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Hedge funds are challenging private equity firms over restrictions that dictate who can lend to or buy the debt of buyout-backed companies, weighing legal action to capitalise on a surge in corporate distress. Private equity portfolio companies can be particularly exposed to interest rate rises because of buyout firms’ reliance on debt to buy businesses. The firms draw up “whitelists” of approved lenders to stop potentially troublesome credit investors from using a position in the companies’ debt to steer the business’s strategy. READ MORE