It is the bankruptcy part that I don't understand the legality of. Parent company pulls a ton of money out of subsidiary, claims bankruptcy, then magically parent company isn't liable for subsidiary's debt?
PE isn't a parent company. LBO debt is debt carried by the acquired company. So there is no sleight of hand in bankruptcy. The poison is already in the acquired company's bloodstream.
Yep, all correct. The sleight of hand comes just before bankruptcy when the assets are stripped and sold to a different entity so the debtholders are screwed with worthless assets and are stuck filing longshot lawsuits to recover assets while the ghouls who raided the company invest their ill-gotten proceeds while tying the mess up in court for years.
