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You're completely right that it does not add up. PE detractors really need to be able to explain how this observation fits in with their analysis.

• wewxjfq 3y ago
  The companies have to refinance their debt perpetually to avoid default, which is where the banks make money. Also, that debt will then be repackaged and sold to others, so the banks won't be the bag holders.
  • tome 3y ago
    That's just begging the question. Why are the "others" buying?
• ImPostingOnHN 3y ago
  It's been explained multiple times in this thread. tl;dr: the "observation" is made-up and false.
  • tome 3y ago
    Somehow I haven't been able to find an explanation that I find convincing.
    • ImPostingOnHN 3y ago
      Given how many people explained the same thing, that lack of understanding may be more attributable to you than to everyone else. In any case, I and several others were able to find many, so it's okay that you weren't. Sometimes a person who has made up their mind and doesn't want to change it, ignores anything that might, and further effort committed to them is just a lost cause.
      • tome 3y ago
        Thanks for the reassuring words. Can you point to an explanation you find convincing?
        • ImPostingOnHN 3y ago
          I would need to first see proof that the "observation" that banks would go bankrupt is true in the first place. I don't see any evidence it is, so the "observation" seems made up, and thus there is nothing to explain. It's possible you misunderstand how the process works.
          • dllthomas 3y ago
            The observation wasn't that the banks would go bankrupt. The observation was that if the practice was reliably so destructive to the value of the purchased businesses that the loans couldn't be repaid (including interest), the banks would stop choosing to make loans for that purpose. I think that observation is probably true. I also think that there are possible ways to accommodate that observation while preserving the main thrust (or perhaps even the entirety) of the criticisms, but I don't know which of those match reality (if any) or to what degree.
            • tome 3y ago
              Thanks, yes, that's a good summary. I think if the original claim was that the PE business model is pathological and parasitic because it is (economic) value-destroying then the claim must be false. Other financial stakeholders wouldn't participate, because they would make an economic loss. If the claim is that it is pathological and parasitic because it leaves employees and customers worse off that's another argument, and I could see myself agreeing, but it's a value judgement, not a financial or economic one. In principle there's nothing that PE can't do that owner-operators can't also do. The objection is to the outcome, not the means they use to get the outcome.
              • dllthomas 3y ago