The mountain of cash held by private-equity firms is turning out to be a mirage for companies they own that are struggling due to the coronavirus pandemic, the Wall Street Journal reported. The buyout industry has spent years building up its dry powder, or money that investors have committed to private-equity funds that hasn’t yet been spent. That pile was at a record $1.45 trillion globally as of June, excluding venture-capital funds, according to data provider Preqin Ltd. Yet all this dry powder has done little to soften the pandemic’s blow to companies owned by buyout firms. From retailers to restaurants and rental companies, businesses owned by private equity have toppled into bankruptcy since coronavirus lockdowns began in the U.S. in March. Thirty-four U.S. private-equity-backed companies filed for bankruptcy from March 1 through June 14, according to data provider PitchBook Inc., including well-known names such as Hertz Global Holdings Inc., Neiman Marcus Group Inc. and J.Crew Group Inc. The private-equity owners of some bankrupt companies had no shortage of cash to spend. Ares Management Corp., which bought Neiman Marcus in 2013 alongside the Canada Pension Plan Investment Board, was sitting on more than $33 billion of dry powder shortly before the luxury retailer filed for bankruptcy last month. Ares declined to comment, and the CPPIB didn’t respond to a request for comment.
