Private Equity’s Brutal Side Deals Leave Lenders Grasping in the Dark

It’s a familiar saga in today’s credit markets: A debt-saddled company restructures and some of its lenders band together to defend their rights.

But when Vibrantz Technologies — a paint-additives maker owned by a private equity firm — overhauled its borrowings earlier this year, its smaller creditors were offered a choice: Agree not to speak to your fellow lenders and challenge the transaction before it closes, or face the prospect of steeper losses. Some had little time to decide.