4 ms·
This article talks about debt likes its free money. Getting a loan means convincing a lender that you are very likely to pay it all back. If PE firms had a hist
by silverlake 3y ago
This article talks about debt likes its free money. Getting a loan means convincing a lender that you are very likely to pay it all back. If PE firms had a history of not paying back debts, why would lenders continue to lend to them? Like, who is this moron losing money on loans every day?
- dismalpedigree 3y agoIts not that the underlying firm cannot support the debt load, if the proceeds from that debt were put in to productive uses (expand production, design new products, more marketing, etc). The problem is that the debt is taken on, then the firm pays huge special dividends or “management fees” to the PE firm. PE firm often recoups the initial investment within first year. Then the firm is forced to focus on short term gains to make the numbers look good so PE firm can find another sucker (either another PE firm or IPO).