Having worked in and around distressed debt and private equity, I'd say that the frictions costs of bankruptcy are enormous relative to the size of most corporate entities.
totally agree. I'm consulting on a typical 'chapter 11' style bankruptcy, albeit one where the company survives in a form. The shareholders have lost everything, half the management are sacked, the other half have a black mark on their career (plus lawsuits in the wings), and even the financiers are out a lot of money. It's no picnic.
the financiers are out a bunch of money, but if you look back you might find that they paid out enough in dividends that the investment washes its face anyway, and you might even find that the people picking up the post-restructuring equity at a low price are awfully similar to the ones claiming to have lost a load. (not saying this is true of your deal of course! but as a description of the private equity market since the 80s, it's not a wholly unfair parody ...)
Having worked in and around distressed debt and private equity, I'd say that the frictions costs of bankruptcy are enormous relative to the size of most corporate entities.
totally agree. I'm consulting on a typical 'chapter 11' style bankruptcy, albeit one where the company survives in a form. The shareholders have lost everything, half the management are sacked, the other half have a black mark on their career (plus lawsuits in the wings), and even the financiers are out a lot of money. It's no picnic.
the financiers are out a bunch of money, but if you look back you might find that they paid out enough in dividends that the investment washes its face anyway, and you might even find that the people picking up the post-restructuring equity at a low price are awfully similar to the ones claiming to have lost a load. (not saying this is true of your deal of course! but as a description of the private equity market since the 80s, it's not a wholly unfair parody ...)