General Discussion

Basically when the p.e. firm decides it's a lost cause (whether that's the correct analysis or not) but instead of having an open and honest liquidation, they abuse bankruptcy law by lending at super high rates, effectively extracting whatever assets remain in the company through interest and fees.

It forces a less-than-orderly liquidation and inappropriately screws the incumbent creditors by jumping ahead and taking all that interest and fees leaving very little for anyone else.

But there are many cases that don't make headlines where the p.e. firm repeatedly injects capital for years until the company can finally succeed.

I think theres reform to be made. P.e. can argue that everyone involved agees to the terms, high interest rates and fees and all, but bankruptcy law should be changed to prevent the abuses.

Perhaps making those high rates and fees subject to clawback might be enough to curb the abuses.