The number of buyout-backed companies listed in Standard & Poor’s November “weakest links” report has fallen from three months earlier, but the list of defaulters continued to grow.
At least 53 of the total 251 global companies listed in the Nov. 16, 2009 “weakest links” report are portfolio companies of U.S.-based buyout shops, according to analysis by Buyouts. These companies represent total debt of about $99.2 billion. We counted at least 59 companies with affected debt of $64.9 billion in the rating agency’s August report.
All told, there are now 251 “weakest links” companies (representing $268.44 billion in debt) as of Nov. 11, 2009. These figures are down from the peak of 300 companies with debt of $468.98 billion in April 2009, but significantly more than the 207 identified a year earlier.
Companies must have speculative corporate credit ratings of ‘B-‘ or lower, along with having a negative outlook or otherwise being on S&P’s CreditWatch with a negative implication, to be included in the list.
Energy Future Holdings Corp., subject of the largest buyout in history, accounted for more than a third of the debt outstanding by U.S.-based buyout shops on the November “weakest links” list. The Dallas-based utility was downgraded to ‘CC’ in October 2009 after exchanging some distressed debt. The ratings agency viewed the offer as equivalent to a default. Energy Future Holdings, which has $39.3 billion in affected debt, is a portfolio company of
Media & entertainment, along with retail & restaurants were the two sectors that had the most LBO-backed portfolio companies in the November report. Both had eight representatives in the latest tally. Three months ago, those two categories had nine and seven, respectively. The chemicals, packaging and environmental services sector had the next highest concentration, with six representatives. Its count was seven in the previous S&P report Buyouts reviewed last quarter.
For the second consecutive quarter,
Deletions from the LBO-backed “weakest links” list typically stem from S&P withdrawing its ratings, issuing improved ratings, removing ratings from credit watch or placing them on the watch with positive implications; in other cases the buyout firm exits a company, or the company defaults.
Separately, Buyouts has tracked 80 portfolio companies that filed for bankruptcy protection sometime this year through Dec. 7, 2009, up from the 65 we identified through Sept. 2. One of the recent bankruptcy additions is
During the fourth quarter, Cygnus Business Media Inc. emerged from bankruptcy on Sept. 21. It filed for Chapter 11 a month earlier because of a decline in advertising sales. The reorganization cleared out
As for defaults, S&P has seen a steady rise in the number throughout year. Through Nov. 11, the agency counted 243 issuers with affected debt worth $573 billion. Buyouts has identified at least 61 with LBO backers, including three that appeared twice in the list. Those with LBO sponsors represent $131.9 billion in debt.
KKR’s NXP B.V., as well as Carlyle Group and
Six of the defaulters are part of Carlyle Group’s portfolio.
Since the November “weakest links” report was issued, S&P downgraded more portfolio companies to ‘SD’ and ‘D’, putting the total count to date at least 63. One of the latest defaulters was Integra Telecom Inc., which is backed by