The Default Notice — Brought to you by PE-backed ‘sidestepping’
- 9fin team
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Private equity-backed companies are defaulting at almost double the clip of non-sponsor backed companies — with a higher proportion of defaults coming from LMEs versus bankruptcies. And it’s not surprising which PE firms’ portfolio companies account for most of those defaults over that time span, according to a new report by Moody’s on defaults among rated PE portfolio companies from the period between 2022 and August of this year.
While non-PE backed firms defaulted at a rate of 7.1% during that period, companies owned by the 12 largest sponsors tracked by Moody’s defaulted at a rate of 14.3%. The rate was even worse among other PE firms tracked by the credit rating agency, at 16.7%.
Moody’s observed 31 defaults among 217 firms owned by the 12 largest sponsors, a list that includes Apollo, Blackstone, Clearlake and Platinum Equity.