Buyout Shops Swoop In for a Feast on the Cheap

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.