A Bad Man’s Guide to Private Equity and Pensions

Critics of private equity often inveigh against the fact that the general partners (firms like KKR and Blackstone) have strong incentives to borrow heavily against the companies that they buy, since they collect so many fees that they profit whether or not the businesses they buy can survive with the debt load. It has reached the point where the European Union imposed restrictions on how much borrowed money private equity firms could use, out of concern about how many bankruptcies private equity firms were leaving in their wake.

In the US, the objections to private equity financial engineering and asset stripping generally focus on the risk of company failure and job loss. But an important part of the equation often gets second shrift: that of how private equity kingpins use bankruptcy to get rid of pensions. Eileen Appelbaum and Rosemary Batt did address it in their landmark book Private Equity at Work, but the practice still needs broader exposure.

– Truth Out

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