Private equity firms made poor bets in the decade leading up to the 2022-2023 Federal Reserve tightening cycle. So why do creditors seem so eager to let the Masters of the Universe off the hook? A Moody’s research report showed last week that PE-backed companies have defaulted at a 15 per cent rate in the past two years. That is twice the proportion of companies that are not owned by a financial sponsor firm. The differential should not be surprising given the elevated leverage in PE transactions. But “default” increasingly does not mean “bankruptcy”. Rather the rating agency contends that so-called “distressed exchanges” counts — where lenders or bondholders swap into new paper at a discount to 100 cents on the dollar — are a blight. READ MORE