Another Greek tragedy

Bray as you go

IN THE run-up to the financial crisis, private-equity funds seemed to be trying to outdo each other in overpaying for assets. Yet many avoided the bulk of the losses when disaster struck. Often the industry would contribute only a sliver of equity, then quickly extract an equivalent amount or more through heroic feats of financial engineering—thus ensuring a quick profit, and leaving others to bear the pain if the acquired firm tottered under its new mountain of debt. Wily tax structures could help boost returns further.

Now the chickens appear to be coming home to roost for the architects of one particularly egregious-looking deal: the takeover in 2005 of a Greek telecoms group, TIM Hellas, by funds set up by TPG and Apax Partners, two private-equity giants. One question is whether TPG and Apax put their own payouts from Hellas ahead of the financial health of the company. But aggrieved creditors go further. They allege that the transactions involved were not just imprudent, but fraudulent.

Hellas wobbled—and eventually toppled—after the private-equity sponsors increased its debt many...

from The Economist: Finance and economics http://ift.tt/1Txu8P8