[ImPostingOnHN]

The example of McDonald's acquiring value through real estate, funded by the business, is pretty poingnant, considering the PE firm here did the exact opposite: sold all the valuable real estate and rented it back from the buyer under crippling rent payments, funded by the business.

Why did the PE firm do that when McDonald's didn't?

[devilbunny]

Because the PE firm had partners who bought the underlying real estate for themselves.

I'm sure that there are PE firms that really do try to make businesses successful and profitable, but the vast majority are in it to sell off anything of value and dump all the ensuing debt into a company that will shortly go bankrupt.

If you own a company, and a PE firm buys one of your clients, that should be a hint to require prepayment for everything they ask for after that. They will leave you holding the bag as a creditor.

[outop]

Your first point: this would obviously be serious fraud. I'm not sure if you have any evidence of this in this particular case or is you are alleging this is standard practice by PE funds?

Your second point: why would someone lend money to a company which was going to go bankrupt? If PE firms always made the companies they controlled bankrupt, no one would lend to them.

Your third point: if someone buys a company from you, how does it make you a creditor of the bought company?

[devilbunny]

It’s not fraud if the sales are advertised and fair… even if they’re not widely publicized. But that was just spitballing.

For 2), people loan to the PE firm because they extract all the value for themselves. Their creditors get paid. People who loan to PE-controlled firms don’t seem terribly wise to me, but maybe they can model them like junk bonds.

For 3), if the firm buys one of your clients, be cautious.