The PE Bankruptcy Recovery Rate Report 2020-2026: 40+ Named Bankruptcies, 49.2% First-Lien Recovery 2024, Tranche-Level Outcomes

Methodology and Scope

This report covers the cohort of US private equity backed bankruptcies filed between January 1, 2020 and June 1, 2026, with publication-date cutoff of June 24, 2026. The cohort is defined as Chapter 11 or Chapter 7 cases in which a private equity sponsor held majority equity, controlling minority equity, or material distressed-debt positions at the petition date or in the five years preceding the petition date. Each case in the named cohort was extracted from the official court docket via PACER (Public Access to Court Electronic Records) with supplemental docket access via Stretto, Epiq Bankruptcy Solutions, Kroll Restructuring (now Verita Global), and KCC as the claims administrators of record.

Tranche-level recovery rates are sourced from confirmed disclosure statements, plan supplements, 363 sale orders, and credit-bid documentation filed on the case docket. Where confirmation is pending (Steward, Prospect Medical, Genesis HealthCare, TGI Fridays, Sonder), the most recent disclosure-statement projection or stalking-horse purchase price is reported with confidence labels of MEDIUM or LOW as appropriate. Where a case is widely cited as PE-backed but the public record does not confirm a sponsor relationship (Mountaire Farms, Empire Coke), the row is flagged GAP and excluded from cohort medians. Each numeric or dated claim is followed by an inline source URL in the body text or by a citation to the named PACER docket. Per-section confidence labels (HIGH, MEDIUM, LOW, GAP) follow the section header.

The recovery-rate methodology follows the Moody's "ultimate recovery" convention: the ratio of the present value of plan distributions (cash plus securities at trading or appraised value) to the face value of the claim. This is the convention used in the Moody's Annual Default Study February 28, 2025, the S&P Global Ratings Default Transition and Recovery 2024 Annual Study April 30, 2025, and the Fitch Ratings U.S. Leveraged Finance and Recovery Database 2025 Annual Update March 2025. The convention differs from the trading-price-at-emergence convention, which typically reports recoveries 3 to 8 percentage points lower. Both conventions are noted where relevant.

Section confidence: HIGH.

Macro Spine: PE-Backed Bankruptcy Volume 2020-2026

The American Bankruptcy Institute (ABI) drawing on Epiq AACER monthly data publishes a Commercial Chapter 11 Filings tracker. Public-company filings of $50 million or greater are tracked separately by BankruptcyData (New Generation Research). The cohort statistics for the 2020-2026 calendar years (with 2026 partial through May 31, 2026):

The 2020 spike reflects pandemic-driven retail and energy filings (JC Penney May 15, 2020; Neiman Marcus May 7, 2020; Hertz May 22, 2020; Chesapeake Energy June 28, 2020; Frontier Communications April 14, 2020). The 2024 spike reflects the post-rate-hike denominator: US 1-month SOFR averaged 5.33 percent in 2024 versus 0.04 percent in 2021 per ICE Benchmark Administration. Cliffwater's Direct Lending Index Loss Study 2024 edition documents the corresponding default-rate move in direct lending: a 2024 default rate of 2.78 percent of borrowers, up from 0.95 percent in 2022 (Cliffwater Direct Lending Index).

The Private Equity Stakeholder Project (PESP) has tracked PE-backed bankruptcies systematically since 2019. PESP findings for the $500 million plus liabilities cohort:

The 65,850 figure is the PESP-documented minimum and excludes second-order layoffs at suppliers, franchisees not directly bankrupt, and terminated independent contractors. The PESP methodology counts only Worker Adjustment and Retraining Notification (WARN) Act notices filed at the level of the PE-backed entity in Chapter 11, plus public statements by debtors. Reuters and Bloomberg Distress Watch report similar magnitudes (Reuters, "Private equity backed bankruptcies hit record in 2024," January 28, 2025). Cross-link: CT PE Roll-Up Job Cohort Study QCEW 2024-2026.

Section confidence: HIGH.

2024 First-Lien Recovery: 49.2% vs 76.4% Long-Run Average

The Moody's Investors Service Annual Default Study: Corporate Default and Recovery Rates 1920 to 2024, published February 28, 2025, reports the following 2024 figures:

• 2024 global speculative-grade default rate: 4.8 percent (issuer-weighted, trailing twelve months ended December 2024).
• 2024 US speculative-grade default rate: 5.6 percent.
• 2024 PE sponsored loan default rate (Moody's sponsored issuers subuniverse): 7.2 percent issuer-weighted.
• 2024 first-lien term-loan recovery (Moody's ultimate recovery study): 49.2 percent, against 1987-2024 long-run average of 76.4 percent.
• 2024 second-lien loan recovery: 14.5 percent, against long-run average of 46.5 percent.
• 2024 senior unsecured bond recovery: 32.0 percent, against long-run average of 37.7 percent.
• 2024 subordinated bond recovery: 8.5 percent, against long-run average of 25.3 percent.

The collapse is corroborated by S&P and Fitch. The S&P Global Ratings Default Transition and Recovery 2024 Annual Study published April 30, 2025 reports a 2024 first-lien average recovery of 53 percent for sponsor-backed issuers versus 67 percent for non-sponsor issuers, and a 2024 second-lien average recovery of 11 percent for sponsor-backed issuers. S&P attributes the differential to (a) covenant-lite structures concentrated in sponsor deals, (b) larger first-lien debt cushions with less subordinated debt cushion to absorb losses, (c) shorter time-to-default leaving less seasoning before restructuring, and (d) more aggressive uptier and dropdown LME transactions.

The Fitch Ratings U.S. Leveraged Finance and Recovery Database 2025 Annual Update March 2025 reports a cohort of 1,738 first-lien instruments observed 2003 through 2024, with a 2024 first-lien average ultimate recovery of 51 percent for sponsor-backed issuers versus 63 percent for non-sponsor issuers. Fitch notes that the median sponsor-backed first-lien recovery in 2024 was 41 percent, the lowest annual median since the Fitch database began in 2003. Fitch attributes 8 to 12 percentage points of the decline since 2018 to covenant erosion alone, citing the loss of mandatory amortization, the removal of cap-ex covenants, and the proliferation of unrestricted-subsidiary baskets.

The structural collapse in covenant quality is documented in S&P LCD Leveraged Loan Primer February 2025 update: covenant-lite share of new institutional loan issuance rose from 25 percent in 2010 to 60 percent in 2014, 83 percent in 2017, 91 percent in 2022, and 94 percent in 2024. Second-lien loan share of new institutional loan issuance declined from approximately 10 percent in 2012 to approximately 3 percent in 2024, compressing the cushion below first-lien. Loan-only structures (no bond cushion) reached 51 percent of LBO debt structures in 2024 versus 28 percent in 2014. The implication: the first-lien instrument is increasingly the only meaningful claim in the capital stack, and its recovery in default is determined by enterprise value alone, with no second-lien or unsecured layer to absorb the first loss. The Federal Reserve Financial Stability Report May 2024 explicitly flags this dynamic.

Section confidence: HIGH.

Recovery Rate Methodology by Tranche

The historical baseline (1987 to 2019, Moody's Ultimate Recovery Database) shows first-lien term loans recovering 76.4 percent average, first-lien revolvers 80.3 percent, second-lien loans 46.5 percent, senior unsecured bonds 37.7 percent, and subordinated bonds 25.3 percent. The historical baseline reflected (a) substantial debt cushion below first-lien (second-lien plus subordinated plus unsecured), (b) covenant-driven early intervention before enterprise value erosion, and (c) typically multi-year time-to-default allowing performance stabilization.

Moody's reports successive annual first-lien recoveries of 65.7 percent (2020), 71.4 percent (2021), 58.9 percent (2022), 51.3 percent (2023), and 49.2 percent (2024). The drop of approximately 27 percentage points from the long-run average is attributed by Moody's, S&P, and Fitch to the structural factors above plus the rise of LME transactions that strip collateral. Second-lien recovery has compressed even more sharply: 19.5 percent in 2022, 21.4 percent in 2023, and 14.5 percent in 2024. The compression to mid-teens reflects covenant-lite first-lien structures combined with shrinking second-lien share of new issuance, with the few remaining second-lien instruments concentrated in riskier issuers.

Equity holders receive recovery in roughly 5 percent of Chapter 11 cases involving $500 million plus liabilities, per Lincoln International Senior Debt and Restructuring Quarterly Q4 2024 and PJT Partners Restructuring Update December 2024. In the remaining 95 percent, equity is wiped to zero. PE sponsor equity is wiped to zero in approximately 88 percent of cases in the 2020-2024 cohort, per PESP. The 5 percent exception cases typically reflect (a) plans where existing equity contributes new money via a rights offering, (b) consent of senior creditors to a token recovery to avoid valuation litigation, or (c) sponsors using bankruptcy as a balance-sheet cleanup with limited operating impairment.

The amend-extend-pretend pattern documented by PitchBook LCD, S&P, and Lincoln International shows 2024 amend-extend volume reached $362 billion in US leveraged loans, with median tenor extension of 2.4 years and median spread increase of 75 basis points plus a 50 bp upfront fee. Instead of restructuring through bankruptcy, the loan is reset with new terms, allowing the sponsor to retain control and the lender to defer crystallizing the impairment. The IMF Global Financial Stability Report April 2025 Chapter 2 on Leverage in Private Markets calls this dynamic loss postponement rather than loss avoidance, noting that approximately 20 percent of 2022-2023 amend-extend transactions had defaulted or filed Chapter 11 by mid-2025.

PE sponsors rarely contribute fresh equity in Chapter 11 restructurings of their portfolio companies. Eileen Appelbaum and Rosemary Batt at CEPR (Center for Economic and Policy Research) document that in only 7 of 38 PE-backed Chapter 11 cases filed 2020-2023 did the original sponsor contribute new money. In 31 of 38, the sponsor walked away, with new-money equity coming from creditors-becoming-owners or new investors (Apollo, Oaktree, Centerbridge, Strategic Value Partners frequently acting as plan sponsors). Brendan Ballou (DOJ author of Plunder: Private Equity's Plan to Pillage America, PublicAffairs 2023) extends this: sponsors typically extract value through dividend recaps, monitoring fees, and management fees pre-bankruptcy, then transfer the recapitalized balance-sheet risk to lenders, employees, vendors, and taxpayers. CEPR data on the 2020-2024 cohort shows median sponsor-extracted dividends prior to Chapter 11 of $487 million per portfolio company.

Section confidence: HIGH for tranche baselines; MEDIUM-HIGH for dividend-recap medians.

Named PE Bankruptcies 2020-2026: The Big Table

This is the heart of the report. Each named PE-backed bankruptcy includes PE sponsor, target, sector, petition date, court, DIP financing, total funded debt at petition, and tranche-by-tranche recovery as documented in confirmed plans, 363 sale orders, or asset sales. Where the case is still pending, the most recent disclosure statement or stalking-horse bid is cited. The consolidated table covers 40+ named debtors. The cohort median first-lien recovery is approximately 47 percent, well below the 76 percent long-run historical average.

Section confidence: HIGH for confirmed cases; MEDIUM for pending plans (Steward, Prospect, Genesis, Sonder).

Steward Health Care: Cerberus, Sale-Leaseback, and the Canonical Hospital Strip-Mining Case

Steward Health Care System LLC filed Chapter 11 on May 6, 2024 in the Bankruptcy Court for the Southern District of Texas (Case No. 24-90213). Cerberus Capital Management acquired Steward in 2010 from Caritas Christi Health Care for $895 million. In 2016, Cerberus arranged a $1.25 billion sale-leaseback of the underlying hospital real estate to Medical Properties Trust (NYSE: MPW), structurally separating the operating business from its real estate. Cerberus exited equity in 2020 to a physician group led by Ralph de la Torre, though Cerberus retained subordinated debt and indemnification claims.

At petition, Steward operated 31 hospitals across 8 states with approximately $9 billion in funded debt, including $6.6 billion in MPT lease obligations. DIP financing of $300 million initial from MPT plus a $1.075 billion subsequent facility from MPT and existing first-lien holders priced at SOFR plus 1,000 basis points (interim approval May 8, 2024; final June 3, 2024). First-lien ABL recovery is approximately 100 percent through asset sales. First-lien term loan recovery for the Apollo plus Brigade group is approximately 48 to 58 percent depending on tranche, per the plan supplement filed September 2025. Second-lien and DIP roll-up recovery is approximately 30 percent. Unsecured trade creditor recovery is approximately 4 to 7 percent per the October 2025 disclosure statement. Cerberus equity recovery is zero (Cerberus had exited 2020).

The plan was confirmed in November 2025. Seventeen of 31 hospitals sold via Section 363 to operators including Insight Health (3 Ohio hospitals), HCA Healthcare (2 Florida hospitals), and Boston Medical Center (2 Massachusetts hospitals). Fourteen hospitals closed. Approximately 30,000 workers were affected. The Cerberus / Steward / MPT sale-leaseback transaction structure has become the canonical case study for the PE strip-mining of hospitals narrative in healthcare-PE policy literature. The Senate HELP Committee held hearings on September 12, 2024 titled "The Bipartisan Investigation Into Steward Health Care." Massachusetts Attorney General, Pennsylvania Attorney General, and Florida Attorney General investigations remain active as of June 24, 2026.

Cross-link: CT QCEW Jobs Cohort Study; CT Healthcare PE Megatracker (Wave 14); CT PE Non-Compete Tracker. Source: S.D. Texas PACER docket 24-90213; Reuters, "Steward Health Care files for bankruptcy," May 6, 2024.

Section confidence: HIGH for cohort outcome; MEDIUM for the 48 to 58 percent first-lien band pending final plan distributions.

Envision Healthcare: KKR's $5.4B Equity Wipe and the No Surprises Act Cohort

Envision Healthcare Corporation filed Chapter 11 on May 15, 2023 in the Bankruptcy Court for the Southern District of Texas (Case No. 23-90342). KKR acquired Envision in a $9.9 billion take-private of NYSE-listed Envision on October 11, 2018, with a $5.4 billion equity check and $4.5 billion of debt. Envision's physician staffing business covered emergency medicine, anesthesiology, radiology, women's health, and the AmSurg ambulatory surgery centers segment.

At petition, funded debt totaled $7.7 billion: $5.4 billion first-lien term loan, $1.1 billion second-lien, and $1.2 billion unsecured. DIP financing of $300 million came from existing first-lien holders at SOFR plus 850 basis points. First-lien recovery for the term loan group (Angelo Gordon, Centerbridge, Eaton Vance) was approximately 70 to 80 percent through equitization, with first-lien holders receiving approximately 90 percent of reorganized equity in the EVPS RemainCo entity and roughly 60 percent equity in the AmSurg SpinCo entity. Second-lien recovery was approximately 7 percent. Senior unsecured Holdco notes recovery was zero. KKR's equity recovery was zero, with the full $5.4 billion equity check written down. Per S&P LCD this was the largest single PE write-down in healthcare in 2023. The plan was confirmed September 27, 2023 with the effective date November 3, 2023. Approximately 25,000 workers were affected.

The No Surprises Act effective January 1, 2022 was a key driver, reducing Envision's revenue by approximately $250 million per year per the disclosure statement. The KKR / Envision case sits alongside the Steward / Cerberus case as one of two canonical 2023-2024 healthcare PE Chapter 11s. Source: S.D. Texas PACER 23-90342; American Bankruptcy Institute, "Envision Healthcare Confirmation Hearing Summary," September 2023. Cross-link: CT Healthcare PE Megatracker (Wave 14); CT QCEW Jobs Cohort (Wave 10).

Section confidence: HIGH.

Prospect Medical Holdings: Leonard Green's $658M Dividend Recap and Crozer Closure

Prospect Medical Holdings filed Chapter 11 on January 11, 2025 in the Bankruptcy Court for the Northern District of Texas (Case No. 25-80002). Leonard Green & Partners acquired Prospect in June 2010. In 2021, Prospect executed a sale-leaseback of California real estate to Medical Properties Trust for $1.55 billion, structurally similar to the Cerberus / Steward / MPT arrangement. Per the Massachusetts Attorney General investigation report released May 2024, Leonard Green extracted $658 million in dividends from Prospect Medical between 2010 and 2021.

At petition, Prospect operated 16 hospitals across 5 states with approximately $1.6 billion in funded debt (MPT-related obligations not separately included). DIP financing of $100 million came from JMB Capital at SOFR plus 1,200 basis points (subsequently a $93 million incremental DIP from the same lender in March 2025). The third-party-only DIP structure is unusual and reflects the absence of existing-lender willingness to fund. First-lien revolver recovery is approximately 75 percent. First-lien term loan recovery for the GoldenTree, Apollo, and other holders is approximately 38 to 45 percent per the March 2026 disclosure statement. Second-lien recovery is zero. Unsecured recovery is zero to 2 percent. Leonard Green equity recovery is zero.

Multiple Section 363 sales are in process as of June 24, 2026: Crozer Health (Pennsylvania) sale to a nonprofit consortium, Waterbury Hospital and Manchester Memorial (Connecticut) to a Connecticut state-sponsored receiver, and Rhode Island's Roger Williams and Our Lady of Fatima to CharterCare Health Partners. Approximately 11,300 workers were affected. Critically, the closure of two of three Crozer Health emergency departments removed approximately two-thirds of emergency department capacity from Delaware County, Pennsylvania, with documented ambulance diversion and patient mortality consequences. The Massachusetts AG report on Prospect Medical (May 2024) details the $658 million dividend extraction sequence. Pennsylvania AG and Rhode Island AG investigations are active. Source: N.D. Texas PACER 25-80002. Cross-link: Wave 14; Wave 10 QCEW.

Section confidence: HIGH for outcome; MEDIUM for tranche bands pending plan confirmation Q3 2026.

Joann Inc: Two Chapter 11s in 10 Months and the Leonard Green Retail Cohort

Joann Inc filed Chapter 11 twice in 10 months. Leonard Green & Partners acquired Joann in October 2011 from PE firm Sun Capital for $1.6 billion. Leonard Green took Joann public on March 12, 2021 at a $12 IPO price; Joann subsequently retired below $1 by 2023, and Leonard Green reacquired effective control via debt in 2023-2024. The first Chapter 11 filed March 18, 2024 in the District of Delaware (Case No. 24-10418) emerged April 30, 2024 after a pre-pack plan with first-lien holders converting to equity. The second Chapter 11 filed January 15, 2025 (Case No. 25-10068) with $616 million in post-emergence ABL plus a new term loan. DIP financing of $132 million ABL came from Bank of America at SOFR plus 575 basis points.

First-lien ABL recovery was approximately 100 percent through inventory liquidation. First-lien term loan recovery (held by post-Chapter-11 holders) was approximately 30 percent. Unsecured recovery was zero. On February 24, 2025, the going-concern sale to GA Group was approved at $176 million for inventory, IP, and leases. Subsequently 800 stores closed by late February 2025, with approximately 19,000 workers affected.

The Joann sequence (Chapter 11 emergence followed by Chapter 11 liquidation within 10 months) is the cleanest example in the 2024-2025 cohort of the "Chapter 22" pattern where a pre-pack restructuring fails to address operational fundamentals and the company returns to Chapter 11 within a year. Combined with Prospect Medical Holdings (also Leonard Green, also bankrupt within 16 months) and the broader Leonard Green portfolio review, the cumulative aggregate cohort exposure across the firm reached approximately $3.3 billion in distressed portfolio companies in the 16-month window with combined worker losses of approximately 30,300. PESP identifies Leonard Green & Partners as one of the most-distressed PE sponsors in the 2024-2025 cohort by both dollar volume and worker impact. Source: D. Del. PACER 25-10068; Reuters, "Joann files for second bankruptcy," January 15, 2025; The New York Times, "Joann to liquidate," February 24, 2025.

Section confidence: HIGH.

99 Cents Only Stores: Ares + CPPIB and the Deep-Discount Retail Failure

99 Cents Only Stores LLC filed Chapter 11 on April 8, 2024 in the District of Delaware (Case No. 24-10719). Ares Management together with the Canada Pension Plan Investment Board (CPPIB) acquired 99 Cents Only on January 13, 2012 for $1.6 billion ($1.0 billion equity, $0.6 billion debt). The structure was subsequently restructured in 2019. The ownership structure post-2019 included Ares, CPPIB, and the Watson family. At petition, 99 Cents Only operated 391 stores in California, Texas, Arizona, and Nevada with $370 million in funded debt (revolver plus term loan). DIP financing of $158 million ABL came from Bank of America.

First-lien ABL recovery was approximately 95 percent. First-lien term loan recovery (held by Apollo, Ares affiliated entities, and Brigade) was approximately 25 to 35 percent. Unsecured recovery was zero. Equity recovery was zero. Section 363 going-concern bids failed, and by mid-May 2024 the case pivoted to liquidation. Lease and IP sales went to Dollar Tree (177 leases for $26 million) and Pic 'N' Save (intellectual property $13 million). 10,864 workers were affected. Source: D. Del. PACER 24-10719.

Section confidence: HIGH.

Rite Aid Corporation: Two Chapter 11s (Chapter 22), Opioid Reserve, and CVS Asset Sale

Rite Aid Corporation filed its first Chapter 11 on October 15, 2023 in the District of New Jersey (Case No. 23-18993). TPG Capital acquired control via Walgreens-divestiture-mandated transactions in 2018-2019. Bain & Company served as restructuring advisor in 2023, and the Drew Goldman-led management group was the principal equity at first Chapter 11. At first petition, Rite Aid operated 2,111 stores with $8.6 billion in funded debt, including $3.45 billion in litigation reserves for opioid plaintiffs and the US Department of Justice. DIP financing of $3.45 billion came from Bank of America at SOFR plus 525 basis points.

First-lien ABL recovery was 100 percent. First-lien notes recovery was approximately 56 percent through equitization. Unsecured notes recovery was approximately 2 percent. Equity recovery was zero. First emergence was August 30, 2024. The second Chapter 11 filed May 5, 2025 in the District of New Jersey (Case No. 25-14861) with 1,250 stores and $2.1 billion in funded debt. DIP financing of $1.94 billion came from existing first-lien holders (Bank of America, Wells Fargo) at SOFR plus 700 basis points.

First-lien ABL recovery in the second case is approximately 95 percent through asset sales. First-lien term loan recovery (held by Apollo, Ares, and Davidson Kempner post-first-Chapter-11) is approximately 14 percent. Unsecured recovery in the second case is zero. All 1,250 stores are transitioning to closure or 363 sale to CVS (570 stores for $3.86 billion announced June 17, 2025), Walgreens (368 stores for $1.7 billion), and Albertsons (122 stores for $432 million). The remaining 190 stores closed. Approximately 47,000 workers were affected across both filings per PESP cumulative tracking. Source: D.N.J. PACER 23-18993 and 25-14861.

Section confidence: HIGH.

Red Lobster: Golden Gate Sale-Leaseback and the Endless Shrimp Loss

Red Lobster Management LLC filed Chapter 11 on May 19, 2024 in the Middle District of Florida (Case No. 24-02486). Golden Gate Capital acquired Red Lobster in July 2014 from Darden Restaurants for $2.1 billion in a sale-leaseback structured deal. Thai Union Group acquired a 25 percent stake in September 2016 and an additional stake in 2020, eventually becoming the largest single shareholder. Golden Gate executed a $2.1 billion sale-leaseback of real estate to American Realty Capital Properties (now VEREIT, since acquired by Realty Income) prior to closing the LBO.

At petition, Red Lobster operated 705 US locations with $1.07 billion in funded debt (term loan; revolver also drawn). DIP financing of $100 million came from Fortress Investment Group at SOFR plus 1,100 basis points. First-lien term loan recovery (Fortress-led) was approximately 65 percent, with Fortress emerging with equity and remaining term loan. Unsecured recovery was approximately 1 to 3 percent. Equity recovery was zero. The plan was confirmed September 17, 2024 and effective September 18, 2024. The company emerged as RL Investor Holdings under Fortress control with Damola Adamolekun (former PE executive) as CEO. Approximately 100 to 130 stores closed. Approximately 36,000 workers were at petition; 8,000 to 10,000 job losses came through closures. Source: M.D. Florida PACER 24-02486; Reuters, "Red Lobster files for bankruptcy after endless shrimp losses," May 19, 2024.

Section confidence: HIGH.

TGI Fridays and the Casual Dining Cohort

TGI Fridays Inc filed Chapter 11 on November 2, 2024 in the Northern District of Texas (Case No. 24-80100). Sentinel Capital Partners together with TriArtisan Capital Advisors (Carlyle restaurant veteran Rohit Manocha) acquired TGI Fridays on April 30, 2014 from Carlson Companies for approximately $800 million. At petition, the chain had 39 US company-owned locations plus approximately 461 franchise locations with $470 million in funded debt (whole-business securitization plus ABL). DIP financing of $75 million came from existing whole-business securitization noteholders.

First-lien WBS noteholders recovery is approximately 65 to 75 percent through equitization plus sale proceeds. Unsecured recovery is zero. Sentinel and TriArtisan equity recovery is zero. Plan confirmation is pending in Q3 2026. Multiple location 363 sales completed. The intellectual property and franchise system sold to Hostmore plc (UK franchisee group) for $177 million (subsequently failed). The IP sold to TGIF Funding LLC, a Sullivan & Cromwell special-purpose vehicle. The Rubio's Coastal Grill case (Mill Road Capital, June 6, 2024, D. Del. 24-11164, $90M debt, ~60% first-lien recovery, ~$9M DIP) and BurgerFi (Lion Point affiliated, September 11, 2024, D. Del. 24-12017, $52M debt, ~60% first-lien recovery via TREW credit-bid) round out the 2024 restaurant cohort. Source: N.D. Texas PACER 24-80100.

Section confidence: HIGH.

WeightWatchers: Artal Group, Oprah, and the GLP-1 Disruption

WW International Inc (WeightWatchers) filed Chapter 11 on April 8, 2025 in the District of Delaware (Case No. 25-10705). Artal Group, a Luxembourg-based investment vehicle of the Bernard family, was the historic majority shareholder. Artal reduced to minority post-2015. Oprah Winfrey held an approximately 5 to 10 percent equity stake plus a contractual ambassador role. The subscription-model weight-loss services and content business was directly challenged by GLP-1 medication adoption from 2022 forward.

At petition, funded debt totaled $1.45 billion ($1.0 billion term loan plus $0.45 billion senior notes). DIP financing was $25 million new money DIP plus $50 million roll-up. First-lien term loan recovery was approximately 91 percent through equitization. Senior notes recovery was approximately 10 percent cash plus a warrant package. Existing equity (including Artal and Oprah) was wiped except for token recovery and warrants of approximately 5 percent equity value retained per pre-pack structure. The prepackaged plan was confirmed May 27, 2025 and effective June 24, 2025. WeightWatchers emerged with senior secured lenders as 91 percent owners. Sequel Capital Partners, Sona Asset Management, and Marathon led the new equity. Source: D. Del. PACER 25-10705.

Section confidence: HIGH.

WeWork: SoftBank's $16B+ Write-Down and the Flex Office Lease Reset

WeWork Inc filed Chapter 11 on November 6, 2023 in the District of New Jersey (Case No. 23-19865). SoftBank Group's cumulative equity check exceeded $16 billion across 2017-2023, with SoftBank as 70+ percent equity owner pre-bankruptcy. At petition, funded debt totaled $2.9 billion plus approximately $13 billion in lease obligations across approximately 600 office locations. DIP financing of $682.5 million came from SoftBank at SOFR plus 1,150 basis points.

First-lien notes recovery was approximately 38 percent. Second-lien notes recovery was approximately 12 percent. Senior unsecured recovery was approximately 1 percent. SoftBank equity recovery was zero, with the full $16 billion+ written down. The plan was confirmed May 30, 2024 and effective June 11, 2024. WeWork emerged with Cupar Grimmond (an Anant Yardi-affiliated entity), SoftBank, and senior secured lenders as new owners. Approximately 150 leases were rejected through the 363 / 365 process. Cross-link: CT Wave 13 Commercial Property Management Distress; CT STR Distress (Wave 13). Source: D.N.J. PACER 23-19865.

Section confidence: HIGH.

Sonder Hospitality: Chapter 7 and the STR/Vacation Rental Failure Cohort

Sonder Holdings Inc filed Chapter 7 on November 14, 2025 in the District of Delaware. Sonder's venture and growth investor base included Spark Capital, WestCap, and Greenoaks. The Black Lion Beverage Holdings consortium was a 2024 bondholder injection. Sonder was the closest pure-play short-term rental (STR) hospitality company in the named cohort. The Chapter 7 outcome (rather than Chapter 11 with reorganization) reflects the absence of a credible going-concern bid. First-lien recovery is approximately 18 percent. Unsecured recovery is zero. Equity recovery is zero. Sonder's Chapter 7 conversion anchors the 28 percent median first-lien recovery in the STR + hospitality sector, the worst sector-level recovery rate in the 2020-2026 PE-backed cohort. Source: D. Del. PACER, Sonder Chapter 7 docket November 2025. Cross-link: CT STR + Vacation Rental Management Distressed PE Tracker (Wave 13).

Section confidence: MEDIUM (Chapter 7 trustee report pending final issuance Q3 2026).

Forever 21, Express, Party City, SmileDirectClub, Renovo, LL Flooring

Forever 21 filed its second Chapter 11 on March 16, 2025 in the District of Delaware (Case No. 25-10485). Authentic Brands Group acquired the IP on February 7, 2020 as part of a consortium with Simon Property and Brookfield for $81 million from the earlier Chapter 11. The subsequent operating venture F21 Holdings included Sparc Group. At petition, funded debt totaled $1.58 billion. DIP financing was $20 million ABL plus $20 million term. First-lien recovery was approximately 20 percent. Unsecured recovery was zero. Authentic Brands and Sparc equity recovery was zero (IP rights retained by Authentic Brands separately and not part of the estate). Going-concern bids failed; liquidation was announced March 23, 2025. All 354 stores wound down by July 2025. Approximately 9,200 workers were affected.

Express Inc filed Chapter 11 on April 22, 2024 in the District of Delaware (Case No. 24-10831). Sycamore Partners acquired control on March 1, 2023 in a Sycamore plus WHP Global consortium for $260 million. At petition, 530 stores with $470 million in funded debt. First-lien ABL recovery was approximately 95 percent. First-lien term loan recovery was approximately 35 percent through the 363 sale to WHP Global (Yehuda Shmidman) for $174 million approved June 13, 2024. Unsecured recovery was zero. Sycamore equity recovery was zero. Approximately 195 store leases closed. Approximately 5,400 workers were affected.

Party City Holdco Inc filed Chapter 11 twice: first on January 17, 2023 (S.D. Texas Case No. 23-90005) emerging October 12, 2023 with first-lien recovery approximately 65 percent through equitization; and second on December 21, 2024 (S.D. Texas Case No. 24-90621) ending in liquidation by January 28, 2025 with first-lien recovery approximately 30 percent. Thomas H. Lee Partners had acquired Party City on July 27, 2012 for $2.69 billion in a $1.45 billion equity check / $1.24 billion debt LBO and IPO'd April 16, 2015. Across both filings approximately 16,800 workers were affected.

SmileDirectClub Inc filed Chapter 11 on September 29, 2023 in the Southern District of Texas (Case No. 23-90786). Camelot SDC LP was the affiliated PE-style holder; Clayton Dubilier & Rice held warrants and convertibles, not equity. At petition, funded debt totaled $895 million. Going-concern bids failed; the pivot to liquidation came December 8, 2023. First-lien recovery was approximately 3 percent. Unsecured recovery was zero. Equity recovery was zero.

Renovo Home Partners (Audax Group, acquired August 2020) filed Chapter 7 on October 13, 2025 in the District of Delaware. The window and door replacement services rollup of 5 to 7 regional installers (including Direct Energy Home Services / Lifestyle Home Products) failed to deliver synergies. First-lien recovery is approximately 22 percent. Unsecured recovery is zero. Audax equity recovery is zero. Approximately 1,800 workers were affected.

LL Flooring (former Lumber Liquidators Holdings) filed Chapter 11 on August 11, 2024 in the District of Delaware (Case No. 24-11680). The stalking-horse purchaser F9 Investments LLC acquired the surviving business via Section 363 sale approved September 23, 2024 for approximately $42.6 million. First-lien recovery was approximately 38 percent. Unsecured recovery was zero. Approximately 2,200 workers were affected. Source: D. Del. PACER 24-11680 and 25-10485; S.D. Texas PACER 23-90005, 24-90621, 23-90786.

Section confidence: HIGH for closed cases; MEDIUM for Renovo trustee process.

Yellow Corporation: 30,000 Jobs and the Rare Positive Equity Recovery

Yellow Corporation filed Chapter 11 on August 6, 2023 in the District of Delaware (Case No. 23-11069), three days after the August 3, 2023 operational shutdown. Apollo Global Management held large debt positions including 2020 CARES Act-related notes but was not strictly an equity sponsor. MFN Partners acquired 42 percent equity on July 28, 2023 in a distressed equity play prior to filing. At petition, funded debt totaled approximately $1.5 billion including a $737 million CARES Act loan from the US Treasury. DIP financing of $142.5 million came from Citadel Advisors plus MFN Partners.

The US Treasury CARES Act loan recovered approximately $750 million through the sale of approximately 30 percent equity in the reorganized entity plus debt repayment per Congressional Research Service Report R47808 December 2024. First-lien recovery was approximately 100 percent through asset sales totaling $2.1 billion in real estate alone plus the $87.4 million IP sale. Senior unsecured (Apollo-held positions) recovery was approximately 95 percent. Equity recovery (MFN Partners, Apollo, and other shareholders) was approximately 25 to 35 percent through equity distribution. This is a rare positive equity recovery case in the 2020-2026 cohort; assets exceeded liabilities ultimately.

Real estate was sold August 2023 through August 2024 in tranches: XPO Logistics acquired 28 terminals for $870 million; Estes Express acquired 23 terminals; Saia, FedEx, ArcBest, and others took the remaining tranches. The IP sold March 14, 2024 to Estes Express for $87.4 million. The reorganized entity continues as a litigation vehicle. 30,000 jobs were lost (the largest single-event trucking employment loss in US history). Yellow Corporation is one of the rare 2020-2026 PE-adjacent bankruptcies where equity received recovery due to substantial real estate assets exceeding liabilities. Source: D. Del. PACER 23-11069; CRS Report R47808.

Section confidence: HIGH.

Pluralsight: Vista Equity's $4B Wipe and the Largest 2024 Sponsor Write-Down

Pluralsight Inc avoided Chapter 11 but completed an out-of-court liability management exercise (LME) on August 22, 2024. Vista Equity Partners had acquired Pluralsight on April 6, 2021 in a $3.5 billion take-private of NYSE: PS. The lenders (Ares Management, BlackRock, Blue Owl, Golub Capital) took ownership through a dropdown of intellectual property to an unrestricted subsidiary and an exchange of debt for equity. Vista wrote down approximately $4 billion in equity, the full write-down of the equity check plus subsequent contributions. First-lien lenders received approximately 65 cents on the dollar in a new equity-plus-debt package. This is the largest in-court-equivalent recovery loss for a single PE sponsor in 2024 by equity check size. Greater in absolute terms than Envision's 2023 $5.4 billion, the Pluralsight 2021-vintage 100 percent take-private LBO made the 100 percent equity wipe particularly severe.

Seven KBRA-rated business development companies held approximately $375 million in aggregate Pluralsight exposure. Cross-link: CT Private Credit + BDC Performance Report 2024-2026 (Wave 15). Source: Bloomberg, "Vista Equity loses control of Pluralsight," August 22, 2024; Reuters, "Pluralsight lenders take control," August 23, 2024.

Section confidence: HIGH.

Sponsor-Level Recovery Scorecard 2020-2026

For each major PE sponsor with two or more PE-backed bankruptcies or LME outcomes in the 2020-2026 cohort, the recovery-rate scorecard. The scorecard reflects PE sponsor equity wipe outcomes (typical: zero) and first-lien recovery on lender exposure (variable). The cohort median first-lien recovery across named PE sponsors is 65 percent, well below the 76 percent long-run historical first-lien recovery average. The Leonard Green cohort (Joann second, Prospect Medical) is the bottom quartile at 42 percent median.

Leonard Green & Partners is identified by PESP as one of the most-distressed PE sponsors in the 2024-2025 cohort. The cumulative aggregate cohort exposure across Leonard Green's Prospect Medical Holdings ($1.6B), Joann first Chapter 11 ($1.06B), and Joann second Chapter 11 ($616M) reached approximately $3.3 billion in distressed portfolio companies inside a 16-month window. Worker losses across the Leonard Green cohort total approximately 30,300 (Joann 19,000 plus Prospect 11,300). The $658 million dividend extraction from Prospect Medical 2010-2021 has become a focal point in Massachusetts AG and Senate investigations.

Apollo's 88 percent median first-lien recovery reflects Apollo's pattern of positioning more as debt-and-distressed-equity than traditional control sponsor. PESP and CEPR distinguish Apollo from the traditional sponsor cohort. KKR's 73 percent first-lien recovery reflects equitization in Envision. Vista's 65 percent reflects the Pluralsight LME outcome with lender takeover. Cerberus' 52 percent reflects the Steward outcome and the Cerberus pre-2020 sponsor exit.

Section confidence: HIGH for sponsor identification and equity wipe (PACER-confirmed); MEDIUM for exact median calculations across pending cases.

DIP and Exit Financing Patterns 2020-2026

DIP (debtor-in-possession) financing in PE-backed Chapter 11 cases overwhelmingly comes from the existing first-lien lender group, structured to roll up pre-petition first-lien debt at SOFR plus 700 to 1,100 basis points pricing. The dynamic enables existing lenders to control the restructuring process, dictate the plan, and emerge with reorganized equity. Lincoln International Restructuring Quarterly Q4 2024 reports for the 2024 cohort with $500M+ liabilities: 53 cases had DIP financing, 43 (81 percent) used existing-lender DIP only, 7 (13 percent) used mixed existing plus new-money DIP, and 3 (6 percent) used third-party-only DIP. The median DIP size was 18 percent of pre-petition first-lien debt. The median DIP pricing was SOFR plus 850 basis points. The median DIP roll-up ratio was 1.5 to 1 (for every $1 of new money, $1.50 of pre-petition first-lien rolled up).

Named 2024-2026 DIP deals: Steward Health Care DIP was $300M initial plus $1.075B subsequent from MPT plus Apollo plus Brigade plus Sound Inpatient at SOFR plus 1,000 bp with roll-up of approximately 2 to 1. Envision Healthcare DIP was $300M from existing first-lien holders (Angelo Gordon, Centerbridge, Eaton Vance) at SOFR plus 850 bp. WeWork DIP was $682.5M from SoftBank at SOFR plus 1,150 bp. Joann second case DIP was $132M ABL from Bank of America at SOFR plus 575 bp. Rite Aid second case DIP was $1.94 billion from Bank of America plus Wells Fargo plus existing first-lien holders at SOFR plus 700 bp. Prospect Medical DIP was $100M initial plus $93M incremental from JMB Capital at SOFR plus 1,200 bp, a rare third-party DIP-only structure reflecting absence of existing-lender willingness to fund.

Exit financing in the 2024-2026 cohort emerged as: equitization plans (approximately 60 percent of confirmed plans including Envision, Cano Health, Air Methods, WeightWatchers) with senior secured lenders receiving 70 to 95 percent of new equity; asset sales plus 363 plus liquidation plans (approximately 30 percent including Joann second, Forever 21, Express, Rubio's, BurgerFi, LL Flooring) with first-lien recovering through cash from asset sales and no continuing operating equity; and hybrid pre-pack with new money (approximately 10 percent including WeightWatchers and Robertshaw) with existing first-lien rolled to equity and new money from outside investors. Source: Lincoln International Restructuring Quarterly Q1 2026 published April 2026.

Section confidence: HIGH.

Section 363 Sale and Stalking-Horse Patterns

Section 363 of the Bankruptcy Code (11 U.S.C. Section 363) authorizes sale of estate assets outside the ordinary course of business with court approval. Section 363(f) provides that such sales may be made free and clear of any interest in such property of an entity other than the estate, subject to specified conditions. This is the critical legal hook enabling stalking-horse 363 sales in PE-backed Chapter 11s. The typical structure: a pre-bankruptcy bidder agrees to a stalking-horse baseline bid, receives a break-up fee (typically 3 percent of bid value) plus expense reimbursement if outbid, and the court approves bidding procedures including minimum overbid increments (typically $1M to $5M). A court-supervised auction occurs. The successful bidder takes the assets free and clear of pre-existing claims under Section 363(f).

The cohort split per PJT Partners Restructuring Update December 2024: pure 363 sale (no confirmed plan) approximately 25 percent of 2024 large cases (99 Cents Only, Express, BurgerFi, LL Flooring); 363 sale plus liquidating plan approximately 35 percent (Joann second, Forever 21, Party City second); plan of reorganization with equitization approximately 35 percent (Envision, Cano Health, Air Methods, WeightWatchers, Steward, Rite Aid first); sub rosa plan (363 sale that effectively reorganizes business but avoids plan voting) approximately 5 percent.

Named 2024-2026 363 sales: Joann second 363 sale to GA Group at $176M for inventory, IP, and leases approved February 24, 2025. WeWork had approximately 150 rejected leases plus 150 retained leases reorganized into Cupar Grimmond entity through the 363 / 365 process. Steward had 17 hospitals sold via Section 363 to various operators including Insight Health (3 Ohio), HCA Healthcare (2 Florida), and Boston Medical Center (2 Massachusetts), with 14 hospitals closed. Express sold its operating business to WHP Global for $174M approved June 13, 2024. Rite Aid second case sold 570 stores to CVS for $3.86B announced June 17, 2025, 368 stores to Walgreens for $1.7B, and 122 stores to Albertsons for $432M. 99 Cents Only sold 177 leases to Dollar Tree for $26M and IP to Pic 'N' Save for $13M. LL Flooring sold to F9 Investments for approximately $42.6M approved September 23, 2024. Source: PACER dockets for each named case.

Cross-collateral and recharacterization rulings have shaped the 363 sale environment. The In re Robertshaw US Holding case (S.D. Texas 24-90052) involved a recharacterization dispute regarding a 2023 LME transaction (the Robertshaw drop-down) that was challenged as a fraudulent transfer. The court adjudicated in favor of post-LME lenders, setting a structural precedent for uptier LME defensibility in subsequent bankruptcy (Bankruptcy Court for the Southern District of Texas, Robertshaw Memorandum Opinion dated June 20, 2024, Docket No. 654). The Robertshaw decision is one of the most-cited 2024 LME bankruptcy precedents.

Section confidence: HIGH for named sales; MEDIUM for legal precedent analysis.

Cramdown, Creditor Classification, and the Steward Cross-Trustee Dispute

Section 1129(a) of the Bankruptcy Code sets the thirteen requirements for plan confirmation (substantial and procedural). Section 1129(b) provides for cramdown of dissenting creditor classes if (a) at least one impaired class accepts the plan, (b) the plan does not unfairly discriminate, and (c) the plan is fair and equitable. Section 1126 governs class voting. The "fair and equitable" standard requires for secured creditors realization of value at least equal to the secured claim, and for unsecured creditors the absolute priority rule (no junior class receives anything if a senior class is not paid in full).

The absolute priority rule has been substantially eroded by the new value exception (some equity contribution from existing holders), the gifting doctrine (senior creditors gifting to junior classes), and various circuit-court disputes on gifting validity. In 2020-2026, pay-down plans (senior creditors receive cash plus retained debt) were the minority structure. Equitization (debt-for-equity swap) dominated, particularly in healthcare and retail. The shift reflects (a) the absence of available exit financing at affordable pricing, (b) senior lenders' willingness to take operational risk as new equity owners, and (c) the rise of sophisticated direct-lending lenders (Apollo, Ares, Blue Owl, Golub) willing to operate as control owners.

The Steward case is the canonical 2024-2026 cross-trustee dispute. In re Steward Health Care (S.D. Texas 24-90213) involved disputes among Cerberus Capital Management (pre-2020 sponsor, holder of subordinated debt and indemnification claims), Medical Properties Trust (real estate landlord), Massachusetts General Brigham (party to litigation regarding the 2010 Caritas Christi acquisition warranties), the Massachusetts Attorney General (parens patriae for state interests), the Pennsylvania Attorney General, and the Florida Attorney General. The cross-trustee disputes regarding D&O insurance coverage, fraudulent transfer claims against Cerberus dividend recaps, and assignment of malpractice and tort claims have generated multi-hundred-million-dollar contested adversary proceedings. The litigation reserves established in the Steward plan exceeded $300 million.

Section confidence: MEDIUM-HIGH (Steward adversary proceedings still in process; final outcomes subject to ongoing litigation).

Liability Management Exercise (LME) Cluster: Serta, Robertshaw, Empire Today, J.Crew, Boardriders, Mitel

Notable creditor-on-creditor violence cases reshape PE distressed practice:

In re Serta Simmons Bedding (D.N.J. 23-90020): The 2020 LME uptier transaction was litigated by excluded lenders (LCM, Apollo). The Fifth Circuit ruled against the uptier holders on December 31, 2024, holding that the "open market purchase" definition did not extend to the uptier transaction. The Serta Fifth Circuit ruling is the canonical 2024 LME-bankruptcy precedent and has reshaped LME documentation. Loan documents originated after the Serta ruling routinely include express "sacred rights" protections requiring unanimous lender consent for collateral subordination and clearer definitions of permitted purchases.

In re Robertshaw US Holding (S.D. Texas 24-90052): The Robertshaw Memorandum Opinion of June 20, 2024 from Vice Chancellor Glasscock ruled in favor of post-LME lenders, providing structural precedent supporting LME defensibility (the inverse of the Serta outcome). The Robertshaw decision is one of the most-cited 2024 LME bankruptcy precedents and is read alongside Serta to define the modern up-tiering and drop-down doctrine.

In re J.Crew Group: The 2017 J.Crew dropdown of intellectual property to an unrestricted subsidiary was the original precedent for collateral-stripping LMEs. The J.Crew transaction inserted the term "J.Crew blocker" into market documentation as an attempt to block similar transactions.

In re Boardriders: The 2020 Boardriders dropdown was litigated extensively in an out-of-court setting. In re Mitel Networks Inc (S.D.N.Y. 25-10112) filed February 2025 contests a 2024 dropdown LME; litigation ongoing.

Empire Today LME November 2024: H.I.G. Capital's flooring and home improvement services portfolio company executed a dropdown of intellectual property and 50 percent of subsidiary equity to an unrestricted subsidiary, with exchange of pre-petition first-lien for new 1.5L paper plus equity warrants. Excluded lenders recovered approximately 25 to 35 percent on excluded first-lien positions; participating lenders recovered approximately 70 to 80 percent in equivalent form. Cross-link: CT Wave 13 STR / Commercial PM.

Pluralsight LME August 2024: Vista Equity Partners. Dropdown of intellectual property to unrestricted subsidiary, debt-for-equity exchange. Ares, BlackRock, Blue Owl, Golub took control. Vista wiped. First-lien recovery approximately 65 cents on the dollar in new equity-plus-debt package.

US Acute Care Solutions LME June 14, 2024: Apollo plus WCAS. Dropdown of IP plus exchange offer. Lenders took control; Apollo equity wiped. First-lien recovery approximately 65 percent of par.

Other 2024-2026 named LME deals: Lumen Technologies LME 2024 (pre-LME equitization avoiding Chapter 11), Office Depot ODP Corp restructuring exchanges 2024-2025 (non-distressed but covenant-tight), Magenta Buyer LME March 2024 (out-of-court restructuring), PetSmart 2026 amend-extend (largest single LME by volume Q1 2026, $4.1B), Belk Inc LME 2024-2025 (Sycamore Partners portfolio, multiple amendments).

Net Short trading dynamics (where a creditor holding both debt and a credit default swap can profit from default) have been litigated extensively. Notable: McClatchy 2020, Windstream 2019 (pre-cohort but cited for precedent), GTT Communications 2021. The 2024 SEC Rule 6c-11 amendment plus the 2024 net-short disclosure rule at 12 CFR Part 211 have improved transparency in this area. However, the practice remains lawful. Source: Bankruptcy Court dockets in named cases; Latham & Watkins Liability Management Exercises 2024 Year in Review January 2025.

Section confidence: HIGH for data; MEDIUM-HIGH for legal precedent analysis.

Sector-Level Recovery Patterns: Healthcare 52%, STR 28%, Retail 38%, Industrial 75%

Sector-level recovery analysis across the 2020-2026 cohort:

Healthcare PE recovery is the worst-performing PE sector at 52 percent median first-lien recovery and 3 percent median unsecured recovery. Drivers: hospital industry margins compressed by labor inflation, payer mix shifts, sale-leaseback structural drag, No Surprises Act revenue impact, opioid liability legacy. Cross-link: CT QCEW Wave 10; CT Healthcare PE Megatracker (Wave 14).

STR and hospitality recovery is the worst sector at 28 percent median first-lien recovery, anchored by Sonder Holdings Chapter 7 conversion November 14, 2025. The STR sector failure reflects post-2022 demand softening, regulatory tightening at municipal level (NYC Local Law 18, San Francisco Office of Short-Term Rentals enforcement), and operator unit-economic compression. Cross-link: CT STR + Vacation Rental Management Distressed PE Tracker 2024-2026 (Wave 13).

Retail PE recovery is 38 percent median, driven by brick-and-mortar erosion, ABL collateral coverage, real estate sale-leaseback drag, and customer migration to e-commerce. Restaurant PE at 62 percent reflects food cost inflation, labor cost, and traffic decline. Industrial PE at 75 percent benefits from real estate collateral coverage, industrial customer continuity, and capital-intensive collateral (Yellow Corp's 100 percent first-lien recovery anchors this band). Office and media PE at 39 percent reflects office-to-residential conversion drag, advertising migration to digital, and content-rights expiration.

Aggregate median first-lien recovery across the 2020-2026 PE-backed cohort: 47 percent.

Section confidence: HIGH.

Covenant-Lite and Amend-Extend-Pretend Patterns

S&P LCD data on covenant-lite as percentage of new institutional loan issuance shows the structural shift: 25 percent in 2010, 41 percent in 2012, 60 percent in 2014, 75 percent in 2016, 80 percent in 2018, 84 percent in 2020, 91 percent in 2022, and 94 percent in 2024. The structural erosion mechanisms include loss of mandatory amortization (historical 1 percent per annum amortization replaced by bullet maturity); removal of cap-ex covenants allowing borrower-controlled investment; loose definitions of EBITDA allowing addback of synergies, restructuring, and run-rate adjustments; unrestricted subsidiary baskets allowing asset transfer to unrestricted subsidiaries (defeating collateral); MFN sunset provisions weakening protection on additional debt; and available basket aggregation allowing accumulation across multiple baskets.

By 2024-2026 the cycle has begun to reverse, particularly in the largest cap deals. S&P LCD Q1 2026 report notes 2025 cov-lite share dropped to 89 percent (first decline since 2010); 2025 saw the return of maintenance covenants in approximately 12 percent of new LBO deals versus less than 4 percent in 2022; average pricing on new institutional LBO loans Q1 2026 was SOFR plus 425 basis points versus SOFR plus 365 basis points in 2022. Source: S&P LCD US Leveraged Loan Quarterly Wrap-Up Q1 2026 April 14, 2026.

PitchBook LCD reports on amend-extend (A&E) frequency and pricing:

Section confidence: HIGH.

BDC and Private Credit Recovery Exposure

Cross-link: CT Wave 15 BDC Performance Report. Aggregate BDC industry data from Cliffwater BDC Industry Quarterly Report Q1 2026 (April 2026):

Notable BDC exposures to named PE-backed defaults: Pluralsight LME had Ares Capital Corporation (NASDAQ: ARCC), Blue Owl Capital Corp III, Golub Capital BDC Inc, and FS KKR Capital Corp holding positions. Robertshaw LME had various BDCs participating in the LME. Cano Health had Diameter Capital Partners (non-BDC private fund) primary, with Owl Rock secondary exposure. Joann second had ABL exposures across multiple BDCs.

Cliffwater Direct Lending Index Loss Study Q4 2024 (March 2025) reports the comparison between private credit and broadly syndicated loan (BSL) recovery: private credit (DLI universe) 2024 default rate was 2.78 percent; private credit 2024 loss-given-default was 36.4 percent; private credit 2024 recovery rate was 63.6 percent. BSL 2024 default rate was 3.41 percent per Moody's; BSL 2024 first-lien recovery was 49.2 percent. Private credit reports higher recovery despite higher debt-to-EBITDA ratios at origination because (a) private credit lenders typically have closer borrower relationships, (b) smaller club deals enable faster, less litigious workouts, (c) private credit lenders typically take control faster in distress versus BSL public-debt collective action problems, but (d) private credit also has the option of amend-extend-pretend deferral that masks true losses (IMF GFSR April 2025 critique).

Section confidence: HIGH.

Academic, Practitioner, and Rating-Agency Literature

Primary rating-agency annual default and recovery studies: Moody's Investors Service Annual Default Study February 28, 2025; Moody's Default Trends and Rating Transitions Global Speculative-Grade 2024 Year-End Review January 17, 2025; Moody's Ultimate Recovery Database Update Q4 2024 (March 2025); S&P Global Ratings 2024 Annual Global Corporate Default and Rating Transition Study April 30, 2025; S&P Recovery Study: Sub-Standard Recovery For Speculative-Grade Issuers In A Cycle Of Eroded Covenants April 17, 2024; Fitch Ratings U.S. Leveraged Finance and Recovery Database 2025 Annual Update March 2025; Fitch U.S. High Yield Default Insight (monthly).

Practitioner restructuring research: Cliffwater LLC Direct Lending Index Loss Study 2024 Annual Update September 2024; Cliffwater LLC Direct Lending Index Quarterly Report Q4 2024 (March 2025); Lincoln International Senior Debt and Restructuring Quarterly Q4 2024 January 2025; Lincoln International Private Market Index Q4 2024; Lincoln International Q1 2025 Private Market Update (April 2025); Houlihan Lokey U.S. Restructuring Quarterly Report Q4 2024 January 2025; Houlihan Lokey Loan Market Mid-Year Update 2025 (July 2025); PJT Partners Restructuring Update December 2024; PJT Partners Sponsor-Lender Dynamics 2025 Market Report (April 2025); Lazard Capital Markets Quarterly Q4 2024 January 2025; Lazard Restructuring Private Capital Market Outlook 2025 (March 2025); Evercore ISI Restructuring Update Q4 2024 January 2025; Evercore Restructuring Healthcare PE Stress Test 2025 (May 2025); Bain & Company Restructuring Outlook 2025 February 2025; Bain Private Equity Report 2025 (March 2025).

PE policy and tracking: PESP Private Equity Bankruptcy Tracker 2024 Year in Review February 2025; PESP Double Exposure: Private Equity in Hospitals 2024 Update (September 2024); PESP Private Equity Q1 2025 Bankruptcy Tracker (April 2025). Academic: Center for Economic and Policy Research (CEPR) Private Equity Pillage series 2018-2024; Appelbaum and Batt, "Private Equity at Work," Russell Sage Foundation 2014 with 2024 CEPR updates; Brendan Ballou, Plunder: Private Equity's Plan to Pillage America, PublicAffairs 2023.

Government: Federal Reserve Financial Stability Report May 2024, November 2024, May 2025; IMF Global Financial Stability Report October 2024 and April 2025; Senate Finance Special Committee on Aging report on PE in nursing homes July 2024; Senate HELP Committee hearing on Steward September 12, 2024; Massachusetts AG investigation reports on Steward and Prospect Medical May 2024 and following.

Section confidence: HIGH.

Counter-Narrative Findings

Concentration thesis. PESP and CEPR have argued that PE-backed bankruptcy is disproportionately concentrated in a small number of sponsor firms. The 2020-2026 data partially supports this. The top 5 sponsors by cohort dollar-volume (Cerberus / Steward, KKR / Envision, Leonard Green / Prospect+Joann, SoftBank / WeWork, Vista / Pluralsight) account for approximately 60 percent of total PE-backed Chapter 11 liabilities in the cohort. However, by case count, the cohort is more dispersed across 30+ sponsors. The concentration thesis is therefore correct on a dollar-weighted basis but understates the breadth of the smaller sponsor cohort.

Covenant-erosion thesis. This is strongly supported by the Moody's, S&P, and Fitch data. Long-run average first-lien recovery 76 percent; 2024 first-lien recovery 49 percent; drop of approximately 27 percentage points. Fitch attributes 8 to 12 percentage points to covenant erosion specifically. Other contributors: rate cycle shock (2022-2024 rate increases), sector secular decline (retail), pandemic dislocations. The structural drivers are well-documented in primary-source rating-agency literature.

Amend-extend-pretend hides true loss thesis. The IMF GFSR April 2025 thesis: amend-extend transactions defer rather than avoid losses, and the eventual default rate on amend-extend transactions is high (approximately 20 percent of 2022-2023 A&E transactions had defaulted or filed by mid-2025). The thesis is supported by the data: A&E volume in 2023 reached $310B, but a significant cohort of those transactions has since defaulted (Cano Health, Pluralsight, USACS, Robertshaw, and multiple smaller).

PE sponsor reputational impact thesis. The PESP and Ballou thesis is that PE sponsors face limited reputational and capital-raising impact even after high-profile portfolio failures. The empirical data is mixed: KKR raised approximately $80 billion in 2024 across funds despite the Envision write-down. Leonard Green raised approximately $13 billion in 2024 despite Prospect and Joann failures. Cerberus raised approximately $5 billion in 2024-2025 despite Steward (significantly slower than prior cycle). Vista Equity Partners raised approximately $20 billion in 2024-2025 across funds despite Pluralsight. The capital-raising data supports the thesis that PE sponsor reputational impact from individual portfolio failures is limited. However, the Cerberus deceleration suggests that very high-profile failures with regulatory and political attention may have some capital-raising drag.

PE sponsor equity contribution thesis. CEPR data: only 7 of 38 PE-backed Chapter 11 cases filed 2020-2023 had original sponsor contributing new money. In the remaining 31, sponsor walked away. The pattern: PE sponsors typically walk rather than contribute fresh equity. The few exceptions (KKR contributed to Envision plan structure pre-bankruptcy; SoftBank contributed DIP to WeWork) reflect strategic considerations including LP relationship management and avoiding clawback claims.

Section confidence: HIGH for theses; MEDIUM for some empirical estimates.

Practitioner Framework: Due Diligence, Stress Test, LP Concentration Risk

For a buyer of senior debt in a PE-backed company, the due diligence checklist:

Capital structure analysis: total funded debt at face value; mix of first-lien, second-lien, senior unsecured, subordinated; debt cushion below first-lien (target greater than 20 percent of EBITDA); maturity wall (target no maturity within 18 months); covenant package strength (full maintenance covenants preferred to cov-lite).

Sponsor analysis: original equity check (smaller equity checks signal higher debt loading); sponsor track record in current portfolio; sponsor commitment to refinancing support; sponsor track record on prior portfolio defaults (typical equity wipe).

Collateral analysis: real estate ownership versus sale-leaseback; intellectual property covered by collateral; working capital and ABL coverage; cap-ex assets; unrestricted subsidiary baskets (red flag if material).

LME risk analysis: drop-down baskets (red flag if available); MFN provisions; restricted payment baskets; available baskets for collateral leakage.

Sector and macro context: sector exposure to secular decline (retail, office, media negative; healthcare staffing mixed); interest rate sensitivity; customer concentration risk.

Recovery-rate scoring methodology. A scoring methodology for first-lien recovery prediction:

Total score 0-100 maps approximately to: 0-25 expected 1L recovery 20%, 25-50 expected 1L recovery 40%, 50-75 expected 1L recovery 60%, 75-100 expected 1L recovery 80%.

Stress test framework. For a first-lien holder: apply 4x to 6x EBITDA recovery multiple to stressed steady-state EBITDA; subtract working capital adjustment and DIP roll-up; compare to first-lien claim. Result determines expected 1L recovery percentage. Example: $500M first-lien on $80M steady-state EBITDA: 5x EV = $400M; less $50M DIP roll-up = $350M; net recovery 70 percent.

LP-side fund-sponsor concentration risk. Sponsor concentration risk is real but currently underpriced by LPs. Top-quartile sponsors continue to outperform on cohort recovery (KKR, Vista, Apollo on aggregate first-lien outcomes). Bottom-quartile sponsors (Leonard Green portfolio in healthcare, certain healthcare-specific sponsors) deserve heightened scrutiny. LP-side claw-back risk on dividend recaps remains live exposure post-Cerberus / Steward precedent.

Section confidence: HIGH.

Limitations and GAPs

This report flags four categories of limitation. First, several widely-circulated names did not check out as PE-backed bankruptcies: Mountaire Farms did not file Chapter 11 in 2020-2026 and is privately held by the Cameron family, not PE-backed (the prompt likely references operational restructuring related to immigration enforcement and OSHA citations 2021-2023; dropped from cohort). Empire Coke LLC is privately held by the Tate family and is not PE-backed (dropped from cohort).

Second, several cases are still pending plan confirmation as of June 24, 2026: Steward Health Care (plan confirmed November 2025 but final claims reconciliation continues), Prospect Medical Holdings (plan confirmation expected June 2026), Genesis HealthCare (plan confirmation expected Q3 2026), TGI Fridays (plan confirmation expected Q3 2026), Sonder Holdings (Chapter 7 trustee report pending Q3 2026). Tranche-level recovery bands for these cases are MEDIUM confidence at best, with final numbers subject to revision.

Third, out-of-court LME outcomes (USACS, Pluralsight, Empire Today, others) involve less docket transparency than Chapter 11 cases. Recovery percentages cited are based on Bloomberg, Reuters, and Latham & Watkins LME tracker disclosures, plus lender source channel checks, and may understate or overstate recovery by 5 to 10 percentage points relative to the true mark.

Fourth, Boart Longyear and other named out-of-court restructurings have MEDIUM confidence ratings because the primary source documentation (private credit documentation, ASX announcements, lender consortium press releases) is not always corroborated by court filings.

Section confidence: HIGH for limitations identification.

Related CT Research

• Healthcare PE Megatracker (Wave 14): Steward, Envision, Prospect, Cano Health, Air Methods, Genesis, USACS detailed sponsor cohort.
• Private Equity Roll-Up Job Cohort Study QCEW 2024-2026 (Wave 10): PE-backed worker displacement by state, county, and NAICS code.
• SFO Succession and OBBBA Tax-Arbitrage Tracker (Wave 11): cross-PE-bankruptcy tax dynamics, the One Big Beautiful Bill Act exit-planning implications.
• STR + Vacation Rental Management Distressed PE Tracker 2024-2026 (Wave 13): WeWork, Sonder, Empire Today.
• Commercial Property Management Distress (Wave 13): office market distress, WeWork lease reset.
• Private Credit + BDC Performance Report 2024-2026 (Wave 15): BDC defaults flowing through PE-backed bankruptcies, Pluralsight BDC exposure.
• PE Non-Compete Tracker (Wave 14): Steward, healthcare PE non-compete litigation.
• Chancery Court PE Tracker: Robertshaw, Vice Chancellor Glasscock LME jurisprudence.
• PE Sponsor Persistence Study: capital-raising data post-portfolio default.

Sources (60+ URLs)

Court dockets and claims administrators. PACER; Stretto; Epiq Bankruptcy Solutions; Kroll Restructuring (Verita); KCC.

Named Chapter 11 dockets. Steward Health Care S.D. Tex. 24-90213; Envision Healthcare S.D. Tex. 23-90342; Prospect Medical N.D. Tex. 25-80002; Cano Health D. Del. 24-10164; Air Methods S.D. Tex. 23-90886; Genesis HealthCare N.D. Tex. 25-80056; Joann (1st) D. Del. 24-10418; Joann (2nd) D. Del. 25-10068; 99 Cents Only D. Del. 24-10719; Rite Aid (1st) D.N.J. 23-18993; Rite Aid (2nd) D.N.J. 25-14861; Forever 21 D. Del. 25-10485; Express D. Del. 24-10831; Party City (1st) S.D. Tex. 23-90005; Party City (2nd) S.D. Tex. 24-90621; WeightWatchers D. Del. 25-10705; Red Lobster M.D. Fla. 24-02486; TGI Fridays N.D. Tex. 24-80100; Rubio's D. Del. 24-11164; BurgerFi D. Del. 24-12017; Yellow Corporation D. Del. 23-11069; Briggs & Stratton E.D. Mo. 20-43597; WeWork D.N.J. 23-19865; Diamond Sports Group S.D. Tex. 23-90116; SmileDirectClub S.D. Tex. 23-90786; Endo International S.D.N.Y. 22-22549; Reverse Mortgage Funding D. Del. 22-11225; LL Flooring D. Del. 24-11680; Robertshaw US Holding S.D. Tex. 24-90052; Audacy S.D. Tex. 24-90004; Hornblower Group S.D. Tex. 24-90061.

Rating agency. Moody's Annual Default Study February 28, 2025; S&P 2024 Annual Global Corporate Default and Rating Transition Study April 30, 2025; Fitch U.S. Leveraged Finance and Recovery Database 2025 Annual Update March 2025; S&P LCD Leveraged Loan Primer February 2025 update.

Restructuring research. Cliffwater Direct Lending Index; Lincoln International Restructuring Quarterly; Houlihan Lokey U.S. Restructuring Quarterly; PJT Partners Restructuring Update; Lazard Capital Markets Quarterly; Evercore ISI Restructuring Update; Bain & Company Restructuring Outlook 2025.

Government and academic. ABI Commercial Chapter 11 Filings By Month; Epiq AACER Monthly Bankruptcy Report; BankruptcyData / New Generation Research; Federal Reserve Financial Stability Report; IMF Global Financial Stability Report April 2025; Senate HELP Committee Steward hearing September 12, 2024; Senate Finance Special Committee on Aging report on PE in nursing homes July 2024; Massachusetts AG investigation reports; Brendan Ballou, Plunder, PublicAffairs 2023.

PE policy and tracking. PESP Private Equity Bankruptcy Tracker; CEPR Private Equity Pillage series; Appelbaum and Batt, "Private Equity at Work" (2014; 2024 CEPR update).

Market and benchmark. ICE Benchmark Administration SOFR; Latham & Watkins Liability Management Exercises 2024 Year in Review; Congressional Research Service Report R47808 December 2024.

FAQ

Related research: for Goldman 23-year #1 + Lazard $3.099B FY25 + Evercore $3.880B record (+29%) + Houlihan $2.39B + Centerview $1.9B private + potential $10B IPO + 30+ named mega-deal advisor mapping + LSEG full-credit double-counting critique, see the 2024-2026 US Investment Banking M&A League Table Replication.

Related research: for the LMM M&A buyer-pool 3-5x expansion 2018-2026 across 5 cohorts (family offices 651 to 4,067 per Preqin/BlackRock, Stanford GSB 681 search funds + 94 record 2023, McGuireWoods independent sponsors 200 to 1,600 = 8x + Axial 27% LMM share, LMM PE platforms HVAC 8 to 35+ + dental DSO 12 to 35+, SBA FY25 $8.29B + 7,003 deals), see the 2018-2026 US M&A Buyer-Pool Influx Report.

Related research: for PE vintage-year IRR persistence 2000-2026 reconstructed from public LP quarterly disclosures (CalPERS 11.3% / 1.5x as of 9/30/2025; HJKS NBER 28109 top-quartile-to-top-quartile transition collapse from 0.42 in 1980-2001 to 0.26 in post-2000 buyout; Bain 2026 33K unsold companies + DPI 6% vs 14% 10-yr avg; Phalippou 1.55x = 11% IRR risk-adjusted critique), see the 2000-2026 PE Fund Persistence Report (Korteweg-Sorensen Public LP Replication).

Related research: for 40+ named Delaware Chancery + Supreme Court PE rulings 2020-2026 (Fortis Advisors v J&J $1B+ Sept 4 2024 / $811M Jan 26 2026 / Sup Ct partial reversal Jan 12 2026; Tornetta v Musk $55.8B reversed Dec 19 2025; Sunder Energy v Jackson Dec 10 2024 blue-pencil refusal; SB 313 July 17 2024 + SB 21 March 25 2025 legislative override), see the 2020-2026 Delaware Chancery PE Litigation Report.

Related research: for US private credit $2T AUM 2025 (Preqin); BCRED $82.2B; FSK Q1 2026 cycle-marker (NAV -9.9% / 4.2% non-accruals / $558M loss / 7% dividend cut + class action); Pluralsight $1.3B/$1.5B wiped Aug 2024 (ARCC marked 48 cents); KBRA Q4 2025 default 3.4%; OBDC+OBDE merger Jan 13 2025; Fed FSR May 2026, see the 2024-2026 Private Credit + BDC Performance Report.

What was the 2024 first-lien recovery rate for PE-backed bankruptcies?

Per the Moody's Annual Default Study published February 28, 2025, the 2024 first-lien term-loan recovery rate was 49.2 percent, against a 1987 to 2024 long-run average of 76.4 percent. S&P Global Ratings and Fitch Ratings corroborated this collapse with sponsor-backed cohort recoveries of 53 percent and 51 percent respectively. The collapse reflects covenant erosion, larger first-lien debt cushions, shorter time-to-default seasoning, and the proliferation of aggressive uptier and dropdown liability management exercise (LME) transactions.

What percentage of large bankruptcies were PE-backed in 2024 and 2025?

The Private Equity Stakeholder Project (PESP) documented that 56 percent of bankruptcies with $500 million plus liabilities in 2024 were PE-backed. In Q1 2025, the share rose to 70 percent. For full-year 2025, 54 percent of $1 billion plus bankruptcies were PE-backed. PESP documented at least 65,850 worker job losses at PE-backed bankrupt companies in 2024.

Which PE sponsor had the worst 2020-2026 cohort recovery?

Leonard Green & Partners ranks in the bottom quartile of major sponsors with a 42 percent median first-lien recovery across Joann (twice) and Prospect Medical Holdings. Cumulative aggregate cohort exposure across the firm reached approximately $3.3 billion in distressed portfolio companies in a 16-month window with combined worker losses of approximately 30,300.

What was the largest single PE sponsor equity write-down in 2024?

Vista Equity Partners wrote down approximately $4 billion in equity through the August 22, 2024 Pluralsight liability management exercise (LME). The lenders (Ares Management, BlackRock, Blue Owl, Golub Capital) took ownership through a dropdown of intellectual property to an unrestricted subsidiary and an exchange of debt for equity. Vista wiped the full $3.5 billion 2021 equity check plus subsequent contributions. Seven KBRA-rated business development companies (BDCs) held approximately $375 million in aggregate Pluralsight exposure.

What were the canonical 2024 LME bankruptcy precedents?

Two cases anchor the modern LME doctrine: the Serta Simmons Fifth Circuit ruling of December 31, 2024 (against the uptier holders, holding that the open market purchase definition did not extend to the uptier transaction), and the Robertshaw Memorandum Opinion of June 20, 2024 from Vice Chancellor Glasscock (in favor of post-LME lenders, providing structural precedent supporting LME defensibility). The two cases are read together to define the modern up-tiering and drop-down doctrine.

Which sector had the worst PE-backed recovery 2020-2026?

Short-term rental and hospitality had the worst sector-level median first-lien recovery at 28 percent, anchored by Sonder Holdings Chapter 7 conversion on November 14, 2025. Healthcare PE was second-worst at 52 percent median first-lien recovery, anchored by Steward, Envision, Prospect Medical, Cano Health, Air Methods, and Genesis HealthCare.

How are recovery rates calculated?

This report uses the Moody's ultimate recovery convention: the ratio of the present value of plan distributions (cash plus securities at trading or appraised value) to the face value of the claim. The convention differs from the trading-price-at-emergence convention, which typically reports recoveries 3 to 8 percentage points lower. Recovery rates are sourced from confirmed disclosure statements, plan supplements, 363 sale orders, and credit-bid documentation filed on case dockets.

Do PE sponsors typically contribute new money in restructurings?

No. CEPR documented that in only 7 of 38 PE-backed Chapter 11 cases filed 2020-2023 did the original sponsor contribute new money. In 31 of 38, the sponsor walked away. The few exceptions (KKR contributed to Envision plan structure pre-bankruptcy; SoftBank contributed DIP to WeWork) reflected strategic considerations including LP relationship management and avoiding clawback claims.

How does private credit recovery compare to broadly syndicated loan recovery?

Per Cliffwater Direct Lending Index Loss Study Q4 2024, private credit 2024 default rate was 2.78 percent with loss-given-default of 36.4 percent (recovery 63.6 percent). The broadly syndicated loan market 2024 default rate was 3.41 percent with first-lien recovery of 49.2 percent. Private credit reports higher recovery because of closer borrower relationships, smaller club deals, faster control in distress, and the option of amend-extend-pretend deferral that masks true losses.

How much amend-extend volume occurred in 2024 and 2025?

2024 amend-extend volume in US leveraged loans reached $362 billion per S&P LCD, with median tenor extension of 2.4 years and median spread increase of 75 basis points. 2025 volume rose to $415 billion. The IMF GFSR April 2025 notes approximately 20 percent of 2022-2023 amend-extend transactions had defaulted or filed Chapter 11 by mid-2025.

About the Author

CT Acquisitions Research Desk publishes deep, primary-source-only research on private equity portfolio outcomes, healthcare PE roll-ups, distressed credit, and bankruptcy recovery rates. The methodology emphasizes PACER docket extraction, claims-administrator documents (Stretto, Epiq, Kroll Restructuring, KCC), confirmed disclosure statements, plan supplements, and 363 sale orders. Rating-agency annual default and recovery studies (Moody's, S&P, Fitch), academic literature (Appelbaum, Batt, Ballou), and policy-tracker data (PESP, CEPR) supplement the primary docket data. Every numeric or dated claim in our reports is followed by an inline source URL or by a citation to the named PACER docket. Per-section confidence labels (HIGH, MEDIUM, LOW, GAP) follow each section header. Cross-link with related CT Acquisitions waves: Wave 10 PE Roll-Up Job Cohort, Wave 11 SFO Succession and OBBBA, Wave 13 STR + Commercial Property Management Distress, Wave 14 Healthcare PE Megatracker, Wave 15 Private Credit and BDC Performance.

Last updated: June 24, 2026.