Well this stinks.
The problem, once you read though all of the hyperbole, is the leveraged buy out, LBO, was really messed up.
Where do you find investors this dumb? Really, I want to know, I am in the capitol market now.
The private equity firms violated THE golden rule of financial leverage, e.g trade a appreciating asset for an deprecating asset. They did the reverse.
The trade they made was to trade high interest rate bonds, an (appreciating asset) for a deprecating asset (a static asset like Guitar Center).
BTW
This works for governments too.
The Greeks for example, took out loans in an appreciating asset, the Euro, for a deprecating asset, Greek debt.
In effect they got themselves into a situation that they could not repay when the Euro went up 140% in the 2000’s