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by bsder 1887 days ago
How many of these are genuinely because the store couldn't make a profit vs got saddled by a bunch of private equity financial engineering debt?

Guitar Center is a good example--if you sent them through a full blown Chapter 7 where they could finally discharge the stupid private equity debt they would be a perfectly profitable running business.
2 comments
drzhouq 1887 days ago
Wow. Thanks. I didn't know this is a thing. Had to Google and learn. https://blogs.lse.ac.uk/businessreview/2017/01/23/how-privat...
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Nasrudith 1887 days ago
Aren't those two roughly equivalent by opportunity costs? One which is raking in money is too expensive if your goal is borderline debt dumping fraud when you can buy a mediocre stable business for those shenanigans.
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bsder 1887 days ago
It has to do with the size of the cash flows.

An unprofitable business with $1 billion in cash flow is way more useful for financial engineering than a profitable business with $100 million in cash flow.

The point of shoving something like Guitar Center through Chapter 7 is that the financial engineering debt holders actually take a bath and consequently think twice about wading into this with another firm.

If these kinds of financial engineering games can just keep getting handed around, there is no incentive to stop as you can shuffle the chairs around and keep looting the cash.

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