Key Takeaways
- • Private equity firms were involved in 54% of the largest U.S. corporate bankruptcies in 2025 (19 of 35 filings with liabilities exceeding $1 billion), despite PE-backed companies representing only 7% of the U.S. economy and 10% of all corporate bankruptcy filings.
- • PE-backed companies demonstrated acute sectoral vulnerability, accounting for 60% of the largest manufacturing bankruptcies and 71.43% of the largest consumer discretionary bankruptcies in 2025, including notable retail and consumer brands.
- • Private equity firms also played a significant role in distressed exchanges—out-of-court debt restructurings that circumvent formal bankruptcy but produce similar outcomes—appearing in 44% (18 of 41) of such transactions during 2025.
- • The disproportionate bankruptcy concentration among PE-owned firms underscores structural risks associated with financial engineering, leverage, and operational pressures inherent to private equity ownership models.
Summary
Private equity firms maintained a substantially outsized role in corporate distress during 2025, according to data released by the Private Equity Stakeholder Project (PESP) in its updated Private Equity Bankruptcy Tracker. The disparity between PE's footprint in bankruptcies versus its economic presence reveals a material risk concentration in the alternative investment sector.
The most striking finding centers on large bankruptcies—those with liabilities exceeding $1 billion at filing. PE firms played a role in 54% of these mega-bankruptcies (19 of 35 filings), a substantial overrepresentation given that private equity accounts for approximately 7% of total U.S. economic activity. When expanding the analysis to bankruptcies with $500 million or greater in liabilities, PE involvement reached 51% (21 of 41 filings). Across all corporate bankruptcy filings regardless of size, PE-backed companies represented 10% of the 388 total filings in 2025—already elevated relative to their economic share.
Sectoral concentration amplifies the risk profile. In manufacturing, PE-backed companies accounted for 60% of the largest bankruptcies, while consumer discretionary showed even sharper overrepresentation at 71.43% (5 of 7 largest filings). Specific brands including Joann Fabrics, At Home, and Claire's exemplified this retail sector vulnerability. These patterns suggest that PE ownership structures—characterized by aggressive leverage, cost-cutting mandates, and aggressive exit timelines—create elevated operational fragility in capital-intensive and cyclically sensitive industries.
Beyond formal bankruptcies, PE firms maintained material exposure to distressed outcomes through out-of-court debt restructurings. According to S&P data, PE firms participated in 44% of distressed exchanges (18 of 41 transactions) during 2025. These exchanges, while technically avoiding formal bankruptcy proceedings, frequently produce similar economic consequences for creditors, equity holders, and stakeholders. The prevalence of PE involvement in both bankruptcy and pre-bankruptcy distressed exchanges underscores systemic leverage risks embedded in the private equity portfolio.
The concentration of large bankruptcies among PE-backed companies carries material implications for workers and local economies, as demonstrated by store closures and employment disruptions across retail chains. For institutional investors, creditors, and policymakers, these findings illuminate a critical gap between PE's proportional economic contribution and its outsized presence in corporate distress, warranting heightened scrutiny of leverage deployment and portfolio management during economic uncertainty.
The most striking finding centers on large bankruptcies—those with liabilities exceeding $1 billion at filing. PE firms played a role in 54% of these mega-bankruptcies (19 of 35 filings), a substantial overrepresentation given that private equity accounts for approximately 7% of total U.S. economic activity. When expanding the analysis to bankruptcies with $500 million or greater in liabilities, PE involvement reached 51% (21 of 41 filings). Across all corporate bankruptcy filings regardless of size, PE-backed companies represented 10% of the 388 total filings in 2025—already elevated relative to their economic share.
Sectoral concentration amplifies the risk profile. In manufacturing, PE-backed companies accounted for 60% of the largest bankruptcies, while consumer discretionary showed even sharper overrepresentation at 71.43% (5 of 7 largest filings). Specific brands including Joann Fabrics, At Home, and Claire's exemplified this retail sector vulnerability. These patterns suggest that PE ownership structures—characterized by aggressive leverage, cost-cutting mandates, and aggressive exit timelines—create elevated operational fragility in capital-intensive and cyclically sensitive industries.
Beyond formal bankruptcies, PE firms maintained material exposure to distressed outcomes through out-of-court debt restructurings. According to S&P data, PE firms participated in 44% of distressed exchanges (18 of 41 transactions) during 2025. These exchanges, while technically avoiding formal bankruptcy proceedings, frequently produce similar economic consequences for creditors, equity holders, and stakeholders. The prevalence of PE involvement in both bankruptcy and pre-bankruptcy distressed exchanges underscores systemic leverage risks embedded in the private equity portfolio.
The concentration of large bankruptcies among PE-backed companies carries material implications for workers and local economies, as demonstrated by store closures and employment disruptions across retail chains. For institutional investors, creditors, and policymakers, these findings illuminate a critical gap between PE's proportional economic contribution and its outsized presence in corporate distress, warranting heightened scrutiny of leverage deployment and portfolio management during economic uncertainty.
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