Ominous data
Buried eight paragraphs deep in a feature about the bankruptcy of retailer Mervyn’s in Monday’s Wall Street Journal is this disquieting passage:
Forty private-equity-owned companies have sought bankruptcy-court protection this year, according to data compiled by Thomson Reuters. And of the 86 Standard & Poor’s-rated companies that have defaulted on their debt this year, 53 were involved in private-equity transactions, according to S&P.
S&P expects the default rate to increase sharply over the next year, probably leading to more private-equity-backed companies filing for bankruptcy protection. Creditors, employment lawyers and bankruptcy are expected to step up legal scrutiny of those buyout transactions, which typically involved large amounts of borrowed money.
And the mess continues to unravel…
Don Mecoy
Business News
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