Re:Neiman Marcus files for bankruptcy
by gamblor956 on Thursday May 07, 2020 @06:42PM
(#23109224)
The theory is that PE exists to run existing companies better than their current owners.
The financial and legal reality is that PE simply loads the target company with the debt used to acquire the company (i.e., PE doesn't actually put up any of its own money), and then pays itself by taking out more debt secured by the acquired company. And then they charge the acquired company a management fee for the privilege of having all of its useful assets being used as collateral for loans the PE company never intends to repay.
The financial and legal reality is that PE simply loads the target company with the debt used to acquire the company (i.e., PE doesn't actually put up any of its own money), and then pays itself by taking out more debt secured by the acquired company. And then they charge the acquired company a management fee for the privilege of having all of its useful assets being used as collateral for loans the PE company never intends to repay.