Happy Friday. Here’s what we’ve got today…

• A look at Moody’s data on private equity defaults

• Plus, BlackRock considers HPS purchase

The wrong league tables:

Credit ratings agency Moody’s released a report on Thursday that finds private equity-backed companies defaulted at twice the rate—nearly 17 percent—of non-sponsor-backed speculative-grade borrowers between January 2022 to August 2023.

The finding itself isn't surprising given the debt-heavy nature of leveraged buyouts, which Moody's acknowledges: "Private equity-backed companies tend to have more debt and lower credit ratings than their peers, contributing to the higher default rate."

The more interesting takeaway is the agency’s firm-level breakdowns.

More than half of the covered companies owned by Platinum Equity and Clearlake Capital are at heightened risk of default, defined as a credit rating of B3 Negative or below. On average, the two firms also have the highest leverage ratios among the dozen largest sponsors covered in the report (defined as firms with at least 15 rated companies over the period).

Ares Management was not far behind on the B3N list, with 47 percent of its portfolio companies considered distressed.

The incidence of poor ratings at current portfolio companies does seem to correlate with actual outcomes. Over the period, more than a third of Platinum-owned companies covered by Moody's underwent an out-of-court restructuring or defaulted. For Clearlake, that figure was 17 percent.

Distressed debt exchanges accounted for most of the defaults. "Private equity sponsors have favored these exchanges in recent years as a way to preserve their equity and exploit loose governing provisions to claw financing from some lenders at the expense of others," said Moody's.

Apollo Global Management also appeared close to the top of the tables, with nearly a quarter of its Moody’s-rated companies defaulting since 2022.

A spokesperson for the firm took issue with the findings, saying: “Leverage in Apollo’s private equity portfolio is among the lowest in the industry,” and challenged Moody’s characterization of term loan extensions and opportunistic debt exchanges as defaults. Apollo also pushed back on the B3N list and says its portfolio companies are performing well and not in distress.

Broadly, Moody’s data confirm the prevalence of this year's headline trends, including usage of payment-in-kind toggles, continuation vehicles, and liability management exercises.

One notable takeaway is the rejection of a common anti-private equity narrative: dividend recaps do not actually cause higher rates of default. While often cited in re-tellings of deals gone wrong, Moody’s finds that dividend recaps in its coverage universe are typically done on the highest quality assets in the portfolio.

Moody’s does note that its analysis is less comprehensive than in years past. Many borrowers have refinanced publicly-rated debt with private deals and are no longer rated.

Certain firms have led the trend. Vista Equity Partners, Carlyle Group, and Thoma Bravo—historically among the most-frequently rated sponsors—have now “nearly disappeared,” says Moody's.

• BlackRock is exploring a purchase of HPS Investment Partners that could value the firm at over $10 billion, per Bloomberg.

• Clayton Dubilier & Rice is in exclusive talks to acquire Sanofi's consumer health unit at an enterprise value of €15.5 billion, with Sanofi likely to retain a minority stake.

• TA Associates agreed to acquire a majority stake in Solifi, a provider of automotive and asset finance software, from Thoma Bravo.

• Auctus Capital Partners agreed to acquire SPIG and Babcock & Wilcox Vølund, Italian and Swedish subsidiaries of Babcock & Wilcox Enterprises (NYSE: BW), a developer of renewable power generation solutions.

• VSP Vision agreed to acquire Eyemart Express, an optical retailer with nearly 250 stores, from FFL Partners and Leonard Green & Partners.

• Warburg Pincus is exploring the sale of a majority stake in Kestra Financial, an Austin-based independent wealth management platform.

• Nippon Steel agreed to sell its 50 percent stake in an Alabama steel JV with ArcelorMittal for $1 to address antitrust concerns related to its proposed $14.1 billion acquisition of U.S. Steel, contingent on the U.S. Steel deal closing.

• Charles Monat Associates, an insurance broker for HNW individuals, is exploring a sale that could value the business at up to $500 million and has received initial sponsor interest.

• Aircraft components manufacturer Triumph Group (NYSE: TGI) is exploring options, including a sale of the company, and is working to gauge interest from both sponsors and strategics, per Bloomberg.

• GXO Logistics (NYSE: GXO), the supply chain services provider that spun off from XPO in 2021, is working with advisors to explore a potential sale after receiving inbound interest, per Bloomberg.

• Zabka Group, Europe's largest convenience store chain backed by CVC Capital Partners, priced at the top of its range to raise around $1.6 billion in Warsaw's largest IPO in four years.

• Sixth Street Growth invested in atVenu, a live event commerce platform.

• CoreWeave, an AI-focused cloud computing provider, secured a $650 million revolving credit facility and is set to receive an investment from Cisco Systems at a $23 billion valuation.

• Solis Mammography, backed by Madison Dearborn Capital Partners, acquired Breast Center of Acadiana, a Louisiana-based breast imaging provider.

• Fullscript, backed by HGGC, acquired Rupa Health, a platform for practitioners to order and manage laboratory tests.

• Harmony Healthcare IT, backed by Novacap, acquired Trinisys, a Nashville-based healthcare data management company.

• Victory Live, a ticketing technology platform, acquired Logitix, a provider of ticket inventory management solutions for live events, from Zelnick Media Capital.

• ACR, backed by HCI Equity Partners, acquired Mat-Pac, a supplier of foodservice and janitorial packaging solutions.

• Ardian agreed to acquire a majority stake in Vista Vision, an Italian ophthalmic and refractive surgery provider.

• Brookfield Asset Management agreed to acquire London-listed logistics real estate investor Tritax EuroBox (LSE: BOX) for £1.1 billion.

• Brembo (BIT: BRE) agreed to acquire Ohlins Racing, a Swedish manufacturer of vehicle suspension technology, for $405 million from Tenneco, a portfolio company of Apollo Global Management.

• Legendary Entertainment and Apollo Global Management are in advanced talks to buy out Dalian Wanda Group's stake in Legendary, the film studio behind movies like Dune and Godzilla vs. Kong.

• Post Road Group and Bain Capital Credit led an equity investment in DC BLOX, a provider of interconnected data centers in the Southeastern US.

Tech, Vertical SaaS, & Misc. Enterprise

• EvenUp, an AI personal injury claims platform, raised $135 million in Series D funding led by Bain Capital Ventures, with participation from Premji Invest, Lightspeed Venture Partners, Bessemer Venture Partners, SignalFire, and B Capital Group.

• Relyance AI, a data governance platform, raised $32.1 million in Series B funding led by Thomvest Ventures, with participation from M12, Cheyenne Ventures, Menlo Ventures, and Unusual Ventures.

• Scope3, a collaborative sustainability platform, raised $25 million in new funding led by GV, with participation from Venrock, Room40 Ventures, Craft Ventures, Aperiam Ventures, and Virgo Strategic Investments.

• Document Crunch, an AI-powered document intelligence provider for the construction industry, raised $21.5 million in Series B funding led by Titanium Ventures, with participation from Nemetschek Group, Navitas Capital, Zacua Ventures, Fifth Wall, and Ironspring Ventures.

• WatchTowr, an external attack surface management cybersecurity startup, raised $19 million in Series A funding led by Peak XV, with participation from Prosus Ventures and Cercano Management.

• ApertureData, a developer of a purpose-built database for multimodal AI, raised $8.25 million in seed funding led by TQ Ventures, with participation from Westwave Capital and Interwoven Ventures.

Fintech

• Imprint, a co-branded credit card for brands, raised $75 million in Series C funding led by Khosla Ventures, with participation from Thrive Capital, Kleiner Perkins, and Ribbit Capital.

• Zeal, a payroll platform for gig-work, raised $15 million in Series B funding led by Portage, with participation from Spark Capital and Commerce Ventures.

Consumer & Media

• TOCA Football, an operator of tech-enabled soccer training centers and entertainment venues, raised around $100 million in new funding from Jim Kavanaugh, Bill Anderson, Jared Smith, Magnus Carlsen, and existing investor Harry Kane.

Healthcare

• Cytovale, a developer of early sepsis detection technology, raised $100 million in Series D funding led by Sands Capital, with participation from Canada Pension Plan Investment Board, Norwest Venture Partners, Global Health Investment Corporation, and Breakout Ventures.

• Glooko, a remote diabetes management platform, raised $100 million in Series F funding led by Georgian, with participation from Health Catalyst Capital and Canaan.

• Suki, an AI-powered healthcare voice assistant, raised $70 million in Series D funding led by Hedosophia, with participation from Venrock, March Capital, Flare Capital, Breyer Capital, and inHealth Ventures.

• Qantev, an AI claims management platform, raised €30 million in Series B funding led by Blossom Capital, with participation from Elaia, Omnes, and RAISE Venture.

• RadiantGraph, a consumer healthcare engagement platform, raised $11 million in Series A funding led by M13, with participation from XYZ Ventures and True Ventures.

• MiLaboratories, a computational biology platform, raised $10 million in Series A funding led by Kfund, with participation from Speedinvest, Acrobator Ventures, EGB Capital, Courtyard Ventures, Somersault Ventures, and Ten13.

Industrials, Greentech, & Other

• Form Energy, a developer of long-duration iron-air batteries for grid energy storage, raised $405 million in Series F funding led by T. Rowe Price and GE Vernova, with participation from TPG Rise Climate, Breakthrough Energy Ventures, Prelude Ventures, MIT's Engine Ventures, Energy Impact Partners, Capricorn's Technology Impact Funds, Coatue, NGP, Temasek, GIC, Claure Group, Gigascale Capital, Blindspot Ventures, and VamosVentures.

• Ares Management is raising a $7 billion opportunistic credit fund focused on complex situations.

• Mill Point Capital raised $1.7 billion for its third middle market fund.

• Interlagos, founded by former SpaceX executives, is targeting $550 million for its debut fund focused on deep tech startups from inception through Series B.

• Siguler Guff raised $580 million for its third Small Business Credit Opportunities Fund to provide mezzanine debt and first-lien loans to sponsor-backed businesses with up to $15 million in EBITDA.

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