Comment by edgefield

I’m struggling to understand how the standard PE model works, particularly the debt component. PE firms seem to target mediocre businesses, load them with debt, and then harvest returns and eventually the assets. Why would a bank loan money for such an arrangement, given how often these businesses end up in bankruptcy (Toys R Us as an example)? Is the debt collateralized and bundled with better performing debt or sold off to an unwitting buyer?