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PE-Backed Borrowers Drive Repeat Defaults, Deepening Lender Losses
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Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Tuesday, June 16. In today's briefing, Moody’s Ratings reported that private equity-backed companies are driving a surge in corporate repeat defaults and bankruptcies following complex LMEs, leaving lenders with significantly lower debt recoveries.
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Efforts by overleveraged companies, often backed by private equity, to counter financial pressures frequently lead to new defaults, Moody’s Ratings says. Photo: Angela Weiss/Agence France-Presse/Getty Images
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Recoveries Weaken in Bankruptcies Preceded by LMEs, Moody’s Says
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Elevated interest rates, market volatility and refinancing challenges are increasing the risk of re-default for companies that previously engaged in distressed-debt exchanges and complex liability-management exercises to avoid bankruptcy, according to a Moody’s Ratings analysis.
Private equity-backed companies continue to drive distressed-debt restructurings including exchanges, which accounted for more than 70% of U.S. defaults since 2022, Moody’s said in a new report.
Additionally, bankruptcies preceded by LMEs—transactions undertaken by a company to restructure liabilities—are resulting in significantly lower debt recovery outcomes for creditors.
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Behdad Eghbali (left) and Jose E. Feliciano, co-founders and managing partners of Clearlake Capital Group. Photo: Clearlake Capital Group
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Clearlake Raises $14.8 Billion for Eighth Private-Equity Fund
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Clearlake Capital Group closed one of the largest private-equity funds in recent years after an extended fundraising process, capping a period of acquisition-driven expansion that pushed the Santa Monica, Calif., firm’s assets under management to $185 billion.
Clearlake Capital Partners VIII closed with $14.8 billion, including co-investment commitments and separately managed accounts, said José E. Feliciano, Clearlake’s co-founder and managing partner. The firm plans to announce the closing Tuesday.
It is the third-largest private-equity fund to reach a final close so far this year, and the fifth largest to do so since the beginning of 2025, according to private-markets data provider PitchBook.
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Kevin Warsh Wants the Fed to Stop Explaining Everything
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Kevin Warsh boiled down his advice for the Federal Reserve before an audience of investors last year. “Stop talking so much,” he said. “More thinking, less talking.”
For more than a decade, Warsh has argued that the Fed should say less. How much a central bank reveals about its thinking shapes mortgage rates, markets and the cost of borrowing for everyone.
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