The number of bankruptcy filings by private equity-backed companies in the U.S. edged higher in 2022, with the consumer sector, battered by supply chain disruptions and surging inflation, leading the pack.
Forty-nine private equity portfolio companies have filed for bankruptcy in 2022, representing 6.6% of total filings in the U.S., according to S&P Global Market Intelligence data as of Dec. 9. This compares with 42 portfolio companies that filed the previous year, representing 3.5% of the total.
Of the portfolio companies that filed for bankruptcy in 2022, 38 are restructuring, six have liquidated and the remaining five are still operating.
The consumer sector accounted for 15 of those bankruptcies, followed by the healthcare industry with 11 filings.
Bankrupt companies
Cosmetics company Revlon Inc. on June 16 announced that it filed for Chapter 11 bankruptcy, citing liquidity constraints brought about by supply chain disruptions, rising inflation and obligations to its lenders. The company, which counts Ares Private Equity Group among its investors, sought $575 million in debtor-in-possession financing from its existing lender base to support its day-to-day operations.
Another cosmetics company, BH Cosmetics Inc., also filed for bankruptcy Jan. 14. It was bought out of bankruptcy by Revolution Beauty Group PLC, which acquired certain BH intellectual property assets and inventory for $3.9 million. BH counts Trinity Capital Investment LLC and Trinity Capital Inc. among its investors.
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Cryptocurrency companies also had a disastrous year. Cryptocurrency exchange West Realm Shires Services Inc., doing business as FTX US, filed for bankruptcy Nov. 11. FTX founder Sam Bankman-Fried was charged by the U.S. Justice Department over alleged misappropriation of customer funds deposited with the platform. West Realm counts Temasek Holdings (Pvt.) Ltd., Lightspeed Ventures LLC and Greenoaks Capital Partners LLC among its backers.
Other bankrupt private equity-backed companies that have links with FTX include BlockFi Inc., Blockfi Lending LLC and Deck Technologies Inc.
Cryptocurrency lender Voyager Digital Ltd., which is backed by venture capital firms Digital Currency Group Inc. and Streamlined Ventures, began a voluntary Chapter 11 reorganization process July 5, days after its operating platform Voyager Digital LLC suspended trading, deposits, withdrawals and loyalty rewards due to prevailing market conditions.
Voyager agreed to sell its assets to FTX in September for about $1.42 billion, but it decided to reopen the bidding process months later following FTX's collapse.