Basically, the company had to pay for its own buyout when private equity firms KKL, Vornado, and Bain bought the company for $6.6 billion, mostly with loans.
Because the company then had to pay off those extreme loans, they were forced to sell off their assets and property, which they leased back from the very private equity firms that now owned them.
The same thing happened more recently with Red Lobster and JoAnn Fabrics.
This is like me taking out a loan to buy a car and then expecting the car to make the payment.
And since all the debt is on the company and not the people/organization who bought the company, they don’t suffer any of the repercussions of defaulting on the loans. Why this isn’t illegal is beyond me.
It’s even worse than that. Imagine you bought a car from a dealership and were making monthly payments on it. I take a loan to buy your debt from the car dealership, sell your car to pay my loan off, and then expect you to continue making your monthly car payments to me. You file bankruptcy to get out from under the debt, but by then I’ve pocketed months or years of your car payments and come out with a tidy profit.
And then I do it to hundreds of other people, over and over again, as long as other rich people are willing to loan me money. Which of course they are, because running companies into bankruptcy is incredibly profitable.
Something something road to serfdom.
Well fuck … that’s even more depressing.
Well, in theory it’s the responsibility of the banks to not make bad loans. If private equity passes on their debt to the company they bought, and then that company goes bankrupt and the private equity walks away free, that’s still the bank’s problem and they’re gonna lose a lot of money. Of course the problem is banks have a pretty bad track record about being disciplined with their loans.
It was illegal, then Reagan changed that.
Because of course it was Reagan.
Elementary my dear billwashere, in one word: money.
People don’t notice the leeches, so noone cries out. This enables said private equity leeches to
bribe politiciansmake considerable donations to various political action committees. And believe it or not, politicians like money.Well, you wouldn’t want those politicians to be poor?
Oh deary me, no, poor politicians would be susceptible to bribes