Private equity firms are loaded with cash that they can’t invest, and they face hostile credit markets

Big shops have responded by raising distressed-debt funds. There is now about $200 billion-plus of capital devoted to buying companies either on the verge of, or actually in, bankruptcy. But a lot of distressed companies are owned by—you guessed it—private equity funds. How does their new involvement in distressed debt affect their investment in troubled companies’ equity?