Comment by Cheer2171
2 years ago
Private equity firm wants to buy Red Lobster, but they don't have enough money. So to afford the sale, they make a deal to sell the land every Red Lobster sits on to a firm that will charge Red Lobster above-market rate rent to stay in business.
This doesn't seem like it should be legal.
Why would it be illegal?
When the PE firm took over red lobster, it wasn't a thriving business. They made a gamble: if we sell the land, we can pay down the debt to reduce interest payments and restructure it into a profitable business.
It was always a risky proposition, but the alternative was probably slow decline. The PE firm lost their gamble and they suffered the losses for it.
If the PE firm sold the land to a landlord they owned at discount prices, then yea, that would be a conflict of interest but that isn't what happened.
Reminds me of payday loan companies, except for billion dollar businesses instead of poor people struggling to pay for groceries.
Well, they DID have to scrape together a few % of the purchase price </s>
Isn't this what Gordon Gecko did in the movie Wall Street? Look for asset-rich companies, buy a controlling interest of the stock (the equivalent of the PE leveraged buyout) then strip them for parts? Also, wasn't that a cautionary tale of the worst of the 80's vs. a "how to" manual?