In February 2010, just three PE-backed companies filed for Chapter 11 bankruptcy protection, a decrease from last year and a stark contrast to the country’s rise in general corporate bankruptcies.
By this time last year, 18 LBO-backed companies had filed for bankruptcy. But 2010 is on track to be a happier year for private equity portfolio companies: Combined with January’s total of two filings, buyout firms only received five black eyes to date. The survivors have flexible lenders to thank.
Even more surprising is the continued rise in corporate bankruptcies across the board. Data from yesterday shows that bankruptcies rose last month for the fifth straight February. The total number of filings was 6,557, according to AACER, a database of bankruptcy statistics. The fact that private equity had its hands on just two of those, compared with 18 a year ago, is encouraging for buyout pros.
Even if the economy gets better, bankruptcy filings continue at a healthy clip for six to 18 months,” said Mike Bickford, president of AACER.
Whether PE-backed companies will be able to continue skirting their covenants through amendments and debt extensions remains to be seen, but some firms have already said their companies are out of the rough. Blackstone Group said on its year-end earnings call last week that it had refinanced the majority of the portfolio company debt it needed to deal with and was largely done putting out fires. Bain Capital Managing Director Mark Nunnelly said Monday at the Reuters Hedge Fund and Private Equity Summit that Bain is seeing stabilization in portfolio companies, and in the market in general, which could lead to an increase in deal activity. The worst, it seems, could be over.
Download here: peHUB LBO-Backed Bankruptcies Feb. 2010