Despite fears of a global spike in bankruptcies, given rising interest rates and a generally more hostile economic environment, private equity portfolio companies in Europe seem to be managing the challenging climate well.
So far this year, 27 European PE-backed companies have filed for bankruptcy protection, according to PitchBook data. At the current pace, the total number of PE-backed bankruptcies is likely to fall well short of the levels seen during the pandemic.
The largest bankruptcy this year was Altera, a UK-based supplier of infrastructure to the offshore energy sector. The company emerged from a Chapter 11 process in the US, having restructured its debt obligations with the assistance of its backers, including Brookfield Business Partners.
But it’s the B2C sector that has been the most troubled this year, accounting for nearly 60% of bankruptcies. One prime example of the types of companies facing difficulties is stationery retailer Paperchase. Once owned by Aspen Phoenix, the company was bought by a consortium in August but entered into administration at the start of this year. Tesco bought the intellectual property but not the shops.
B2C was also the most impacted during the pandemic, although with lockdowns in place, consumer-facing businesses in sectors such as hospitality were affected. Government measures to protect companies across Europe during the pandemic are no longer in place, and businesses that rely on customers’ discretionary spending may be in for a rough ride.
Featured image by Andriy Blokhin/Shutterstock
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