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Okay so:
Artificially boost valuation by cutting costs to unsustainable levels.
Take out a loan financed against the artificially valuable company.
Abandon the company they financed the loan with when it inevitably dies.
So the bank is the one eating the loss while the private equity firm gets away with all the loan money?
How isn't this just bank fraud ๐
The bank is getting paid regardless, because the money is invested in other companies with varying degrees of success (or at different stages of being gutted), or other financial vehicles that don't necessarily track actual company value accurately. I don't know that much about the financial part of it, but in my unfortunate experience with these kinds of shops they know not to piss off the banks.
It's like the meme with the two dudes exchanging a briefcase back and forth, "creating value"
I guess the bank is okay with eating the loss on one slash and burn if it means they can get more return from other investments, but I definitely can't wrap my mind around it. It's like the bank is being robbed and deciding it's okay because the robbers are reinvesting the money they stole.