prepackaged bankruptcy quick review

Must have skipped over this CFAI EOC question that specifically asks this otherwise I would skip it. Either way to summarize: Prepackaged Bankruptcy is conducted by Private Equity firms. Firm takes dominant position in distressed debt of public company (hence prepackaged bankruptcy falling under the Distressed Security section of Alternative Investments). There are typically three players: 1) The creditors of the company which have already agreed in advance with the debtor company on a reorg plan before filing for bankruptcy. This may involve creditors making concessions in return for equity of the reorg company. 2) The old shareholders of the stock of the prebankruptcy company typically lose their entire stake in the company. They are out their investment as the Private Equity firm or “vulture investor” comes swooping down to become a majority owner in the new company. 3) The Vulture investor/PE firm is bearing most of the risk in this process, but may come out with substantial profit if things work out. They want to end up with a healthy company that they can sell for a profit. Reading 36

ok and how do they make profit? Only if things work out well? who gets the profit?

ehhh this isnt that big of a section in the books. i would review the paragraph on it (which summarizes my 3 points, the EOC question, and move on.