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Companies Should and Will Issue More Debt: Hedge Fund CEO

It is no longer "in vogue" to carry cash on corporate balance sheets, Steve Tananbaum, an influential player in the credit and distressed markets and CEO of the $12 billion-plus hedge fund GoldenTree Asset Management, told CNBC on Wednesday.

"If you are an investor or a shareholder you want to get the best return given the risk. If you don't have any debt and its all equity, then you're not optimizing your structure," Tananbaum, who founded GoldenTreet, said.

"I believe that you are going to see a large issurance of debt and retirement of equity as a result," he said.

"The equities are going to do well, as ITT did, as Motorola has done as they split up,"

Defense contrator ITT said Wednesday it will spilt into three publicly-traded companies, separating its defense and information businesses, its water technology unit and its industrial products business, according to AP.

For this reason, more debt will be on the balance sheet and they will go down in price because they are riskier credits, Tananbaum said.

For example, he added, "This past week in Sara Lee, the spreads have widened over 125 basis points."


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