A Look at Realogy Parent Apollo Management's Leon Black

Julie Creswell:

"Traditional private equity is dead and has been for a year," says Mr. Black, seated at a round conference table in an office once occupied by L. Dennis Kozlowski, who was ousted as chief executive of Tyco International. "It will probably remain so for a couple of years."

Part of the allure of private-equity honchos like Mr. Black is that they made an art out of making money during the boom years. Their fist-pounding negotiations were legendary. Their corporate turnarounds became Harvard Business School case studies. Their multiple homes, black-tie parties, sports cars and yachts were alternately envied and vilified.

Today, with Wall Street in tatters and the easy money long gone, the question now for Mr. Black and his peers is whether they have enough moves left to turn the bleak outlook for private equity into something rosier for themselves, their companies, their investors and the legions of workers they employ.

Achieving that will hinge on whether Mr. Black and his peers can persuade banks and investors to give their companies more time to make good on their debts, something that Mr. Icahn's lawsuit suggests is not always easy.

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In an effort to conserve cash and give themselves some breathing room, Harrah's and Realogy are trying to persuade investors to exchange the securities for new debt that will reduce overall leverage or lengthen maturities. Currently, Harrah's, Realogy and Claire's are keeping up with some of their debt payments by issuing more debt to investors rather than paying them in cash -- a maneuver made possible by agreements reached during the boom.

Some analysts see these moves as little more than putting off the inevitable.

"What they're doing is putting more debt on a company at a time when we are in a recessionary environment. Also, the companies that we're talking about are some of the lowest-rated companies out there, so the margin for error is razor thin," says Diane Vazza, head of global fixed-income research at Standard & Poor's. "What this does is buys them a little bit of time, but the day of reckoning is around the corner."