PE -backed companies hit a wave of bankruptcy

High interest rates and low spending on consumers, companies full of debts supported by private stock groups are pressed, forcing them to either restructure through bankruptcy or buy time to recover through the settlements outside the court with creditors.

Stress appears on companies supported by the most obvious private stocks in A. A recent study By the S&P Global Market Intelligence, which shows that a record number of 110 private rights companies supported by investment capital were submitted for bankruptcy in 2024.

These failures, which are concentrated in the consumer and health care sectors, show how the unemployment rate in the United States is still low and the S&P 500 pants is higher than ever, some of the angles of American companies hurt me, where many companies struggle to stay under the pressure of interest rates High, low spending on consumer and broken debts.

“I think the initial reason that companies provide bankruptcy when you are the subject of the acquisition process by private stocks, there is a lot of debt,” said Lawrence Kotler, a law partner who focuses on bankruptcy in Duan Morris. “Everything is used to the maximum.”

The high interest rates affected the scene of the American companies last year, with bankruptcy The highest level Since the financial crisis. But the PE and VC companies were particularly great success, as the conservative companies included a growing session-a man-from the bankruptcy of companies, according to S&P data.

Data, which dates back to 2010, includes private companies that have private majority ownership, and they also include some companies traded to the public with strategic investments for minorities by private stock stores.

A narrower analysis by FTI Consulting, which focuses on the largest private stock deposits, does not appear similarly, but indicates that the tactics outside the court suppresses the number of bankruptcy associated with private shares in recent years.

The overwhelming loads of debt have become more strict due to the high federal reserve rates, which directly affected the cost of paying loans with a floating rate made by the conservative companies sponsored by private stocks. These high interest rates have been high now for nearly three years, and relief possibilities have decreased in the form of aggressive discounts.

The software company, which was captured by CVC Capital Partners in 2019, embodies a problem with facing private stock portfolio companies.

The software collection, known for its cloud products and cyber security, and now C1, has been called a purchase in the years that followed their last acquisition, taking debts to seven companies before the interest rates began.

In the end, religion has proven much to keep it. Last spring, Christone submitted bankruptcy for only $ 21 million in the bank, and $ 1.8 billion of debt. CVC refused to comment, and could not respond to the comment.

“Consumers are looking for ways to find value when inflation bites,” said Mike Bast, the Burges wallet manager. “The market is full of bankruptcy in consumer products and retail sectors,” he added.

While most private stock companies fail from a group of many debts and operational problems, some cases raise Acerbic allegations. One of the initial cases: The instant brands, which make the famous instant pressure chefs, have emerged as one of the failure of the conflicting companies.

In 2019, Cornell Capital bought immediate brands for more than $ 600 million. By 2023, the kitchen appliance maker submitted a bankruptcy. Shortly after the company’s request to protect the court, creditors accused Cornell of clearing large sums of money from the company’s treasures.

The creditors filed a lawsuit against Cornell Capital and some executives in November for “looting it to the Governor” by obtaining $ 345 million profits for its investors, which claim the complaint with the immediate and concerted brands.

A trial on these allegations is scheduled to start later this year. A spokesman for Cornell Capital in a statement entitled “Unrealistic attacks”, which has a basis for the lawsuit, and confirmed that the reconstruction of profit distributions led to the bankruptcy of instant brands, and instead mentioned “the total economy events are indisputable.”

Meanwhile, the exercises outside the court to avoid insolvency, which are usually called responsibility management exercises or LMES, have risen with companies seeking to avoid chapter 11.

“Private stockpiles have a great interest in LMES,” said David Mayer, President of the Lawyer Vinceson and Alecins for restructuring and reorganization, in an interview. “The main focus is: How can we address a position outside the court?”

While the common solution, it rarely continues. Less than half of the respondents to Alixpartners Survey From October, the responsibility management exercises are described as successful. Only 3 percent said they turned into permanent reforms.

Despite the efforts made to avoid insolvency, some companies have acquired the doubtful discrimination to enter “Chapter 22” or “Chapter 33”, which is the Sobriquet indicates their second or third bankruptcy.

One of the most recent cases such as Joann, which is Ohayu, based in Ohio, with hundreds of sites, thousands of employees and two separate bankruptcy files last year.

Joan was taken, especially for $ 1.6 billion in 2011 by the private stock company Leonard Green and partners. Then the company Joan took the public in 2021, while its largest shareholder remained.

Business flourished in 2020 thanks to the popularity of crochet and other crafts during Covid-19s. But sales slowed with the deviation of the epidemic, the rates of weakness are more than double the interest payments of the company and the supply chain issues in its stock – although 96 percent of its stores were positive for cash flow, according to the stadiums.

The company applied for bankruptcy in March. After a month, after her half -debt reduced $ 1 billion, but eventually returned to Chapter 11 earlier this month, this time to blame the difficulty of keeping sellers shipping products. Joan and Leonard Green did not respond to the suspension requests.

“The tide has come out, and a lot of boats are vibrating,” said Gereold Brejman, a partner in the BG Law. He added that private stock companies prefer to sell or float their property in a profit. “Usually, all they look to do is reach the liquidity event and earn some money.”