Ari Nathanson is leaving Buyouts Magazine at week’s end, which causes all sorts of “going-away party” problems, as he doesn’t drink. But at least he’s going out with a strong portfolio, like a new story (sub req.) about how private equity firms own half of all U.S. companies that have defaulted on their debt in 2007.
Ari writes: “With default rates still at historic lows, and portfolio companies especially levered up these days, it could be taken as an ominous sign. That’s especially true because LBO firms can no longer rely on a generous credit market to easily secure refinancing packages and forestall defaults for struggling companies. Distressed investors are circling, predicting that default rates will climb as the debt market worsens.”
The latest example is The Wornick Co., a Veritas Capital portfolio company that got its credit rating dropped to ‘D’ by Standard & Poor’s on July 24.
S&P reports that 10 U.S. companies have so far defaulted on their debt in 2007, including Wornick, TK Aluminum (backers: AIG, CCMP Capital, Questor Management), Remy International (Court Square Capital Partners) and InSight Health Services (J.W. Childs & The Halifax Group).