so what does that even mean? do you mean that they are doing traditional LBOs in emerging markets?
To give an example, the RJR Nabisco takeover cost KKR north of $30B in the 80s. Massively leveraged takeover that ended up flopping so hard because of the amount of debt that KKR loaded up Nabisco with. But if a PE firm were to seek a similar Emerging Market equivalent opportunity, say Ulker Biskuvi in Turkey, it would only cost it $500 million. The PE firm does not need to load the company with debt - they can simply cut costs in the company, increase cash flow and make pay from that, eventually listing/selling off the asset on the local market (on the other hand, a Nabisco relisting would have been a nightmare for banks).
A similar thing is happening in India currently - Blackstone is buying up commercial real estate by the boatload in India. Expensive for local PE firms, but relatively much cheaper for Blackstone compared to buying stuff in Europe for instance.
2.) Underwriting banks issue the debt for the PEs. They get paid handily, both from the constant debt payments PE firms take out of cash flow and from repeat underwriting business as investment bankers for future deals. Banks have their own ways of disposing junk debt that fails, but usually PE debt doesn't fail - the only ones being shafted are the company employees and the company itself. The management of the company, the owners and shareholders of the company, and the PE firm itself all make out of it like bandits.
Nowadays, the traditional bread and butter of PE, such as leveraged buyouts, are mostly gone, with most of the returns coming from other avenues such as Real Estate (like buying up homes in Western cities), Emerging Markets and more passive investments in family/practitioner-owned businesses, like the Healthcare space.