The Tanker Trade

In the early 1990s, Argentina was broke. Inflation was spiraling, state assets were being sold off in a fire sale, and almost anything with a balance sheet was up for grabs. One of the most peculiar items on the block was a fleet of oil tankers that belonged to YPF, the state-owned energy giant. These vessels were hardly ocean-going instruments anymore; they were rusting in the Plate River, sitting idle and costing money just to keep docked. To most observers they looked like liabilities. Who would want to buy hulks that couldn’t even make a safe voyage? Marc Lasry, then still on his way to becoming one of the great distressed-debt investors of his generation, saw something others missed. He and his team ran the numbers on the steel. A mid-sized tanker displaced about thirty to forty thousand deadweight tons. The overwhelming majority of that mass—close to ninety percent—was recoverable steel. In South Asian breaking yards, where much of the world’s maritime scrap ended up, steel was selling for around $120 to $150 a ton. At those prices, a single ship carried more than four million dollars in raw scrap value. YPF was trying to unload them for barely a quarter of that figure. Some tankers were being offered at less than a million dollars apiece. Lasry recognized the arbitrage. Rather than worrying about putting them back into service, he arranged for the vessels to be towed across the Atlantic to India and Bangladesh, where they could be cut down, melted, and sold into a booming construction market hungry for cheap steel. The economics were brutal and simple. Purchase one of these hulks for around $800,000. Incur another million or so in towing, yard fees, brokerage, and taxes. Collect four to four and a half million in steel proceeds. Net out the costs and the profit per vessel came to roughly $2.5 million. A handful of ships meant ten million dollars in profit in a little over a year—an internal rate of return that would make any Wall Street dealmaker blush. The brilliance of the trade wasn’t in financial engineering or a complex derivative. It was in seeing what was literally in front of everyone’s eyes and valuing it differently. Local sellers thought they were disposing of headaches. Lasry saw a commodity play disguised as rust. It was a perfect case study of how distressed capital could move quickly, take risks that traditional lenders avoided, and profit from inefficiencies that others didn’t bother to calculate. This deal became part of the lore around Lasry, who later co-founded Avenue Capital and managed billions across global distressed markets. The DNA of Avenue’s strategy was visible even then: find assets that the market has given up on, and treat them as raw material for profit. In this case, quite literally, raw material. It’s tempting to call this story colorful, even exotic, but at its core it’s what special situations investing has always been about. You don’t need a balance sheet stuffed with bonds or a cleverly structured option when a rusting tanker will do. You need imagination, speed, and the willingness to see scrap as capital. The Argentina tanker trade showed that value can hide in places where the rest of the market refuses to look—and that the dirtiest deals sometimes shine the brightest.