Portco bankruptcies surged in 2023; pensions funds' heavy PE portfolios

S&P Global Market Intelligence offers our top picks of global private equity news stories and more published throughout the week.

Even as US corporate bankruptcies surged to a 13-year high in 2023, the bankruptcy rate accelerated even faster for a subset of US companies: those backed by private equity and venture capital investors.

US private equity portfolio companies set an annual record last year with 104 bankruptcy filings, more than two-and-a-half times the prior year total. And that is just a partial picture of the distress brought on by higher interest rates, inflation and the tailing off of pandemic-era government stimulus, one that does not include out-of-court restructurings.

Just two sectors, healthcare and consumer discretionary, accounted for more than half those portfolio company bankruptcies in 2023, indicating that there also may be more localized factors at play.

Consider the impact on the healthcare sector of the 2022 No Surprises Act, which limits patients' exposure to unexpected costs tied to emergency and out-of-network care. It factored into the Chapter 11 filing of American Securities LLC-backed helicopter ambulance business Air Methods Corp., according to a bankruptcy court filing by the firm's interim CFO.

Read more about the big year-over-year jump in US private equity portfolio company bankruptcies.

CHART OF THE WEEK: The pensions funds that are PE heavyweights

⮞ Global pension funds in aggregate are slightly above their target allocation to private equity, according to an S&P Global Market Intelligence analysis of Preqin data.

⮞ California Public Employees' Retirement System has the largest private equity allocation among pension funds globally at $63.5 billion as of Jan. 3, or $4.7 billion above its stated target allocation of $58.8 billion

⮞ The largest over-allocation to private equity belongs to the New York State Common Retirement Fund, whose $35.98 billion in private equity holdings as of Jan. 3 put the pension fund $11.13 billion over its target allocation of $24.85 billion.

TOP DEALS AND FUNDRAISING

– Digital infrastructure-focused DigitalBridge Group Inc. and private equity firm Silver Lake Technology Management LLC made a $6.4 billion equity investment in data center company Vantage Data Centers Management Co. LLC.

– Lexington Partners LP raised $22.7 billion in total capital commitments at the close of its Lexington Capital Partners X LP fund. The vehicle seeks to acquire companies owned by large private equity and alternative asset firms.

– Cinven Ltd. secured $14.5 billion at the final close of its latest flagship fund. The Eighth Cinven Fund SCSp reached its hard cap and is nearly 30% bigger than its predecessor fund.

MIDDLE-MARKET HIGHLIGHTS

– Orangewood Partners LLC made a strategic investment in Servpro West Coast DRT, a provider of residential and commercial property cleaning, restoration and reconstruction services.

– Blue Wolf Capital Partners LLC and Stonepeak Partners LP completed the C$1.2 billion acquisition of marine and environmental services provider Logistec Corp.

– L2 Capital Partners LP completed the acquisition of hardwood basketball floors company Robbins Sports Surfaces Inc. Terms of the deal were not disclosed.

FOCUS ON: FOOD

– PAG agreed to buy a majority stake in Food Union, an ice cream and frozen treats provider based in Latvia. Financial terms of the transaction were not disclosed.

– RuralWorks Partners LLC made a strategic investment in American eel producer and processor American Unagi LLC.

– Perwyn Advisors UK Ltd. made a strategic investment in frozen pizza and gelato brand Crosta & Mollica Ltd.

For further private equity deals, read our latest In Play report, which looks at potential private equity-backed M&A, including rumored transactions, each week.