The credit quality of firms taken private in the last few years has "visibly eroded" since the credit crunch began last summer, analysts at Fitch Ratings wrote in a new report. "The risk of default is rising," their report said.
This is particularly important given the amount of LBO debt that was issued to take these companies private. Between 2004 and 2007, roughly $450 billion of sponsored LBO issuance poured into the leveraged loan market, Fitch said, citing data from Reuters Loan Pricing Corp.
A weakening economy combined with a crushing debt load has LBO companies struggling to make ends meet.