No Money, Just Linens 'N Things...

Linens 'N Things is expected to file for bankruptcy on Tuesday. Separately, and yet entirely related, Apollo is going ahead with its IPO plans, despite the turbulent market. How are these two stories related? Because Apollo, the highly regarded private equity firm run by Leon Black, took LNT private in February of 2006 in a $1.3 billion buyout. Maybe Mr. Black thought he could get his firm's IPO out the door before the LNT bankruptcy filing in order to cash out before returns in his funds suffer? I'm just speculating, of course.

Who on earth could've seen the surprising news of LNT's bankruptcy coming? Did the news of LNT's $154 million loss in 2006 not ring a bell for investors and cause them to view other similarly debt laden deals with caution? No. The private equity boom continued for at least another year. But perhaps it is finally starting to dawn on people that not every company in America needed to be loaded up with debt and taken private, unlike the definitive claims of all of those nauseating editorials I had to read in the Wall Street Journal during the height of the boom about how private equity "creates efficiency." Maybe, just maybe, the whole boom was based on financial engineers taking advantage of the tax benefits of issuing debt and temporary insanity in the debt markets. Perhaps, private equity players are starting to think "hmmm, maybe piling a ton of debt on a bunch of highly cyclical businesses (hello Freescale and Chrysler) five years into an economic boom was perhaps idiotic." Yeah, if I were Mr. Black, I'd be planning my IPO too...