Private Equity-owned Companies in Times Square

661 8^th Ave.; 1150 6^th Ave.; 625 8^th Ave.; 1430 Broadway; 4 Times Square

Private Equity Owner: Oak Hill Capital Partners

Owned by private equity since: 2004 (Also owned by Bain Capital from 1992-1998)

Deal value: $744 million

Employees: 6,400

Got a bad case of buyout fever? Duane Reade is the wrong place to go if you’re looking for an Rx. The Oak Hill Partners takeover of the ubiquitous New York drugstore has been a disaster for the company. Oak Hill got Duane Reade for $744 million, but doubled the company’s debt to $500 million in the buyout. The high debt levels are forcing Duane Reade to pay millions in interest payments, leaving them with less flexibility to face the challenges of a changing marketplace. By December 2006, Duane Reade had lost $240 million, and had been quadruple-downgraded to a CCC credit rating, a junk bond status so low that the company was given a 1 in 4 chance of defaulting on its loans. According to BusinessWeek, “Duane Reade's experience shows how quickly companies can find themselves in trouble after taking on lots of debt.” The article explains how, on Oak Hill’s watch, “Duane Reade has blundered. It has fought costly battles with labor unions, made poor merchandise choices, failed to deter rampant pilfering, and made no headway in expanding in the suburbs.” After leaving union workers without a contract for three years, recent employee wage gains put the average wage at a paltry $8.15 an hour. Still, Oak Hill has been paid transaction fees totaling $37.6 million and receives (via an affiliate) an annual $1.25 million fee for “managing” the company. Talk about a case of bad medicine.