Leon Black must be confident that suburban moms will be shopping at Linens 'n Things for a long time to come.  

Black's Apollo Management, after all, knows just about everything there is to know about the company inside and out. In 2006, it took the ailing bath-and-bedding retailer private for $1.3 billion along with its investment partners Silver Point Capital and National Retail & Development Corp.

The plan was to turn it around and cash out. Instead, Linens fell even further into despair under Apollo's watch and filed for bankruptcy protection earlier this month.

And now comes word from the trade publication Debtwire that Apollo has been scooping up Linens' debt in an apparent attempt to protect its equity stake in the company. By becoming a major bondholder and creditor, Apollo would theoretically have more sway over the reorganization plan, and it could force a debt-to-equity swap that would enable it to maintain its ownership.

It's the rare story of a so-called "vulture" investor buying up the distressed debt of a bankrupt company whose equity it already owns. A "loan to re-own," if you will. And it is uncharted territory. As more private equity-backed companies end up under bankruptcy protection, plenty of other out-of-the-money fund managers are going to be closely watching as the Linens story unfolds.

"It's a preservation-of-value move," says Kris Hansen, a partner in the restructuring group of Stroock & Stroock & Lavan. He explains that Apollo, even with possession of insider information, was likely able to buy public debt of Linens by using a "big boy letter," which is the closest thing the securities industry has to legal insider trading. It's an acknowledgement by the debt seller that the buyer has inside information (or vice versa) and a promise not to sue.

Still, it's a risky bet, and Apollo has a lot at stake. Aside from the $650 million in cash that the investment funds ponied up to buy Linens in 2006, Apollo is hoping to raise capital from the public markets soon by touting its smart investment decisions. Bankrupt portfolio companies don't make for good pitch-book material for an asset manager trying to go public.

Moreover, Apollo is running the risk of making enemies of its co-investors in Linens 'n Things. If the strategy is truly successful, Apollo will wind up with all of the upside while Silver Point and N.R.D.C. could end up with nothing but a loss on their books. Silver Point, which is known for its investments in the distressed debt markets, could end up kicking itself for not thinking of this tactic before Apollo.

But the question remains: Is Apollo buying Linens' debt because it sees the potential for real returns for its investors down the road, or is it so desperate to save face that it's throwing good money after bad?

It's more likely the former. Even with a pending I.P.O. on the horizon, Leon Black is no novice to vulture investing. The Drexel Burnham alumnus has plenty of experience profiting from bankrupt companies, even if they weren't ones he already owned.

Putting a portfolio company into bankruptcy will most certainly be a black eye that Apollo won't be able to ignore when it's seeking capital. But failing to try to salvage anything from its investment could be even worse.