Many private equity firms were caught out by interest rate hikes in 2022 after snapping up lower-rated businesses during the easy money era using floating-rate debt. Those firms are typically more highly leveraged than their public equivalents making them more vulnerable to distress. PE-owned companies accounted for three out of five bankruptcies filed during the second quarter: Ascend Performance Materials Operations LLC, At Home Group Inc and CareerBuilder LLC.
Private equity-owned companies drove an increase in defaults and continue to turn to distressed debt exchanges after credit conditions deteriorated in the wake of US tariff announcements, according to Moody’s Ratings.
In the three months through June, 21 companies defaulted on more than US$27 billion ($34.8 billion) of debt, the firm said in a Tuesday report. That’s up from the 15 companies that defaulted on about $15 billion of debt in the prior quarter.
