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PBS NewsHour looks at debt created by private-equity investments

Paul Solman of PBS NewsHour continues his series, “Making $ense: Your Guide to the Economy,”by looking at private equity. Private-equity firms buy struggling companies, borrow money to improve the businesses and sell them. The story notes one problem is many such companies become laden with debt. Solman says:

“Half of the S&P-rated firms that went bankrupt last year, besides banks, that is, were private-equity acquisitions, including Chrysler, Simmons, Six Flags, and ‘Reader’s Digest,’ where retirees, including executives, had their pensions slashed by a debt-driven bankruptcy.”

The segment offers a great primer on how the investment works and notes the companies may have difficulty repaying the loans when the debts come due.

Today’s Tip: Brush up on basics.

Explanatory pieces like this really do help your audience. To do them, you need to understand the basics of business, economics and finance. Check out “Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics” by Henry Hazlitt. Or try “Basic Economics: A Citizen’s Guide to the Economy” by Thomas Sowell. Another text is “Financial Analysis Tools and Techniques: A Guide for Managers” by Erich Helfert. Other good ones are “Accounting Demystified” by Jeffry R. Haber and The McGraw-Hill 36-Hour Course In Finance for Non-Financial Managers by Robert Cooke and The Edgar Online Guide to Decoding Financial Statements: Tips, Tools, and Techniques for Becoming a Savvy Investor by Tom Taulli. There are also books in the “Dummies” series on economics and financial reports. A former colleague and I once bought accounting workbooks and each week plowed through the lessons together. It helped us stay focused on the task and better understand earnings reports.

Other possibilities:

In Economy, Featured, Investing | Banking.

Comments (1)

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  1. If you look at the top 20 companies that private equity held, they did not go bankrupt. However, the top 20 US Banks and Govt agencies involved in those businesses did destroy themselves and shareholder value.

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