Apparently selling buggy whips paper for newspapers, magazines and coupons is not as profitable as – wait, who thought it was profitable? Cerberus? Sadly, that did not work out for them:

NewPage Corp., the largest North American maker of coated papers, filed for bankruptcy six years after being bought by Cerberus Capital Management LP.

NewPage had $3.4 billion in assets and $4.2 billion in debt as of June 30, according to today’s Chapter 11 filing in Wilmington, Delaware. The Miamisburg, Ohio-based company was bought by New York-based Cerberus for $2.3 billion in January 2005, and issued $900 million in junk bonds to fund the purchase. It has been unprofitable since 2006.

A 2005-vintage leveraged buyout company crushed by an unsustainable debt load and operational failure is a good excuse to mention a neat paper posted today on Harvard Law School’s Forum on Corporate Governance and Financial Regulation. The authors, three UT-Austin business professors, use tax return data to examine what happens to 1995-2007 vintage U.S. LBO targets. And they are pretty confident that they can dismiss many of the traditional explanations for how private equity firms make money – both the flattering and the unflattering ones. From the paper: Continue reading »