Buzz Archive:
PE Buzz: Debt vs. Equity: The Debt Piece Retains its Character as Debt in Chapter 11

by Joseph W. Bartlett, Founder of VC Experts.com, 6/28/2007

In any leveraged buyout (restoring the terms "leveraged" and "buyouts," which were used until the public relations experts decided that "private equity" was a gentler label), there is typically a possibility that a holder of both debt and equity (particularly one with enough skin in the game so that it enjoys a seat on the target's board of directors), will find that its debt tranche will be recharacterized as equity in the course of a lawsuit by creditors. This week, Joe Bartlett, formerly Of Counsel at Sonnenschein Nath & Rosenthal LLP, provides a brief overview of the Radnor decision.