I’m a former PE guy. Most of what I invest in since leaving PE has little debt (and ideally none or net cash). I think LBOs as an asset class are too large, employ too many people. As usual, a good idea got perverted and got way too big. I’m not sure what the right answer is.

There are a lot of jobs relying on LBO cap structures, so having a functioning LL/HY market is critical (full disclosure, I’m long MCO, so I’m not w/o an interest in this), but I struggle w/taxpayer funds potentially subsidizing LBO equity returns. And whither the “dry powder”?

If portfolio companies need additional capital and should not wear additional leverage, why not additional equity? Instead Apollo will buy back portfolio hy at pennies, but the businesses will be starved for capital and eventually hit the wall.

Idk. Just spitballing. I generally try to avoid lbo’s or former lbo’s so it doesn’t mean much to my portfolio, but a lot of jobs are in the hands of gp’s. And ultimately if many hit the wall at the same time, orderly reorgs may not be possible. So I don’t know what policy s/b.

Maybe it’s something tarp-like or a pik-preferred with warrant coverage. But then I fear, like tarp, if stronger companies aren’t forced to take dilutive capital, weaker ones who actually need it, won’t. If taxpayer money is going to be risked in pe backed companies (and...

I know that’s an extremely broad brush), I just feel like the cost of that capital should come out of equity, not juice equity returns or come at the expense of employees. It’s a really tricky issue. I believe risk capital is just that, but I know risk capital will cut employment

To preserve their optionality and return profile. And honestly, that’s their job. But in this situation, given the size and speed of the problem, I just struggle a lot with what the right answer is. And I don’t think we have the time to figure it out.