Re:Why privatisation has been a costly failure in Britain
by youngtaff on Tuesday July 11, 2023 @09:58AM
(#36681063)
No the business doesn’t have to make a profit it just needs enough revenue to service the debt
Of course what happens is many business geared this was don’t make a profit, fail their banking covenants, interest on the bond rises and eventually they go bust leaving lenders out of pocket the fund in the money with the dividends
It’s happened to many PE owned businesses
Without getting into the weeds, my point was that in order for owners to end up with cash in their pocket, the business has to earn a profit, at some point. And that profit must come from revenue (higher prices for customers) minus expenses (lower quantity/quality for customers).
You can insert a lender in there to shift when those cash flow changes happen, but the money must come from customers, eventually.
Barring any research and development that results in technology that will allow for lower expenses and/or increased production, but I do not think that is the case here.