%. I don't need to be swinging for the fence all the time to try to make 30%, 40%, 50%, or 100%. Because there's a risk element to that. A lot of people aren't uncomfortable that risk element. People love making money. They just don't want to lose money. But you can't make these large returns without taking a lot of risk. You know, take a look at where -- here's a simple example. So today, so let's just do what's reality today and what's reality 10 years ago. So 10 years ago, the risk-free rate -- so if you just left the money in the bank and did nothing, you made 4%. Today, the risk-free rate, if you leave the money in the bank, is probably -- let's make it easy-- 40 BIPS. So 10 years ago, you made 10 times the amount. So if I made you, 10 years ago, four times the risk-free rate, you thought I was doing great. I'm making 16%. Today if I do four times the risk-free rate, I'm making 1.6%. Nobody's happy. So therefore, I got -- to do what I did, if you think about it just 10 years ago -- to make 20% 10 years ago, treasuries are trading around 4%. So you did five times the risk-free rate. Today you want to make 20%, you've got to do 20, 40, probably like 50 times. That's a lot of risk. But people don't want to hear that. People don't want to hear, hey, I'm taking 50 times the risk I did 10 years ago. So people want you to make 20, but they don't want you to take a lot of risk. Or they want you to make 10, but they don't want you to take a lot of risk. That's really hard to do. That's the difference. ML: Right, right, right. So when did you bring in your first institutional-- write your first big institutional ticket? Was it kind of mid '90s? ML: It was. ML: When did Avenue start to become the Avenue that we know? ML: By 2000. Yeah, if you take a look at it, in '95-- so think of it this way, in '95 we were running, whatever-- you know, you start. So by 2000, we're running a billion dollars. ML: And all friends and family type money? ML: No, like, you're starting to get high net worth. You're getting General Motors, General Electric. I mean, you're getting-- guys are giving you $25 million, $20 million. Then from 2001 to 2007 -- so if you take a look -- so '95, 2001; six years. Running about a billion. 2001 to 2007, another six years, we from running a billion to about $20 billion. Then in 2008, we lose about 25%. 2009, we make about 60%, so make that all back. And then we return about half the capital two years later. And the reason we return the capital we just think, there isn't that much distress or a special set. But I think right now, what we do, it's like an accordion. When there's a lot-- when there's a lot of opportunity, you sort of just open it up and you just raise more money. When there isn't, you take advantage of the opportunities you have. And you can do really well with sort of a smaller capital base. And since a lot of my money is in the fund or in the firm today, we're very focused on returns, as opposed to asset management. ML: So looking back at the 2000s -- that incredible AUM growth -- were you structured as a sort of typical hedge fund with quarterly redemption? ML: I would say a lot of our money was locked up. So we probably had a $3 billion hedge fund. And we gave people liquidity. We didn't really have an issue with it. But I would tell you back then, the people who didn't have issues actually were the providers of liquidity because you couldn't get liquidity from somebody else. So people would come to you and go, look, can I take money out? And you're like, yeah, it's a stupid time. They go, yeah, I know, but I need the money. So the lockup funds, that was actually fine. So that's been the bulk of our business. And today we don't run any hedge fund money. Today it's all locked up capital or institutional money. Take Apple -- everybody's got an iPhone. Everybody loves it. It's great. Apple trades millions of shares a day. So what does that mean? That means, today, you had a number of people who thought Apple was going to go up. That's why they bought it. You got a lot of other people who thought it was going down. That's why they sold it. On both sides are very smart people. What's their edge? What do they know? Not much. Somebody just thinks he knows a little bit more. I'd love to buy the Apple stock from the person who's selling Apple because he needs the money to buy a house, or he needs the money to do something. That's a non-economic seller. That's what I want. I don't want-- I mean, look, I'm happy to try to buy things from people who are as smart or who have as big a team. I don't-- in that situation, we've got to either have done better work or maybe we understand the situation a little bit better. What I really want is I want people who are being forced to sell or who can't find capital. So when you have bilateral negotiations, people are paying you a certain interest rate. They're going to pay you 10%, 12, 14, 15%. Why? Because they've got issues. People who don't have issues, they can go borrow at 2%. I mean, it's not complicated. If they've got issues, they need to come to us. And then what we've got to analyze is, hey, those issues aren't that big a deal, but the market believes it's a big deal. So we can create value. That's the difference. So what you're trying to consciously do is be in situations where you're creating the value, and you've got somebody who needs your capital and is willing to pay you a lot for that capital. The person who's buying Apple stock, if I don't buy it, somebody else buys it. So there's no-- I don't think we have created any real value there because I think there's just as many people who are analyzing Apple as we would. So I think in that situation, I think the network that we have, the people that we have, the information that we have, and the work that we do, it's not as big an edge as when you're sort of creating a security. It's the same thing like when you take a look at the S&P. The theory behind the S&P is that everybody has the same amount of information. OK? So what's your edge? I mean, it's not-- it's a little like, I think Apple's going to sell 10 million iPhones. And the other guy goes, well, I think it's 11 million. OK, why? Well, that's what I think. OK, great. If you're right, stock's going to go up. If you're wrong, stock's going down. I'd rather end up being the person who, I have someone who needs capital. I'm going to lend him money. So like here's a perfect example. We bought-- there's a company-- it's a ceramic company. They make tiles that people put in their houses. Company's got $200 million of debt. They used to have-- they used to make $30 million. Today they make $10 million. Kind of hard to service $200 million on $10 million. It’s just kind of impossible. So what do we do? We go to all the banks and we say to those banks, look, we're going to buy all of you out, and we're going to buy you out for $0.20 on the dollar. But all of you have to sell because we want to control this company. So we take out all the banks-- $200 million. We paid $40 million. So what did we just do? We just bought a company for four times. That makes $10 million. So if you sort of think about it, I just paid $40 million for a company that makes $10 million. So that means every year, I'm making just on that, 25% a year. And what ended up happening after we bought it? Because now they didn't have to-- when they were getting their products and all their suppliers, they wanted COD. They wanted Cash On Deposit. But now that they knew they had no issues -- because everybody was worried they were going to file for bankruptcy -- their EBITDA number has gone from 10 million to 13 and 1/2 million. So we created all this value just by cleaning up the balance sheet. And now we own a company that's making 13. That's going to go to 15. And so we've created less than three times. That's how you create value. And that's what you're trying to do. Now, that takes a lot of work. You need a large team. It's a lot easier to go buy Apple stock or go buy into the S&P. And that's fine. But I think for us, we can end up making money finding these situations. I can't do it though if you said to me, hey, Marc, here's a $100 billion. If you say, here's $20 billion. I can't. What I can do it on is with the capital we're managing, we can find enough of those situations. You need to have a world where there's a lot of problems. Right now there's no problems in the world. The S&P-- if you take look at our world, US growth is 2% or 3%. European growth is 1% or 2%. Asia's growing at sort of 3% to 4%. So you've got a lot of growth throughout the world. OK, that's fine. When things slow down, there's more opportunities. But while the world is going where it is, we still have plenty to do in private debt transactions. ML: So you just said that these macro factors actually do inform your AUM. Do you take macro factors into account in your investing of the money? ML: It's on the micro. I mean, the macro-- you've got to be cognizant of what's happening on the macro side. So if I take a look at it, I could tell you what I think is going to happen over the next year or two. I can't tell you what's going to happen in five years. So the next year or two looks like the economy is fine. But it's starting to heat up. And what I mean by that is, there's going to be issues. When? I don't know. Could be a year from now, could be two, could be three years. So what do you want to do? You want to be taking advantage of what's going on today. So do more structured deals that are shorter in time frame so that when sort of the shit hits the fan, you're ready. And then you can take advantage of that a lot more and raise a lot more capital. But that could be one year from now or three years from now. When you have capital, shockingly, people find you. They just do. Because everybody's looking for capital. And so you can always find situations, and then the larger your organization, the more situations you find. So people are always coming to you looking for capital. And that's just a reality of life. I mean, you're in the business. People will call you up saying, hey, invest with me. You don't need to make any outgoing phone calls. So the outgoing phone calls you make is more through relationships and people that you know. And you're trying to find a little bit more. But your business would be fine if you just dealt with all the incoming calls. And the same thing for us. What we're trying to do is, we've got a whole team, a whole group of people who are trying to do much more where they're trying to find deals. They're searching for deals. And then people still are coming to you with a whole bunch of different things. So it's always a mixture of both. ML: Is there a flagship, a core type Avenue fund? Or is there a series of them? ML: I think today it's a mixture of sort of different opportunities. So for me, what I want to do is go to an investor and say, look, I think there's huge opportunities in Asia. So we're going to invest in Asia. I think there's a lot to do in Europe. I want to do Europe. I think right now-- normally we used to just invest in the US. But I would tell you today, the US is broken down. And what I mean by that is, there's a lot of opportunities in energy. There isn't a lot of distress across the US. There's a lot of special situation distress in energy; aviation in the US. So you sort of find different, I would say, niches in different industries that are going through problems. And that's where we think we can make money. So as opposed saying, look, give me $1, and I'll try to find everything. I'm like, give me $1 because I think I can make it for you in energy. Give me $1 because I think I can make it for you in aviation, or I can make it for you in Asia. So what we do is really target where we're seeing opportunities that we think will be there for the next three or five years. ML: So let's take a quick glance at energy as an example. So energy-- was energy the first thing you kind of carved out of a core more generalized type US opportunity? ML: Yes. So it was a billion-three fund. And we raised that fund about four or five years ago. So oil is 100. We start investing. We have about a third of the fund invested. And as luck would have it, oil goes from 100 down to 40. I think it hit 25. So everything we owned actually went down quite a bit. And that was fine because on a third of what we own, pricing had come in. And we kept buying and buying and buying. I think at the worst, the fund was down about 30% on the invested capital. So if you look at and say, OK, 40% of the fund is down 30, that really means 15 because we haven't put the rest of the money to work. And we started-- remember, we try to buy at the top of the capital structure. So we kept on buying. And our view was, look, if oil stays at 25, yes, we're going to have issues. But we'll be at the top of the capital structure. Really what will end up happening is our debt will be converted to equity. Oil sort of goes down to 25, comes back to 60. And that fund has probably made mid-teens type of returns. And the reason for that is what we bought, because we are at the top of the capital structure, we were going to be fine. It's just as people get really nervous, people sell. And that's sort of what you have. You had a lot of non-economic sellers who kept on selling. And we tried to take advantage of all of that. ML: Do you always look for control in your targets and-- ML: You want to have-- it's not… ML: Control the class, of course. ML: Yeah, you want to be able to-- you don't need to have like 33%, which gives you the effective control. Really what you want is 10% or 15% of the debt. And that gives you enough say-so that people tend to end up doing what you recommend. The simple reason is because then all you need is a few other people to join you. ML: For 25 years, I've always been sort of the, let's go long seniorsecured loans and short high yield. I don't know if that's a trade that ever necessarily works, but it's a great philosophy, I think. And do you ever dabble in high yields-- in the busted high yield space, where you do have to worry about-- where you start having to worry about, geez, my 1x is a little bit lower probability now because I could get flushed. ML: Yeah, what's actually interesting-- you actually don't get flushed if you are the senior bondholder. If you're the senior secure bond holder, really it's a timing issue. And what ends up happening is everybody gets nervous as they see that company go into bankruptcy. So I could show you where we bought bonds at 60. And it's in the middle of a restructuring and everything. And the price of oil is constant during that. And then after the restructuring, the bond goes from 60 to 90. But the problem ends up being, nobody wants to get involved in restructurings. Nobody wants to be really taking all this risk. They want to take risk when everything's done. Well, that's great. But where you make money is where you're taking the risk knowing you're going to able to get the restructuring done. So I think for us in these situations, as you stay at the top, your real risk is a timing issue. And that's fine. I want to know my money is good. But I may have issues. And that's timing. Really what you're finding today is, so think about what's happened. So electricity prices-- so spreads, if you think back to four years ago, everybody builds these huge plants. Why? Because there's this huge demand for energy. So everybody's worried we don't have enough energy and the population's growing. So we need more plants. So you had a plant in California that ended up being billed for a billionthree. You've got all these environmental concerns. You've got to deal with all these different things. And everybody thought, hey, with electricity prices spark spreads, that they were going to be moving up. And at the time, the plant was making, four or five years ago, it's making around $40, $50 million a year. A billion-three was the cost. Fast forward to today-- what's happened? Electricity prices have dropped about 30% or 40%, mainly because you've got renewables. You've got all these different things. So pricing has gone down, but the debt is the same. So that same plant goes on the market. Because why? Because the people ended up-- the senior debt holders were forcing the sale of the plant and the equity had lost money. So we come in and the plant is making about $15 million a year. If you want to build a new plant, it’ll cost you a billion-three. So we paid for this plant, $75 million-- five times. But forget what you're making on that. The real opportunity to me is, you can't build a new plant. So the value of that plant, in my opinion, over the course next five years, it will be worth somewhere between 2 to 700 million. Because electricity prices will come back. Energy, there is going to be more demand. Now, when will that demand come in? Is that next year, or is it five years from now, or is it 10 years? I don't know. But it definitely will happen. But now my basis is 75 million. I've got no debt on that. So I've got the luxury of time. And what you're seeing in the power sector today is the same thing you saw in the energy sector, which is that pricing had come down quite a bit, but the debt that everybody raised was based on that pricing would be flat to moving up. So therefore, you can restructure all these things, take advantage, and re-price everything substantially lower, where now, you can wait. That's what we're doing through the energy fund today is investing in those situations. ML: You know, it's like a common theme in-- I don't want to say all of your investing-- that what you're really doing, you're doing kind of basic underwriting, looking at the business, and the left-hand side of the balance sheet. But the right-hand side of the balance sheet, you sort of crumple up, throw away. It's like, who cares what the capital structure is? I know what I'll be, once I can poke through. And maybe the special sauce is a super high degree of confidence to be able to get through the mess to get to those assets? ML: That's exactly it. People hate restructurings. Because it's messy. It's time consuming. You've got to fight everybody. So think about it. In all these situations, you've got bank debt, you've got bonds, you've got sub debt. And what's everybody doing? Everybody's fighting with everybody over the assets. And it's just a matter of time, but that time could be six months. It can be three years. And so people don't want to deal with that. And we do, because we think, over the course of those two or three years, especially for the debt, what's our downside? So think about it. If I end up having that senior debt, my risk is that somebody pays me off par. That everything works out. It's all great. They've got to pay me. I'm done. Or things stay the same. Well, if they stay the same, what am I doing? I'm crushing everybody beneath me. And then I'm going to take all that value, and I'll end up making money. And the question is, does it take me two years or five years? And that's what the fight always is about. So I'm happy to wait. I would tell you a lot of people today don't like waiting. ML: So one of the people you've come across in your distressed debt investing is Donald Trump in your involvement in the New Jersey Casino bankruptcy. Can you tell us a little bit more about that? ML: Sure. Yeah, I mean, I had to go see him quite a bit for lunch. We'd meet every time for lunch, about once a month, because he wanted to-- he wanted to have about half the equity, and I wouldn't give half the equity. I wanted to only give him 5%. So the part that's interesting about Donald in his office… he's got this huge office. And when you go in, I've never been in an office where on every wall there's a picture of Donald, with him on a magazine cover. So you sort of walk in and you're like, OK then. And we would just sit there once a month, over the course of the year, just trying negotiate and trying to end the bankruptcy, because he'd wanted half the equity and I would only be willing to give him 5%. But at the end, we only give him 5%. So we just wasted a lot of time and money. What you have to respect is he was happy to fight you for a year and a half because he looked at it and said, what's my risk? My worst case scenario is I'm going to get 5% because we need to use the name. He goes, yeah, it will cost money. It will cost time, but I have this option value. For me, it just wasted a lot of time and resources to get to that point. But we finally got at that point, and we controlled it. So it's a story of that's all-- that's what distress investing is, except we ended up doing it with a person who became the next president of the United States, which at the time, you never thought would have happened. ML: I think what's so ironic also about that whole series of events-- so Carl Icahn-- ML: Was involved. ML: --played role in that as well. So he was the one actually at the top of the stack there, right? And you end up with-- so Carl Icahn now, super sort of buddies with Trump, and you ended up with Trump in the second-- the junior debt. ML: Yes. Carl had-- the way it worked, there was $300 million of bank debt, a billion and a half of bonds, and then equity. We bought the bonds at $0.10 on the dollar. So at the time, the company was making about $100 million EBITDA. So $100 million can't service a billion aid of debt. But it can service-- if you think about it, $300 million of bank debt and then $0.10 on the bonds at a billion and a half-- that ends up being $150 million. So that's $450. That was a creation of the company. Yes, and you ended up having to deal with Donald, Carl-- it was just-- it was an interesting restructuring, yes. ML: For sure. So Avenue Aviation is a fund that-- that's actually how we met originally. And that's an asset that you've invested in back in the multi-- when you were doing multiple strategies, and then like energy, carved out. So can you sort of describe that business the way you do it? ML: Sure. So really what you're doing is you're buying a hard asset. That's what a plane is. So think of it this way. Everybody wants a new plane. And the reason people are buying new planes, every five, 10 years, new technology comes out. And you add lighter frames, so you are saving money on fuel costs. And that was the biggest -- other than the new technology -- the biggest expense for airlines is really the fuel costs. So think of a car -- same thing. Everybody wants a new car. And you want it because of new technology, and it's more miles to the gallon. Now when all of a sudden oil goes from $100 to $50, you're not really as focused on saving money on fuel. So where we saw that there was a huge opportunity is end-of-life planes. That planes that used to cost $100 million when they were new, 15 years later, 20 years later, those same planes are $5 million. So you can buy those planes – think of it again as a car. So a 20-year-old car, whether it's a Mercedes or it's a Ford or whatever, it's still a 20-year-old car. So you're going to pay what? $1,000, $500 for the car. But that car is still doing the same thing as every new car does. It gets you from point A to point B. And when you take a look at what's happened in the aviation side, we now-- today, if you're an airline, it's better or it's cheaper for an airline to keep flying older planes because what it's costing them on fuel costs, they're more than making up by not spending $100 million for a new plane. So what you're seeing in that space is that airlines are leasing older planes. So if you fly, when you came out here, you didn't look at it and go, wow, am I on a new plane or not? You just want to go from Chicago to here. And airlines know that. So they're making actually a lot more money today. And for us, they're leasing those older planes. So we buy those planes, lease them out, and we pretty much get back our cost over three years or four years. And now you still have the value of that plane. So what is a 20-year-old plane-- if it's worth $5 million today, what's it worth in five years? Still $5 million-- $4 million. It's already at-- and the reason-- it's at its liquidation value. And what I mean by that is we bought three planes for $5 million each. They had 12 engines. So what did we do with those planes? Well, right after we bought them, somebody needed engines. So we sold nine of the engines. But we sold nine of the engines for $16 million. So we sold nine of the engines for more than we had bought the all the planes. And now what do we have? We have three planes, can't really fly them. So all you do is part it out. And we'll probably make about $8 to $10 million on the part-out. So we spent 15, and we're getting back around 25. So you make $10 million, but your IR is very high because you got back the-- you got back all your capital within the first six months. Now, it's a great business. It's not a scalable business. I can't-- again, I can do that if I have $500 million or a billion. I can't do it if I've got $5 billion. Same thing-- it's easy to spend $100,000 or $50,000 on a new car, and you can grow that pretty quickly. But if you've got to spend $1,000 on a new car-- I mean, an old car-- you just can't buy enough. That's why you can make money. And it's a business where, for us, we're making high teens, low 20s. ML: Most people, I think, when they think of the aircraft business, they actually don't think of what you're doing. They think of what, like, is it's the old ILFC, the old GE, the model of the big AUM. And you've never really… ML: So we haven't done that. And you sort of hit it on the head. The market for new planes is huge. But that's a 6%. So I would have to use a huge amount of leverage to try to get it above 10%. But then I'm taking-- what am I taking? I'm taking the residual risk. So I can buy a plane and whatever-- if it costs me $100 million or $200 million -- whatever the cost of that plane is -- what's it worth 10 years from now or 15 years from now? If I'm wrong on that, I lose a lot of money. So I don't want to deal with that. But you've got a lot of people who want to make that 6% to 8%. That market, by the way, is massively scalable because it's billions and billions of dollars that, every year, people are spending on new planes. ML: How's the evolution-- your evolution in Asia been? And how do you see that market today? ML: Look, I think when we started in Asia, there wasn't any capital out there. So we were able to make pretty high returns. I think for us, our first three funds did very well. Our last fund didn't do that great. It made a couple percent. And part of that, I think, is we were investing in areas where we thought the legal system would work, but that it would take-- in the US, that would take a couple of years. We thought in Asia, it would take three or four years. It ended up taking about seven to 10 years. So it ruins your IR. I also think Asia is not a place where what you want to do is restructurings, which is a lot of what we were doing. And the reason-- because you've got to use the legal system to do restructurings. And I sort of came to a conclusion, it's just too hard to make money that way. So where you want to make money in Asia is being an equity investor. Because if you're right, you'll do exceptionally well. Or being a direct lender, where having collateral and saying, OK, you need money? I'll lend you at 20%, and I'll do it for 18 months. And I want all this collateral. So I think in what we're doing in Asia today, we've got a lot of opportunities where we can do extremely well. And we think the returns will be somewhere between 15% to 25%. Like, we did-- in Asia, we lent money to someone who was buying a water company. So we lent him money at 20%. So he gave us-- we lent him $20 million, he gave us $40 million of collateral. But he's happy to pay 20% because he doesn't want to give up equity. You can always find these situations. What always ends up happening is people-- you can't find them in scale. So that's the issue for everybody. You know, if you want to put a lot of money to work, that's hard to make 20%, unless you're going to do equity and things are going to work themselves out. And what we're doing, we can do really well with $500 or a billion. It starts getting harder as you start investing more of that. ML: Is Europe similar that way from a AUM standpoint? ML: Europe, it's just larger, so you can-- but Europe is about $100, $200 billion of asset sales a year. So if you're running a couple billion, that's fine. You never want to be more than 1% of the market. When you start becoming 5%, 10% of the market-- of the market that's for sale-- that becomes really hard because then your opportunity set, or your ability to say no, is greatly reduced because you've got to put money to work. ML: What do you think of Europe today for your business model? ML: I think it's good. It's a 10%, 15% business, which is good. It's stable. You're in really good legal jurisdictions. You know, it's hard to find things when you're making 10, 15 in areas that people would consider to be pretty safe. So you're comfortable investing in the UK. It's much easier to invest in UK, Germany, Switzerland, Nordic countries, than it is to go invest in Asia or go invest in Indonesia, Thailand, Philippines. I can make you more there, but some people just don't want to take that risk. ML: How do you personally feel? Do you look forward to that, or are you sort of happy if everything just keeps ticking away at this nice, boring 2% to 3% GDP type economy we have? ML: Well, do you like getting hit over the head with a two-by-four? I mean, that's what it is. Do you look forward to it? No. I mean, I'd rather be in a benign environment and make 10 to 15. I think when you're in a really difficult environment like '08, '09 was, it's really, really hard. And you've got to be exceptionally focused. And you've got to keep on investing, even though everybody's telling you not to. And it's easy to say, but it's really hard to do. And so do I look forward to it? No. Do I think if it happens, we'll do fine? Yes. But nobody likes going through pain. Nobody enjoys losing money. And that's what's going to happen. You've got to lose money to make a lot of money. And you've got to be right. We were buying Ford bank debt at $0.80, then $.70, then $0.60, then $0.50. And I remember, we had about half a billion of Ford. And my head trader comes to me and says, look, there's another 50 million for sale at 50, do you want to buy it? And I look at the analyst and the portfolio manager and go, what do you guys think? And they go, well, look, we think it's money good. I said, I know, but you said that at 80. You said it 70. You said it at 60. Nothing personal, but you've been totally wrong. And they go, well, look, we think it will work out. And I actually thought it would work out, obviously, since we're buying it. But I didn't want to own anymore. Everybody's got a threshold of pain. And I said to the trader, well, look, I don't want to buy it. He goes, well, we're committed. We've got to give them a bid. I was like, all right, we'll give them a 30 bid. I don't care. He goes, what, 30 bid for 50 million? I'm like, yeah. He goes, all right. He goes, we're not going to buy it. I go, I know. Don't worry about it. He gives the bid. Five minutes later, he calls me up, he goes, looks like they hit our bid. I'm like, what do you mean they hit our bid? So the problem is-- yeah, the good news is you bought 50 million at 30. The bad news is you're writing down 500 million, 20 points. So you just took yourself-- because you bought that, you just lost another 100 million on a mark to market basis. That's not enjoyable. Now, that same debt in 2010, traded above par. So we made a lot of money on that. But the pain is not an enjoyable process. But you've got to go through it. ML: You know, what I've learned in this interview is, Marc Lasry circa 1990, back in the young-- you'd have been-- ML: Yes, I would have been dying to do that. ML: You would have loved that 30-- you'd have been laughing and high fiving… So Marc Lasry current day-- Milwaukee Bucks. So how did you come across that opportunity? How'd you look at it? Did you view it as a trophy or an investment? ML: Look, it was an investment. It actually was the same thing. I think we saw things that other people didn't see or didn't want to admit they saw. So it actually wasn't complicated. We were buying not a basketball team but a media company. So if you think about it, the TV contract-- so the national TV contract-- there's only 30 teams. The national TV contract was $900 million. So each team got $30 million. And then you have your local contract. So the Bucks get $10 million a year. So what you're making off of that was $40 million -- 30 and 10. We thought that the national contract would be double. And it was coming up in two years from when we bought it. So we we're like, look, we think if it's double, then our team, which you just paid $500 million for, should be worth one and a half times what you paid for it. Two years later, national contract is not two times, but it's three times. So we get paid instead of $900 million, $2.7 billion. So that means every team gets $90 million. And our local went from $10 million to $30 million. So we went from making $40 million on a gross basis to making $120 million-- so $80 million more. Half of that actually goes to the players because you share your thing with the players. If you sort of look that, that's where we thought we'd make a lot of money. And that's actually why all these teams, the value has gone up. So we bought the worst team in the league. And that's all everybody focused on. But we looked at it and said, it doesn't make a difference where it is. It just gets 1/30 of all the revenue. So whether you're in New York or you're in Milwaukee, you get 1/30. And I think other people didn't look at it that way. ML: That's incredible. So the Knicks, presumably -- the Knicks and the Lakers -- those big bulls, big market teams-- those ratios would be a lot different. But frankly, you were really looking at those national revenue streams. ML: So the Bulls and the Lakers and the Knicks, their local TV contracts-- so they have two edges. Local is substantially higher. So ours may be $30 million, whereas the Knicks is $150 to $200 million a year. That gives them a big edge. That's number one. Number two is our courtside seats at the Bucks is $700 a seat. In New York, it's $3,700. So you get your revenue three ways. You get your revenue national, local, and then sort of how many people show up. Well, that's OK for us because costs are a lot lower. We just built a new arena in Milwaukee. That new arena cost us $500 million. The Nets just built a new arena in Brooklyn. That arena cost them a billion-two. I think ours is nicer! But there's a cost element to doing business in Milwaukee and doing business in Brooklyn. And that's sort of what you see. The Knicks just spent a billion dollars to upgrade Madison Square Garden. They didn't build a new arena. That's what's going on. And I think people didn't fully appreciate that. And today they do. ML: But it wasn't that long ago. ML: It was four years ago. ML: So what did your group pay for the team? ML: We paid $525 million. ML: And if you were marking that today? ML: It's worth a lot more. You know, it's nice to make money and enjoy yourself. So it's-- I think, we sort of have a public trust. I mean, I don't think we own the team. I think actually the city of Milwaukee owns it. The fans own it. And you're there for that period of time. If you go to a game, you would be shocked how many people just keep coming up to you and go, hey, I think you should get rid of this guy, or you should do this. Everybody's got an opinion. And it's great. I was a fan. I had my opinion. So I'm a big believer in listening to everybody and seeing what people think. So it's a blast. I mean, I don't think there's anything more fun. ML: The relationship with Bill Clinton -- how did that thing start? Do you think-- do you think that's been a material help to your business? Harm? ML: I don't think it's had anything to do with my business. I mean, I think we became friendly... we started traveling together. And you know, we just became very friendly. And I think, for me, it was like a unique experience to visit the world. If you get invited by an ex-president to go to the Middle East to meet with King Abdullah, to go meet with the King of Bahrain, to go meet with the Emir of Kuwait, the Emir of the United Arab Republic, it's a pretty unique experience. So you sort of do that. And I got to meet all these world leaders. I once went with President Clinton to Davos. And at Davos, you met every-- because everybody was there-- you meet every leader. And Putin's there. And I said to the President, I said, well, would it be possible for me to take a picture with President Putin? And President Clinton goes-- so I can do his voice. So I'll do it. President Clinton goes, absolutely, Vladimir, come over here. We're going to take a quick picture. And Putin goes, no picture. And President Clinton goes, all right, that's great. Let's all sign up. Let's all get a picture right now. And Putin's going, no, no, no. And the President couldn't care less what he says. So we're all there in a picture with Putin. And afterwards, I said to President Clinton, wow, thank you so much. That was really nice. He goes, yeah, [Putin] wasn't happy. But you meet all these people. You would never have that opportunity. So for me, I think not being born in this country and coming here and being able to, I think being friendly with President Clinton -- as friendly as someone can be with an ex-president -- I think that's a dream come true. And then being able to meet people and having access to those people through him has been great. So, yeah, I think for me, you know, we got to be friendly mainly because I was a big Democratic donor. But then, you know, I'd like to think -- maybe I'm naïve -- that it became a little bit more than that. Others might tell you, no, it had nothing to do with that, who knows. But it doesn't really make a difference. I think, for me, the experiences have been pretty unique. ML: Well thanks so much, Marc, for—ML: Thanks, pleasure. ML: --for doing this. I appreciate it.