Debt Bombs
The Dirty Secret Behind Every Deal
If there’s one thing every great heist needs, it’s a way to destroy the evidence.
Private equity has one:
Debt.
Debt is the smoke bomb they throw as they loot the building.
The fire they set to cover their escape.
And for decades, it’s been their most powerful, least understood weapon.
The Debt Trap
Every private equity buyout starts the same way:
Not with investment.
Not with innovation.
Not with a real plan to grow the business.
It starts with a mountain of debt — debt that is immediately loaded onto the company itself, not the buyer.
It’s called a leveraged buyout (LBO).
But what it really means is this:
The company is forced to mortgage its future just to survive the takeover.
Millions, sometimes billions, in new liabilities — overnight.
The business may have been profitable before.
It may have had cash reserves, a solid workforce, strong relationships with customers.
None of that matters now.
Everything the company earns must go to paying off the debt first — before it can afford to innovate, grow, or even maintain basic operations.
And when the debt load becomes unsustainable?
The company, not the private equity owners, takes the fall.
Why Debt Is So Powerful for Wall Street
Risk is Pushed Down the Chain
The private equity firm collects management fees and special dividends almost immediately.
If the company collapses under its debt later, the firm has already been paid.
Accountability Is Dodged
When a Toys R Us or a hospital collapses, the executives blame “changing markets” or “economic headwinds” — not the crippling debt they were saddled with at gunpoint.
Profits Are Extracted Early
Private equity doesn’t wait for real success.
They extract “value” upfront, cashing in through dividends, asset sales, and rent-seeking while the company is still functioning.
Failure Becomes Someone Else’s Problem
When bankruptcy inevitably comes, it’s the workers, suppliers, and communities who suffer the fallout — pensions lost, stores closed, services eliminated.
Private equity walks away clean.
The Bigger Pattern
By 2023, more than one-third of all U.S. bankruptcies involved companies that had been owned or controlled by private equity firms.
Industries affected include:
Retail (Toys R Us, Payless Shoes, RadioShack)
Healthcare (Hahnemann Hospital, Prospect Medical)
Media (Deadspin, The Denver Post)
Manufacturing (Remington Arms, Simmons Bedding)
In every case, the pattern is the same:
Debt was used to finance the buyout.
Profits were extracted early.
The company collapsed under the weight.
This isn’t bad luck.
It’s not bad management.
It’s the business model.
Debt is the getaway car.
And every time it crashes into a wall, it’s the workers and communities left bleeding on the pavement.
Today, in False Promises, we explored The High Price of Pollution — how corporations dump their waste into the environment to protect their profits, leaving the public to pay the price.
Private equity operates the same way.
They pollute the balance sheet.
They strip the assets.
They profit from the destruction.
And they leave the cleanup — the bankruptcies, the layoffs, the broken communities — to someone else.
It’s not just about money.
It’s about making sure someone else pays for your mess.
Coming up tomorrow:
The Getaway: Who Profited — and How We Fight Back.
(Because the heist isn’t inevitable — and the thieves aren’t untouchable.)