The number of buyout-backed investments listed in Standard & Poor’s “weakest links” report, published in May, has declined since Buyouts last reported on the February version of the report, as the outlook for several sponsor-backed companies has improved.
Of the 161 companies on the list with combined debt of $168.4 billion, Buyouts identified 41 (with combined debt of $65.5 billion) as being LBO portfolio companies as of May 14. The February version of the report listed 48 sponsor-backed “weakest links,” with combined debt of $74.1 billion, out of a total 213 companies on the list with combined debt of $197.5 billion.
To be considered a “weakest link,” a company must have a speculative credit rating of ‘B-’ or lower along with a negative outlook or a negative CreditWatch implication, according to the “S&P Global Bond Markets’ Weakest Links And Monthly Default Rates” report.
Two portfolio companies were added to the “weakest links” report since the February listing.
S&P removed nine portfolio companies from the “weakest links” list during the past three months. These businesses had combined debt worth $10.5 billion in February. Three of the companies had debt of at least $1 billion each. NXP BV, backed by
Uplifted performance outlooks since February accounted for most of the sponsor-backed removals from the most recent “weakest links” report.
Industry-wise, media and entertainment remains the most vulnerable to debt-related default. The sector saw 10 such defaults in May, S&P said. Retail and restaurants ranked second in terms of the number of defaults with seven. The ranking of these two industry sectors remained unchanged since February. The consumer products; health care; and chemicals, packaging and environmental services sectors listed four defaults each in the latest report.
Five companies backed by The
As for defaults, S&P tagged 34 companies with either a ‘D’ (default) or ‘SD’ (selective default) rating between Jan. 1 and May 14. From that pool, Buyouts spotted seven with LBO sponsors. Electrical Components International Inc., which
The total debt of the 34 companies that were stamped this year with either a ‘D’ or ‘SD’ rating is $12.6 billion. The seven companies with LBO backers represent total affected debt of $2.6 billion.
Since the May report, two more portfolio companies have been downgraded to either ‘D’ or ‘SD’. S&P cut Sagittarius Brands LLC to ‘SD’ from ‘CC’ on May 25, after subordinated noteholders reduced their claims against the
Separate from S&P’s “weakest links” reports, Buyouts has tracked a total of 12 portfolio companies that filed for bankruptcy protection this year—two of which did so during the second quarter. Barcalounger Corp., a maker of reclining chairs owned by
The second sponsor-backed Chapter 11 filing of the quarter came from TriDimension Energy LP, an oil and gas drilling company backed by