In the wake of the current economic crisis, private equity firm and hedge funds are seeking out ways to cut corners by investing in distressed bonds or lending money.
" 'Loan-to-own' deals make some observers queasy, because the firms that swoop in can look like vultures preying on weak companies and pushing them into a restructuring or bankruptcy to gain control. But some observers said such deals will help cleanse the system of excesses.
'Loan-to-own isn't pejorative,' said Jamie Sprayregen, co-chairman of the bankruptcy practice at Kirkland & Ellis LLP. 'It portends a solution for the company. It doesn't portend the prettiest of solutions for junior lenders.' "
This article appeared in its entirety in the December 31, 2008 edition of The Wall Street Journal.