Sell the Crown Jewels.

When the debt wolves are at the door, the business strategy for the ages has been to toss out some lesser meat, in hopes of surviving the winter. Usually, the best cuts are kept in-house.

But with business asset values down sharply in the past 18 months, many chief executives are finding that they can't raise the money necessary by selling off second-rate enterprises -- the crown jewels often have to go out the door, said Brien Rowe, managing partner and founder of the Sage Group LLC, an investment banking and advisory shop.

"Right now we are working on two specific assignments in the $50 million range, where (the businesses) got into trouble," said Rowe. In general, each business had over-leveraged in good times, but has seen sales drop in 2001, down by double digits. That knocked profits off by more than 25 percent, he said.

Unable to honor bank covenants on loans, leaders in both businesses had to come up with cash, and that meant a yard sale -- except there were no takers on business assets that are not lucrative, said Rowe.

"It is the valuable assets in the portfolio that have to be sold," Rowe said. "One of our clients was forced to sell a very attractive and healthy business unit... The creditors wouldn't accept anything else."

Unlike the late 1990s, business buyers now are snubbing "mediocre" concerns, said Rowe. Part of the problem is that borrowing costs have shot through the roof.

Banks will lend only a decreasing portion of the purchase price, and so-called mezzanine lenders (which provide junior debt, compared to bank debt) want 25 percent annual vigorish, if you count equity kickers. "We have seen deals where borrowers have to put half down, and then pay a lot in interest," said Rowe.

Facing a debt wall like that, buyers aren't going to make the leap to buy a so-so enterprise, said Rowe.

So what happens to a business after they sell off the wheat and are left with the chaff? "Well, at least they are out from under the debt," said Rowe. They have to restructure, and try to make do with what they have." Anyway, it is better than losing all of the business through bankruptcy court, he added. "Something is better than nothing."

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. His new book is "The Pied Pipers of Wall Street: How Analysts Sell You Down the River," published by Bloomberg Press.