These 10 investors are looking for huge returns in beaten-down companies as $1 trillion in corporate debt teeters near default

Heidi Gutman/Getty Images; Apollo Global Management; John Lamparski/Getty Images; Blackstone Group; Ruobing Su/Business Insider

Industry sources pointed Business Insider to the top players and under-the-radar stars in the distressed investing space as it comes into the spotlight again.

• Top distress investors include Avenue Capital founder Marc Lasry and Aurelius Capital founder Mark Brodsky, as well as power players from Blackstone's GSO unit and Elliott Management.
• Distress investing, a subsection of alternative investing that takes advantage of bankruptcies and other high-risk situations, struggled to find opportunities for years.
• The pandemic caused by the novel coronavirus has put these investors back in the spotlight.
• UBS recently projected that more than $1 trillion in corporate debt may become distressed.
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Billionaire Marc Lasry, the founder of Avenue Capital and a longtime player in the distressed-investing space, didn't shy away from the question.

At a New York Alternative Investment Roundtable event in early February, when the novel coronavirus that has since sent markets plummeting was still mostly confined to Asia, Lasry said that distress investing might not need a recession to pick back up, but it definitely wouldn't hurt.

"We need to have problems, because the more problems there are, the better it is," said Lasry, who co-owns the NBA's Milwaukee Bucks.

In good times for the markets, "we can make 10-15%" in a year, he said. But in recessions, "we can make 15-20%."

Investors in distressed securities hope to profit by buying up debt or equity in companies in a tailspin that have some compelling reason indicating there will eventually be upside, whether that's due to a well-known brand, an important patent, an innovative CEO, or favorable outcomes in restructurings.

Lasry described the approach as buying something that normally costs a dollar for a fraction of that.

For years, distressed investors have struggled to find opportunities as the combination of low interest rates and soaring markets limited options. Now, the novel coronavirus pandemic is sending the world hurtling toward a recession.

These investors are among a cadre of professionals who are seeing huge opportunities as companies grapple with a sudden and unexpected hit to revenue. Restructuring attorneys and bankers are meanwhile working around the clock to field calls from clients to navigate the economic fallout from the pandemic.

UBS recently projected that more than $1 trillion in corporate debt may become distressed, and blue-chip companies like airlines, cruiseliners, and restaurant conglomerates may be in need of a bailout.

Industry sources pointed Business Insider to the top players and under-the-radar stars in the distressed investing space as it comes into the spotlight again.