Moody’s Warns of Weak LBO Credit Quality - ABI

Moody’s Investors Service said that companies owned by the 16 largest private equity firms have lower credit quality than those of similar, non-private equity owned companies, WSJ Pro Bankruptcy reported. In a recent report, the ratings agency said that weakening credit worthiness and loose safeguards could mean trouble for private equity firms when economic conditions change. The report says 92 percent of companies owned by the top 16 private equity firms are rated B2 or below, compared to 40 percent of companies without private equity backing. Driving the disparity is private equity’s appetite for shareholder returns and risky debt, according to Moody’s analyst Julia Chursin. Since 2009, Moody’s say it has rated 308 companies owned by the top 16 private equity firms, 99 of which have paid debt-funded dividends to private equity shareholders.

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