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Alternative Market Briefing

Private equity portfolio companies weathering the Covid-19 storm

Thursday, July 09, 2020

Laxman Pai, Opalesque Asia:

Private equity portfolio companies are largely weathering the storm caused by the coronavirus crisis, new research from risk management firm Willis Towers Watson shows.

The report revealed that despite a subdued environment for exit deals in the first six months of the year, there has been little evidence of forced exits.

The results revealed the significant turmoil in capital markets has had little effect on the capital structures of portfolio companies, with 87% of respondents saying their holdings were unlikely to breach covenants as a result. Only 13% said holdings were either close to breaching or likely to breach covenants in the next two to three months.

"Private equity-owned companies have several structural advantages that may have allowed them to navigate this crisis," said Jon Pliner, U.S. head of Delegated Portfolio Management.

Pliner added: "In addition to the expertise provided by private equity managers, the additional access to equity and debt capital from their sponsors may also have provided some respite."

Regarding customer demand for products or services, however, responses were far more varied with 46% of respondents reporting their holdings were feeling a medium-to-high impact from the slowdown in global economies, mostly within the consumer discretionary, industrials, energy and materials sectors.

In contrast, sentiment among commercial services firms remained robust, while 20% of consumer staples firms ......................

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