I'll sketch a few points to illustrate the inner workings here:

- It's hard to buy a decent company at 5x EBITDA today. A typical EBITDA multiple nowadays is like 10x-15x. (e.g. EQT bought SUSE for $3B in 2023, and the adjusted EBITDA was $240M, which implies 12x EBITDA)

- Debts are tranched. Banks typically get a senior slice, often secured by real assets (a.k.a. collateral), so they can recoup the money even when the company goes straight into a ditch. The real risk lies in the junior loans ("mezzanine"), which demand very high yields to compensate for that risk.

- In a typical PE deal, most profits are earned at exit, not via dividends en route. So managers have incentive to make the target company (look) better for the next buyer, rather than neglecting it.

A more fundamental reason why the situation you describe rarely happens is that PE fund managers treat their operation as an "on-going" business. Lenders are gonna be really pissed if they lose their money. So fund managers try to avoid that scenario to keep the credit flowing for their next deal.