Firms & Funds

Distressed Assets: PE-backed retail faces weakness

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private equity, retail
  • 37 PE-backed companies make list
  • Retail industry leads with 10 companies
  • Platinum Equity with most distressed portfolio companies in 2018

Thus far in 2018, 37 private equity-backed companies received distressed ratings from Standard & Poor’s or Moody’s, including three defaults. Those defaults were due to missed interest payments.

The first occurred right after the new year. Fieldwood Energy, an acquirer and developer of oil and gas assets in the Gulf of Mexico, filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code. Fieldwood is backed by Riverstone Holdings.

The next two came in mid-February. Remington Outdoor Co, best known for firearms, found uneasy footing in the current political climate and its sales suffered in the process. Remington was sponsored by Cerberus Capital Management, but the firm lost its stake as a result of the Chapter 11 filing.

Platinum Equity-owned Transworld Systems was the third default. Transworld provides technology-enabled business-process outsourcing and accounts-receivable management, primarily in North America.

At the macro level, retail paced all industries, claiming 10 of the 37 portfolio companies (27 percent) on the list. High technology followed with seven (19 percent) and healthcare’s four (11 percent) stood third.

Kelly DePonte, managing director at Probitas Partners, doesn’t expect things to improve for the retail sector. “The issue for retail is secular, not cyclical, with brick-and-mortar stores being badly hit by internet shopping and social media’s impact on ‘hanging out.’ It’s been building over past two years, and not getting better.”

distressed

Sponsors with multiple portfolio companies on the Distressed Asset list include Platinum Equity (four companies); Vista Equity Partners (three); and Clayton, Dubilier & Rice, GTCR and H.I.G. Partners (two each).

To make Buyouts Insider’s Distressed Asset report, PE-backed companies must have had a speculative corporate credit rating of B- or lower from S&P or a corporate-family rating of Caa1 or lower from Moody’s between Jan. 1 and March 5, 2018.

Action Item: Download the Distressed Asset report here: Distressed Assets Report