> And LBO debt isn’t “pushed” onto the company’s books, it’s never on the sponsor’s (LBO shop’s) books in the first place to any material extent.

Could you please explain the how and why of the mechanics of this process (edit: from the perspective of the lender)?

It seems like the lender is taking a massive sucker bet.

Or is the reality that the lender gets repaid the vast majority of the time, and we only hear about the bad outcomes?

The lender generally has a positive EV, but variability is high. The interest rates on leveraged buyouts are high, and the lender has priority over everything but taxes. If the company can stay afloat for a while, the lender probably got made whole and then some, even if the full loan never got paid back.

Any one loan may be risky, but in aggregate the rates compensate for it.

They pay you 0-4% for the money in your checking account and lend it at 1-3% points higher. As long as they have a big enough uncorrelated portfolio, they make easy money.

And if the whole portfolio tanks all at once, the whole industry gets bailed out.

The latter. Big Banks lend to private equity because the profit is good and they are large enough to absorb the variability.

The public hates it because they see highly visible bankruptcies. They don't see the success stories, or the businesses successfully carved up for more value than the sum of their parts