Bankruptcy: No Obstacle to Private-Equity Profits

Megan Barnett has not one but two excellent articles on today. This morning she checked in on the Citadel IPO story, concluding that for all the buzz, it still ain’t gonna happen. This afternoon, she tells the story of a private-equity firm, Clayton, Dubilier & Rice, which bought Allied Van Lines, steered it into bankruptcy, and still managed to make a profit of 2.5 times its original investment.

This should be an important lesson to anybody holding the debt of a company owned by a private-equity shop. If you think that they can only make a profit so long as they don’t default, you’re wrong.

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