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July 18, 2024
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Private equity-backed bankruptcies hit record high, with radiology firm topping healthcare list

S&P experts said the uptick in bankruptcies is being fueled by inflation, high interest rates and the fading impact of pandemic stimulus spending.

“It’s no secret that there’s been economic headwinds after the COVID bump,” Kris Herrmann, a partner for law firm Proskauer, said in the Jan. 11 report. “I wouldn’t be surprised if, even when the economy kicks up again, you’re still going to see some of those residual bankruptcies happening for those businesses whose time maybe should have run out three years ago,” he added.

Private equity- and VC-backed companies accounted for over 16% of all U.S. bankruptcy filings in 2023, which is their largest share going back to at least 2010, S&P said. More than one-third of the 104 firms on the list were in healthcare, hinting at the “specific economic pressures squeezing” the sector.

Some private equity-backed companies are grappling with restrictions around their ability to raise prices to counter soaring costs, Hermann added. This includes the No Surprises Act, which has cut into profit margins for some in the industry. S&P Global Ratings placed industry giant Radiology Partners on CreditWatch in December while highlighting the NSA’s impact on its cash flow.

Private equity-backed radiology provider Envision Healthcare also filed for bankruptcy in 2023, exiting the process in October.

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