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Private equity groups including Platinum Equity, Clearlake Capital and Apollo Global are struggling with the hefty debt loads of their holdings, Moody’s said on Thursday.
In a new analysis, the agency indicated that recent increases in interest rates have put the assets held by some of the world US’s fastest-growing PE groups under strain.
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It said more than half of the companies in the portfolios of Platinum and Clearlake, both Los Angeles-based, are at heightened risk of default, with a rating of B3 or below.
Moody’s said the holdings of Clearlake, a co-owner of Chelsea Football Club, and Platinum had the highest leverage ratios of the firms it surveyed, while others had begun to reduce their debt loads.
The two groups have attracted tens of billions of dollars in recent years from top institutional investors in North America, transforming them from niche middle-market firms into dealmaking powerhouses.
While Clearlake grew from about $1bn in assets in 2008 to $90bn today, the size of Platinum’s funds has nearly quintupled during that time to almost $50bn in assets.
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The report found that overall in the two years to August, portfolio companies of the top dozen buyout groups defaulted at a rate of 14.3 per cent, a figure twice as high as that for companies not backed by private equity.
Private capital powerhouses including Apollo Global and Ares Management have had buyouts suffer. Nearly a quarter of the Apollo-owned companies that Moody’s rates have defaulted since 2022, while 47 per cent of Ares-backed companies they follow are distressed, the agency said.
Platinum did not immediately respond to requests for comment. Representatives of Apollo and Clearlake disputed Moody’s definition of a default and said it was overly broad.
A representative for Ares Management declined to comment.
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The industry has been hit by the swiftest interest rate increases in a generation, which brought down valuations that had soared during the pandemic and pummelled the balance sheets of thousands of highly leveraged private equity-backed companies.
Between January 2022 and August of this year, more than a third of the Platinum-owned companies rated by Moody’s underwent restructuring or a debt default. Seventeen per cent of Clearlake’s portfolio suffered the same outcome.
Clearlake also became an active user of so-called continuation funds, where the group in effect sells the company to itself and other investors — novel deals that will be tested by higher rates for the first time.
Earlier this year, car parts supplier Wheel Pros, one of Clearlake’s largest fund-to-fund deals, went bankrupt. Moody’s report said it considers similar deals by the group, including for software companies like Symplr, as distressed.
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The fast-growing market for private credit has impeded rating agencies’ task, since such loans are more difficult to track than more traditional forms of borrowing.
As a result of the increased difficulty of analysis, buyout groups including Vista Equity, Carlyle and Thoma Bravo — historically among Moody’s most-frequently rated companies in the US — have now “nearly disappeared”, the agency said.
Private credit can “mask some issues” in a private equity firm’s portfolio, Julia Chursin, vice-president at Moody’s, said in an interview. “There could be some opaque credit risk which is absorbed by the private credit sector, although they claim they only pick good ones.”
The renters’ rights bill, which passed its second reading in the House of Commons this week, is set to be the biggest change to the private rented sector in England for over 30 years with proposed changes to ban Section 21 evictions, the introduction of open-ended tenancies and new requirements for property standards and rent increases (Report, September 12).
Propertymark is the UK’s leading membership body for property agents. While we want to see improved standards, the government must fully understand the impact these changes will have, with agents left wondering how this legislation will help meet the much-needed demand for homes for people to rent.
Our monthly Housing Insight Report shows on average eight registrations for each available property with fewer new properties coming on to the market. The bill in its current form is highly likely to exacerbate this situation with more landlords withdrawing homes from the private rented sector, frequently moving them to short-term lets.
Tax is reducing the investment appetite of new and existing landlords with higher rates of stamp duty on buy-to-let properties and the withdrawal of tax relief on mortgage interest costs. Ministers must recognise the financial implications of this bill and the impact it has on the supply of homes to rent.
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Through the renters’ rights bill, the UK government must commit to reviewing all costs and taxes impacting on private landlords to ensure landlords continue in the market and more landlords can meet the demand for homes to rent.
Additionally, with no security of a rental term for a landlord beyond the proposed two months’ notice period and no long-term guarantee of rent, we would expect to see a significant number of landlords attracted to higher rents in the short-term letting market, which also offers them the advantage of being unregulated.
With landlords exiting the private rented sector, the result would be a reduction in the rental stock available for long-term tenants and increased rents. To help mitigate this, the government must also enact the registration of short-term rental property requirements, as passed in the Levelling-up and Regeneration Act 2023, alongside these reforms to level the playing field for landlords and the long-term rental market.
Timothy Douglas Head of Policy and Campaigns, Propertymark, Warwick, UK
Your report (October 4) that giving the Chagos Islands to Mauritius means the sun has finally set on the British empire reminds me of a comment by Krishna Menon, a defence minister in post-independence India. The British empire had reached its zenith on September 29, 1923 having acquired enormous amount of territories following the first world war. It then covered nearly 14mn square miles, 150 times the size of Great Britain. This was a quarter of the world’s land area with 460mn people, a fifth of the world’s population. George V, as King Emperor, could proudly claim that the sun never set on the British empire.
This prompted Menon, then based in London campaigning for India’s freedom, to mockingly say: “The sun never set on the empire because God doesn’t trust the British in the dark.” Now the sun has set on the empire the British will surely regain God’s trust.
Why are western — normally American, but in this case British — computer programmers so arrogant as to insist that the rest of the world conform to their organisation (“AI start-ups make money faster than software groups of the past”, Report, September 28)?
I wanted to buy a couple of books by the brilliant and eloquent theologian Father Timothy Radcliffe OP, soon to be Cardinal Radcliffe, an eminent eminence indeed. Bloomsbury publishes the books. Unfortunately, my address takes the form of 3-2-1-1111, Osaka 543-2100. It makes twisted sense in Japan where few of the higgledy-piggledy streets and lanes have names. However, Bloomsbury’s computer insists on rendering my address as 3211111 Osaka 5432100 without allowing any hyphens or even commas — which code I doubt even Bloomsbury’s computers would be able to fathom.
Postcodes in Japan are not as precise as in the UK, and the same code may cover several hundred urban metres. There are ways round, by writing Chōme (city district name), Banchi (block), Gō (house number) and apartment, preceded by the number for each, but this is clumsy, and Japan prefers Chōme etc with hyphens; and I do not know whether my credit card or bank would recognise the address thus rendered. I fear that Global Britain may be lost in foreign lanes where customs are different.
China has cracked down on businesses including real estate, technology and finance
“Now I think about it, I definitely chose the wrong industry.”
Xiao Chen*, who works in a private equity firm in China’s financial hub, Shanghai, says he is having a rough year.
For his first year in the job, he says he was paid almost 750,000 yuan ($106,200; £81,200). He was sure he would soon hit the million-yuan mark.
Three years on, he is earning half of what he made back then. His pay was frozen last year, and an annual bonus, which had been a big part of his income, vanished.
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The “glow” of the industry has worn off, he says. It had once made him “feel fancy”. Now, he is just a “finance rat”, as he and his peers are mockingly called online.
China’s once-thriving economy, which encouraged aspiration, is now sluggish. The country’s leader, Xi Jinping, has become wary of personal wealth and the challenges of widening inequality.
Crackdowns on billionaires and businesses, from real estate to technology to finance, have been accompanied by socialist-style messaging on enduring hardship and striving for China’s prosperity. Even celebrities have been told to show off less online.
Loyalty to the Communist Party and country, people are told, now trumps the personal ambition that had transformed Chinese society in the last few decades.
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Mr Chen’s swanky lifestyle has certainly felt the pinch from this U-turn. He traded a holiday in Europe for a cheaper option: South East Asia. And he says he “wouldn’t even think about” buying again from luxury brands like “Burberry or Louis Vuitton”.
But at least ordinary workers like him are less likely to find themselves in trouble with the law. Dozens of finance officials and banking bosses have been detained, including the former chairman of the Bank of China.
The industry is under pressure. While few companies have publicly admitted it, pay cuts in banking and investment firms are a hot topic on Chinese social media.
Posts about falling salaries have generated millions of views in recent months. And hashtags like “changing career from finance” and “quitting finance” have gained more than two million views on the popular social media platform Xiaohongshu.
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Some finance workers have been seeing their income shrink since the start of the pandemic but many see one viral social media post as a turning point.
In July 2022, a Xiaohongshu user sparked outrage after boasting about her 29-year-old husband’s 82,500-yuan monthly pay at top financial services company, China International Capital Corporation.
People were stunned by the huge gap between what a finance worker was getting paid and their own wages. The average monthly salary in the country’s richest city, Shanghai, was just over 12,000 yuan.
It reignited a debate about incomes in the industry that had been started by another salary-flaunting online user earlier that year.
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Those posts came just months after Xi called for “common prosperity” – a policy to narrow the growing wealth gap.
In August 2022, China’s finance ministry published new rules requiring firms to “optimise the internal income distribution and scientifically design the salary system”.
The following year, the country’s top corruption watchdog criticised the ideas of “finance elites” and the “only money matters” approach, making finance a clearer target for the country’s ongoing anti-corruption campaign.
Getty Images
Shanghai is a financial hub and China’s richest city
The changes came in a sweeping but discreet way, according to Alex*, a manager at a state-controlled bank in China’s capital, Beijing.
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“You would not see the order put into written words – even if there is [an official] document it’s certainly not for people on our level to see. But everyone knows there is a cap on it [salaries] now. We just don’t know how much the cap is.”
Alex says employers are also struggling to deal with the pace of the crackdown: “In many banks, the orders could change unexpectedly fast.”
“They would issue the annual guidance in February, and by June or July, they would realise that the payment of salaries has exceeded the requirement. They then would come up with ways to set up performance goals to deduct people’s pay.”
Mr Chen says his workload has shrunk significantly as the number of companies launching shares on the stock market has fallen. Foreign investment has decreased in China, and domestic businesses have also turned cautious – because of the crackdowns and weak consumption.
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In the past his work often involved new projects that would bring money into his firm. Now his days are mostly filled with chores like organising the data from his previous projects.
“The morale of the team has been very low, the discussion behind the bosses backs are mostly negative. People are talking what to do in three to five years.”
It’s hard to estimate if people are leaving the industry in large numbers, although there have been some layoffs. Jobs are also scarce in China now, so even a lower-paying finance job is still worth keeping.
But the frustration is evident. A user on Xiaohongshu compared switching jobs to changing seats – except, he wrote, “if you stand up you might find your seat is gone.”
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Mr Chen says that it’s not just the authorities that have fallen out of love with finance workers, it’s Chinese society in general.
“We are no longer wanted even for a blind date. You would be told not to go once they hear you work in finance.”
*The names of the finance workers have been changed to protect their identities.
LONDON’s Winter Wonderland will be opening next month with some updates – a much-loved rollercoaster is set to return following a one-year hiatus, as well as other reimagined activities.
The winter attraction will run for six weeks in the capital’s Hyde Park, with a variety of attractions, activities, entertainment, and food on offer.
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London’s Winter Wonderland will open in the capital next monthCredit: Winter Wonderland
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The winter attraction is home to over 100 rides and market stallsCredit: Splash
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The Magical Ice Kingdom will also return for another year, featuring a brand-new themeCredit: Winter Wonderland
After a break from Winter Wonderland last year, the rollercoaster Wilde Maus XXL will make its return in 2024.
The 30-metre tall coaster rollercoaster features multiple twists and turns with a G force of 2.5, and the queue is even interesting – with spinning platforms and stepping stones over water.
The freezing cold bar has been brought back to London in association with Mixtons Cocktails – think DJ beats and classic cocktails with a twist.
Other popular attractions include the Giant Wheel, ice sculpting workshops, and Zippos Christmas Circus.
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Those who aren’t keen on big rides will be able to watch the Cirque Berserk show Thunderbolt – an “adrenaline-fuelled circus stunt” show performed by a troupe of daredevils.
And following a run of sell-out performances in 2023, Children’s TV Megastar Justin Fletcher, known for his role as Mr Tumble on CBeebies, will also return for 2024 – and tickets are already limited.
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Magical Ice Kingdom will have an Alice in Wonderland themeCredit: @Joshua Atkins
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Munich Looping, the world’s largest transportable rollercoaster, will be at Winter WonderlandCredit: @Joshua Atkins
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Cirque Berserk show Thunderbolt will be part of the lineupCredit: @Joshua Atkins
More than 20 new traders will be making their Winter Wonderland debut in 2024, with the site’s Christmas Market featuring a diverse range of handmade crafts.
As part of the new line-up, live demonstrations will also be hosted at the market.
Food and drinks like mulled wine, hot chocolate, and tankards of Bavarian beer can also be purchased.
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What else do I need to know?
While entry is free into Winter Wonderland in the morning and early afternoons on certain days (normally weekdays), entry prices for peak times range from £5-£7.50.
Visitors will then need to pay if they want to go on any of the rides or experience any of the other attractions.
For example, ice rink tickets cost £17 for a full-paying adult and £11 for a child and entry into the Ice Kingdom costs £13 for a full-paying adult and £11.
Fast-track tickets on the Giant Wheel cost £16 per adult and £12 per child, cheaper tickets are available for those who don’t want to purchase fast-track.
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Entry to Bar Ice cost £18 per person, with one cocktail included in the price.
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There will be over 100 rides and attractions at Winter WonderlandCredit: Winter Wonderland
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Rollercoaster Wilde Maus XXL will make its return in 2024Credit: Alamy
If you’re clever and book activities in advance online, you can get free entry into the park when you spend over £25.
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Visitors can also purchase the Santaland Unlimited Ride Pass, which gives park-goers unrestricted access to over 12 family-friendly rides, including Race-O-Rama, Santaland Express Train, Winter Spinner, and Racing Coaster – although this is three rides less than last year.
The pass costs £25, and it includes free entry to Winter Wonderland.
A new Off-Peak offer is on the cards for 2024, with off-peak visitors unlocking 20 per cent of selected Magical Ice Kingdom and Ice Skating tickets.
Winter Wonderland will run for six weeks from November 21, 2024, until January 5, 2025.
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It will be open from 10am until 10pm every day between those two dates, excluding Christmas Day.
The nearest London Underground stations to Hyde Park are Bond Street, Green Park, Knightsbridge, Marble Arch, Hyde Park Corner, Paddington, and Victoria.
Several bus routes will also get you there, and Paddington, Victoria, and Marylebone train stations are also nearby.
What’s it like to visit London’s Winter Wonderland?
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The Sun’s Travel reporter Hope Brotherton visited London’s Winter Wonderland last year, here’s what she thought…
THE smell of deep-fat fried batter wafts through the air, and bright, sometimes flashing, lights can be seen in every direction.
A mixture of pop songs and Christmas jingles also compete for some attention, which means I can only be in one place – London‘s Winter Wonderland.
It’s a sprawling maze of high-octane rollercoasters, funfair rides, wooden stalls, food vans, and other activities.
While there’s no real way to explore the festive attraction, I made a beeline for the Magical Ice Kingdom.
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Last year’s theme centred around Norse Mythology but I’m equally excited to see the Alice in Wonderland-themed ice carvings at this year’s attraction.
For me, another one of Winter Wonderland’s highlights was the Real Ice Slide – a 35m slope.
Despite being over in seconds, the Real Ice Slide was a true rush of fun.
Another one of Winter Wonderland’s highlights is the Giant Ferris Wheel, where park-goers are treated to spectacular views of both the park and the London Skyline.
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Journeys on the Ferris Wheel last around 15 minutes, making it well worth the wait.
No trip to Winter Wonderland is complete without riding at least one rollercoaster – and I opted for Munich Looping, the world’s largest transportable rollercoaster.
I gave several other rides a go, including the Haunted Mansion and the Traditional Wave Swinger.
I also had a good wander through the wooden market stalls, and I watched as other park-goers won prizes on one of the many funfair games.
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