Do Private Equity companies have to pay off debt that their portfolio company goes bankrupt on. I'm thinking about these major bankruptcies in the consumer space, and wondering if these MF backers will need to pay off huge amounts of debt that is being defaulted on. Or do they only just lose the equity check they wrote?
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They just lose their equity investment. The ownership is in a bankruptcy remote "Special Purpose Vehicle". The creditors, either 1L or 2L, would most likely take over the company, most likely. Its a lot more complicated than that with DIP and restructuring etc. But to answer your question, no PE firms do not need to pay off the debt.
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