Jared Dillian, Columnist

Private Equity? It's More Like Pirate Equity

LBO sponsors will come under much-needed scrutiny as more of their debt-laden deals fall into bankruptcy and job losses mount.

March 27, 2018 at 11:30 AM UTC

By Jared Dillian

Jared Dillian is the editor and publisher of the Daily Dirtnap. An investment strategist at Mauldin Economics, he is author of "All the Evil of This World." He may have a stake in the areas he writes about.

Private equity firms are causing job losses.
Photographer: Mark Ralston/Getty Images

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Claire’s Stores filed for bankruptcy last week, one of a small but growing cadre of failed private equity-backed retail firms led most notably by Toys ‘R’ Us, which is now liquidating its iconic stores. It shouldn’t have come as a surprise when Toys ‘R’ Us filed for bankruptcy in September when you consider it had a staggering $400 million in annual debt service obligations. As for Claire’s, loading up on $2.2 billion in debt for what is essentially an ear-piercing clinic does not pass the common sense test.

There will surely be more bankruptcies by all types of PE-backed companies, and the debate will intensify around what constitutes an appropriate level of debt. That’s another way of saying people will become very angry as mounting bankruptcies lead to job losses. Then, it will only be a matter of time before popular opinion turns against the world of PE and its extremely well-compensated executives.