The Next Wave of “PE-Backed” Bankruptcies?

When people put private equity and bankruptcy in the same sentence, they’re usually talking about PE-backed portfolio companies going bust. But the next formulation may involve private equity professionals themselves going under.

I’m not talking about the head honchos here, since most of them pull in multi-million dollar annual salaries and have plenty more sitting in Switzerland or the Caymans (past success breeding current position). Instead, I’m taking about the junior investment pros, who over-leveraged themselves in order to participate in co-investment programs. Many of these folks are just a few years out of business school, and don’t have much in the way of financial backstops.

Sources tell me that personal bankruptcies could become epidemic at certain firms. Moreover, the situation could be exacerbated by firm-wide compensation cuts, which certain shops are enacting in lieu of layoffs (or sometimes in tandem with layoffs). Just something to keep an eye out for…