Private Equity Sponsors Are Finding Creative Solutions to Manage Debt

According to Richard Epling, head of Pillsbury’s East Coast insolvency and restructuring practice, this is a permanent solution for the company’s private equity backers to tackle the debt and raise new equity. Refinancings buy time, he explained, but an investment whose fundamental thesis is in pieces — for Caesars, a double whammy of collapses in the real estate market and leisure spending in 2008 — more structural changes may be needed.

"The availability of new debt right now has given many portfolio companies time to consider their long-term plan," he said. "But at the end of the day, you still need that long-term plan."

Epling commented that private equity sponsors are adopting strategies that are increasingly bolder and more permanent. Sponsors, many of which have credit funds of their own, can put in their own debt or choose from the bevy of distressed investors who have bulked up on a steady post-2008 diet.