Romney acknowledged the photo could become political ammunition during a television news interview over the past weekend. The image, originally published by the Globe four years ago, has appeared elsewhere since. Yesterday, it was used in The New York Times to illustrate a story about Romney and Bain.
A campaign debate will generate extreme and opposing descriptions of private equity investors and their long-term social and business impact. They either are bold risk-takers serving capitalism, or rapacious predators destroying companies and jobs.
Those polarized views are commonly discussed about Romney and Bain, but they also apply more broadly to the world of private equity investing. They are intentionally excessive and obviously both can’t be right.
In fact, most private equity managers take real financial gambles purchasing companies. But the risks are often jacked much higher in order to squeeze every dime of potential profit and limit financial exposure to investors. That means borrowing more money.
With such debts piling up, some companies require ideal conditions to succeed as an investment and a business. That’s the real problem.
Take one local example with no connection to Bain Capital: Friendly Ice Cream Corp.
The company filed for Chapter 11 bankruptcy protection two months ago, and an auction for bidders who might want to buy the company is scheduled Thursday. The one known bidder is Sun Capital Partners, the private equity firm that owns the restaurant chain.
A lot of bad things have happened to Friendly and its employees since the bankruptcy filing. A total of 63 stores closed immediately and more than 1,000 employees were laid off. The company’s pension plan, badly underfunded, was frozen.
