Where Are All the Private Equity Bankruptcies?
Defaults are rising but sponsors have the money, tools and motivation to avert disaster.
Few companies have felt the shock from soaring interest rates as much as those owned by private equity. But thanks to surprisingly resilient earnings and their deep-pocketed owners’ talent for financial engineering most are avoiding disaster.
There have been some big bankruptcies, including the collapse of Envision Healthcare Corp. in May just five years after it was acquired by KKR & Co. for $9.4 billion. But so far, default rates have been lower than during the global financial crisis and the early part of the pandemic. While PE investors face lower returns, the financial reckoning may be less acute than I initially expected — providing there isn’t a deep recession.