[codethief]

> And LBO debt isn’t “pushed” onto the company’s books, it’s never on the sponsor’s (LBO shop’s) books in the first place to any material extent.

Doesn't the LBO shop still need to pay off the debt, technically speaking? AFAIU the company's assets (hospital in OP's example) are used as collateral in a credit agreement between the LBO shop (as the hospital's new shareholder) and the bank. But unless I'm mistaken, this is not exactly the same as the debt being on the hospital's books and the hospital having a credit agreement with the bank. (For an increase in debt on the liabilities side of the balance sheet there would have to be an equal increase of assets on the other side. The hospital didn't receive the cash, though, nor does the hospital suddenly own itself.)

[appleiigs]

LBO firm will create a new company called Acquisition Co. ("AcqCo") and put $500K of cash into it (equity). The Blue Owl will lend $2M to AcqCo (debt). AcqCo uses the $2.5M to buy the vet clinic. AcqCo will use cash flow from vet clinic to pay Blue Owl loan interest. If AI makes vet clinic lose revenue because customers treat Fluffy's ear infection at home, then Blue Owl and LBO firm are in trouble.

So the debt isn't "pushed" and it's not risk-free as the original comment said... also not Venture Capital. Lots wrong in that comment.

[throwawayqqq11]

It's not risk free for the companies involved. Limited liability protects private assets which is the original motivator behind all of this. And yes, there could be alot of book cooking going on to extracting liquidity. Over here, we call them locusts, not PE and externalizing risk is kind of their job.

This is the general leap, wealthy dynasties do. They scale up from a regular (family) business that provides services (eg. the clinic) to eventually transition into investors with lesser or indirect motivation of providing services/goods.

[nyeah]

Sure, it should say PE not VC. But it was pretty accurate. The PE firm won't be on the hook for much of the debt. The nano-debate over the word "push" is probably obscuring more than it's revealing.

[JumpCrisscross]

It sort of accurately described something, with the wrong terminology, that is orthogonal to the headline issue.

[nyeah]

Agreed, but that entire thread after your comment was more or less orthogonal to the headline.