I guess in some ways private equity coming in could be the same as creating a liquidity event so as to avoid insolvency, but that’s not common, at least it shouldn’t be (not in these markets). Going private isn’t a real solution to preventing insolvency in most cases. True buyout strategies are aimed at value opportunities that have potential to be turned around, not sub-par assets that lost all value with no definite potential for turning around. There are all kinds of philosophical discussions this could bring up, such as why the KKRs and Carlyles of the world would get into buying secondary debt, only to have to shut down entire funds when market dynamics they don’t really understand change. Still, overall I agree with the analysis … liquidity and solvency go hand in hand. Fundamentally and technically, this is true; unfortunately, it doesn’t always play out that way.

You can view it at my blog.

http://bankruptbanks.blogspot.com/

Thank You.

Thank you for the great article. I just finished the first level of the CFA curriculum this June and this is consonant with what was written (briefly) in the corporate finance portion–albeit in the context of current market conditions.

At least, that’s the way that I do it. Venture capital runs at higher leverage, and often they do well, but then they have control, and I’m just an outside passive minority shareholder.