Dallas Firm Pays Itself $800 Million as Struggling Grocery Chain Nears Default

Shed no tears for Lone Star Funds, the Dallas private equity firm that invested about $150 million in a buyout of the Bi-Lo grocery chain in 2005.By some accounts, Bi-Lo is close to default, putting in jeopardy about $1 billion of debt and 50,000 jobs at Winn-Dixie, Harveys, Fresco y Mas and its namesake stores. But Lone Star has already come out ahead, even after committing more capital. The firm has paid itself at least $800 million since 2012, regulatory filings show, and collected still more in management fees.Led by chairman and founder John Grayken, Lone Star has followed the private equity business model: Borrow money to buy a company and load it with debt. Use the debt to pay yourself and -- with interest rates at rock bottom -- issue more debt and pay yourself more.From the start of 2013, private equity owners have taken $100 billion in debt-funded payouts, according to data compiled by LCD, a unit of S&P Global Market Intelligence. During the same period, private-equity-owned companies defaulted on $49.2 billion worth of loans, the data show.  Continue reading...

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