Doesn't the LBO shop still need to pay off the debt, technically speaking? AFAIU the company's assets (hospital in OP's example) are used as collateral in a credit agreement between the LBO shop (as the hospital's new shareholder) and the bank. But unless I'm mistaken, this is not exactly the same as the debt being on the hospital's books and the hospital having a credit agreement with the bank. (For an increase in debt on the liabilities side of the balance sheet there would have to be an equal increase of assets on the other side.)
Leverage. They raise money in their public funds. And then they borrow, typically around 50% of their capital, to amplify returns.
Note: “Private credit lenders won’t lose money before private equity firms do. That’s how the capital stack of companies work: Equity is the first in line for losses. Before lenders like Apollo Global Management, Blue Owl Capital or Ares Management lose a dollar on their loans if a portfolio company fails, the private equity owners will already have been hit” [1]. Leveraging the senior debt is actually less risky than leveraging the underlying equity. (Though obviously they compound when done together.)
[1] https://www.nytimes.com/2026/03/12/business/dealbook/private...