In Bankruptcies, Private Equity Becomes The Target

Law360, New York (August 5, 2008, 12:00 AM EDT) -- When Mervyn's LLC, a portfolio company of Sun Capital Partners, filed for Chapter 11 bankruptcy protection last week, it joined a procession of privately and publicly owned retail chains felled by the sinking national economy.

While the mechanics for public and private equity bankruptcies are alike, the equity holders in a portfolio company face a higher risk level than shareholders in a publicly held company that files for protection.

The heightened risk comes from a perception that the parent private equity firms have deep pockets that...
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