Now Private Equity Wants In on the Bailout? Spare Me

Private equity firms are crying foul, fearful that companies they own are largely cut off from the $377 billion of small business loans and grants baked into the U.S.'s $2 trillion coronavirus relief bill. But do they really deserve any part in a bailout?

Statistics from corporate loan borrowers that make $50 million a year or less in Ebitda don’t paint a pretty picture. An average middle-market business has a debt-to-Ebitda ratio of 4.8 times and is paying an interest rate of 7.7%, data from S&P Global Market Intelligence show. Put another way, this company is using about 37% of its operating earnings to pay interest alone1 — and that was before the outbreak. So if this business were running at, say, one-third of its full capacity because of regional lockdowns, it wouldn’t even be able to cover its interest payments. A cheap loan from the Small Business Administration would certainly help.