Many reports put the demise of large US retailers lay blame at Amazon, because it makes for a nice, simple narrative.

Takes very little reporting and you can get enough quotes from analysts to back up the premise. However, there’s another villan, which takes a bit more reporting and can be backed up by the old adage of “follow the money.”

Private equity firms, which are the money men for the 1 percenters as well as large pensions and insurance companies, have been feasting on retailer debt for the last three years.

In simple terms a PE firm will do a Levered Buy Out of a firm or what is called “taking it private.” When it does this to a publicly trade company it buys out the shareholders at a premium to the stock price.

The firm puts little of its own money into the buyout, since it will load the company with debt to finance the stock purchase and in turn own the debt, which it will get paid for servicing.

An extreme example of this in retail is Eddie Lampert’s ESL PE firm. Lampert owned K-Mart and then bought Sears in 2005 for roughly $5B. Today Sears is worth maybe $1B but Lampert has made a nice profit from selling off or licensing most of Sears brands as well as the fees he gets from Sears and K-Mart.

Most PE firms hold positions for 5 years or less. If there is anything salvageable after that they may spin the company back to the public markets in an IPO or if there is little left sell it to a bottom feeding PE firm, which will “strip the copper out of the firm” and put it in bankruptcy.

Most of the time all these firms are making big money despite what the balance sheet looks like.

The retailer bonds backed by private-equity are yielding four times as much as their peers without PE money, which provides a better return for the funds.

Now the problem is when retailers can’t service this growing debt levels since revenues are not keeping up with bond payments.

Through the retailers defaulting on the debt, these PE firms sit in the catbird seat. They can put the company in bankruptcy and take control of the company or they can force a sale.

Bankruptcy allows these PE firms to cash out and get paid first after liquidation with the selloff of stores and products.

What does a retailer look like that has been infiltrated by private equity firms?

A brand will show up in your neighborhood, that you have never heard of prior. It will take out plenty of advertising to get its name out. The product looks good and the pricing is pretty good as well. The company may offer decent financing terms unless you are late with a payment.

But once you buy the product you will be disappointed with the quality, since the principal reason this company became a PE candidate was because it found a cheaper way to do what traditional retailers are selling at a lower price point.

An excellent example of the above in the New York metro area would be Bob’s Furniture stores.

Below is a list of PE firms that have profited handsomely from the retail debt binge bankruptcy cycle in the past year or so.

Apollo Global Management: Claire’s

Sycamore Partners: Aeropostale

Sterling Investment Partners: Fairway

Leonard Green & Partners: Sports Authority

Standard General: American Apparel

Other big names in the industry are: Ares Management, Starboard and Jana Partners