Hedge funds are circling a growing number of distressed companies in France, many of which are backed by private equity, as rising debt burdens and economic headwinds trigger a wave of restructurings across the country.

According to restructuring advisers and distressed debt investors, up to 20 mid- and large-cap French companies, most of them private equity-owned, are now on close watch due to leverage and liquidity concerns.

Among the names reportedly at risk are EQT’s Colisée and Cerba, Partners Group’s Emeria, and Apollo’s Ingenico. These companies are either actively restructuring their debt or facing pressure to do so. None of the firms involved have commented publicly.

France’s business insolvency rate has reached its highest level since records began in 1991, according to the Bank of France. The broader European backdrop of rising interest rates, weak cash flows, and post-Covid loan repayments is especially pronounced in France, where leveraged buyouts (LBOs) are more prevalent than in any other major European market. Since 2015, France has seen 4,675 LBOs, far exceeding Germany’s 2,786 and Italy’s 1,749.

Private equity-backed businesses in sectors like telecoms and retail are particularly vulnerable. One high-yield investor noted that hedge funds are now stepping into positions vacated by traditional credit players, with Colisée’s and Cerba’s debt both trading at distressed levels. Cerba’s secured bonds are at 76 cents on the euro, while unsecured bonds have plunged to 22 cents.

Regulatory changes in 2021 – adopting EU-wide insolvency laws – have also shifted restructuring dynamics. Shareholders now have weaker protections, making it easier for creditors to push through restructuring plans via “cross-class cramdowns.” This has made France a more attractive target for hedge funds and credit investors, particularly those based in the UK and US.

“There’s a lot to do there,” said one European credit hedge fund manager. Olivier Sibenaler of AlixPartners added, “In Paris, not a week goes by without a UK or US debt fund coming to see us.”

The restructuring trend follows several high-profile cases in listed businesses, including Casino, Orpea, and Altice. Now, the pressure is extending into the private equity ecosystem, marking a new chapter for distressed investing in the French market.

Source: Financial Times

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