Private Equity buyouts are sometimes described as follows:
PE buys a company using huge loans, secured with the assets of that same company. They then pay themselves (who are now the new owners) giant dividends and management fees. Naturally, the company goes bankrupt, and there is nothing left to pay the loans. The PE people go off and enjoy their enormous gains.
But why do the banks agree to this? Don't they realize that they will lose all the money that they lent out?