"In 2012, Thomas H. Lee Partners bought the company for $584 million down in a $2.69 billion deal, investing only 22% in equity. The following year, the owners had Party City borrow $338 million to pay themselves a dividend." nypost.com/2023/01/25/p... - ThreadSky

tomscocca.bsky.social • 64 days ago

"In 2012, Thomas H. Lee Partners bought the company for $584 million down in a $2.69 billion deal, investing only 22% in equity. The following year, the owners had Party City borrow $338 million to pay themselves a dividend." https://nypost.com/2023/01/25/party-citys-founder-blames-bankruptcy-on-private-equity-firms/

Comments

angrynco.bsky.social•63 days ago

Vampires that's what they do.

drobertsimg.bsky.social•64 days ago

I am not an economist but I do not understand why banks keep underwriting these leveraged deals which are nakedly attempts to run up every possible charge on the company’s credit card and then torch the joint a la Goodfellas. Don’t they get stuck with a bunch of bad debt?

jenlb.bsky.social•64 days ago

And once again, it’s the hardworking employees who get shafted while the rich get richer. No common decency left at the top.

jessdee.bsky.social•64 days ago

No, because they mostly get out from under the deals and spread the debt out to multiple institutions. They're also now the proud owners of a bunch of assets that can be sold for most of these losses. Meanwhile, they were pulling in much higher rates of interest than other corporate loans

turnerjoy.bsky.social•64 days ago

I would think any bank would be aware of any other debts the company has as a standard part of the vetting.

jessdee.bsky.social•64 days ago

(hence the bankruptcies). Not to mention a lot of these banks are party to these private equity firms in some way....

It's a funnel that funnels wealth upwards and either kills businesses or turns them into horrifying profit machines that look nothing like what they did at the start.

jessdee.bsky.social•64 days ago

Part of the strategy is also a kind of debt shake off. Essentially, the idea is to force a company into bankruptcy and structure it in a way that you wind up getting paid back but other debtors don't.

kipenyan.bsky.social•64 days ago

The banks are highest priority creditors in leveraged buyouts. Generally asset liquidation is enough to cover the nominal value of the loan, and they’ve already been collecting a ton in interest in the meantime. LBOs are a magic trick that turns companies into a PE dividend and and bank interest.

malort.bsky.social•64 days ago

Everybody wins!

girlfriend.bsky.social•64 days ago

Fleece and fold

sndrp.bsky.social•64 days ago

With most things involving white collar crime of massive scale @pluralistic.net.web.brid.gy has already nailed it.

The list of plundered companies is long.

https://pluralistic.net/2024/08/05/rugged-individuals/

joyouspanther.bsky.social•64 days ago

I still don't think Obama made a big enough deal about Romney making a career of doing this stuff even though he beat him in 2012.

spencerfleury.bsky.social•63 days ago

I'm not sure Obama saw all that much wrong with it.

legalminimum.bsky.social•64 days ago

Interesting. I believe Delaware law still applies the solvency tests for dividends: that a dividend can’t be paid unless the company can afford to pay it, and borrowing to pay implies it can’t.

jimmyjazz1968.bsky.social•64 days ago

Steve Mandell looks like Temu Nick Nolte

notoriousbrt.bsky.social•64 days ago

DIII Pete Bell

nuphoto.com•64 days ago

Can someone explain this sentence to me like I'm 5?

sunderedmarches.com•64 days ago

they bought the company with very little cash on hand and a lot of debt. they then immediately added more debt to the company to give themselves a big payout. the company is now going bankrupt and everyone except the "owners" and the bank will be stiffed in the bankruptcy.

nuphoto.com•64 days ago

Thanks. And this is the general M.O. of VC/VE firms correct? Buy up companies using little cash, then use the company's inflated valuation to take out more loans/extract money while the company suffers.

sunderedmarches.com•64 days ago

yes. it's not their exclusive business model but it's a very popular one for them and anything else they do can be done with other investment methods that are less parasitic.

nuphoto.com•64 days ago

I meant P.E. for private equity. Anyway, yes, I'm sure some are worse than others, but it seems like most peoples' experience is lower quality/higher cost when PE takeover brands they know/use.

dsherrick.bsky.social•64 days ago

I simply love that private equity's only function is to do bust outs that are, other than the scale of the operation, essentially indistinguishable from what Tony Soprano did to that one guy's sporting goods store.

risefromtheashes.bsky.social•64 days ago

Private equity is simply legalized theft. The goal is to extract maximum value, not to grow a healthy business. It’s a scourge and shouldn’t be legal.

turnerjoy.bsky.social•64 days ago

There certainly are some laws that need to change and loopholes closed; but there are plenty of companies that have been kept alive or improved through it.

It’s kind of funny that for once someone said Value, instead of profits, but in the case Profit would be the right word.

risefromtheashes.bsky.social•64 days ago

Ugh, definitely my mistake in saying value instead of profit.

Yes, there are companies that have been kept alive; I feel like “improved” generally means “wow we were able to squeeze a new IPO out of this”.

alifarukrva.bsky.social•64 days ago

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