Private equity behind 70% of large U.S. bankruptcies in the first quarter of 2025

The first quarter of 2025 saw a disproportionate number of large private equity bankruptcies. 7 out of 10 bankruptcies at companies with over $1 billion in liabilities were at companies owned by a private equity firm, despite private equity accounting for only 6.5% of the U.S. economy. This continues a troubling trend: in 2024, private equity-backed companies comprised 11% of all bankruptcies and 54% of large bankruptcies (those with over $1 billion in liabilities). Just three months into 2025, the industry is already outpacing that track record.

2024 Private Equity Bankruptcy Tracker

These large private equity bankruptcies include the clothing retailer Forever 21, the healthcare giant Prospect Medical, and Joann Craft Stores. Joann is shuttering after filing for bankruptcy for the second time in a year. These bankruptcies can have disastrous consequences for workers, patients, and consumers.

Private Equity-backed Bankruptcies with over $1 Billion in Liabilities

*Private Equity comprises a minority share of the investment consortium

In March, Forever 21’s U.S. operations filed for bankruptcy, subsequently announcing the closure and liquidation of all domestic stores by May.^[1][2] The retailer was acquired in 2020 by a consortium including Authentic Brands Group, Simon Property Group, and Brookfield Property Partners.^[3] Authentic Brands Group itself is backed by a network of investors, notably the private equity firms CVC Capital Partners, HPS Investment Partners, and Leonard Green & Partners.^[4] In court filings, company executives attributed the bankruptcy to increasing competitive pressures from international e-commerce platforms such as Shein and Temu.^[5]  While broader challenges within the retail sector may have impaired the company’s ability to service its financial obligations, its $1.5 billion debt load likely played a decisive role in its collapse.^[6] As part of the liquidation process, Forever 21 is closing 355 stores and laying off approximately 27,000 employees across its U.S. locations.^[7]

Zips Car Wash, one of the largest car wash chains in the United States, was acquired by Atlantic Street Capital in 2020.^[8] In its bankruptcy filing, Zips reported $1 billion to $10 billion in liabilities and only $303 million in revenue over the preceding twelve months.^[9] Under private equity ownership, Zips engaged in a sale-leaseback transaction, a common private equity financial maneuver in which a company sells real estate assets and then immediately leases them back. While this strategy can generate short-term liquidity, it often undermines long-term stability and profitability.^[10]

Joann, the fabric and craft store, filed for bankruptcy in March 2024, and it appeared that it would emerge without any major store closures or layoffs.^[11] But by January, Joann filed for bankruptcy a second time and announced that it would close and liquidate, laying off 19,000 employees.^[12] The company was owned by Leonard Green and Partners, a private equity firm with a history of aggressive debt practices that have led to the failure of a number of its portfolio companies.^[13] Leonard Green and Partners was also behind the January bankruptcy of Prospect Medical Holdings and the December 2024 bankruptcy of The Container Store.^[14][15][16]

Read more about Joann and Leonard Green and Partners

Prospect Medical Holdings is a safety net hospital system with 16 hospitals across California, Connecticut, Pennsylvania, and Rhode Island. It filed for bankruptcy in January of this year with over a billion dollars in liabilities.^[17] Although Leonard Green sold its stake in Prospect in 2021, its financial practices during its decade of ownership helped set the stage for collapse^[18]

Throughout its ten-year ownership, Leonard Green and Prospect’s minority owners extracted approximately $658 million in fees and dividends from Prospect, in part by saddling it with debt and using the proceeds of the loans to pay Prospect’s ownership group.^[19] It collected this money out of Prospect even as many of its hospitals suffered deteriorating financial conditions and quality concerns – between FY 2015 and FY 2020, Leonard Green continued to profit while the hospital company took a $603 million cumulative comprehensive loss.^[20]

The Prospect bankruptcy is putting patient care and community health at risk. In Delaware County, Pennsylvania, two Prospect-owned hospitals are closing, leaving one of the state’s most populous counties with only two hospitals.^[21] These closures will leave Delaware County residents with significantly fewer emergency healthcare options. In response, State Rep. Dan Frankel said, “These hospitals were ransacked, robbed, and plundered for profit, and now their private equity owner gets to ride out of town, leaving communities with diminished access to health care and employment.”^[22]

At the core of this instability is the private equity model’s focus on short-term gains and rapid value extraction, often at the expense of long-term sustainability. Private equity firms have demonstrated overreliance on cost-cutting measures and aggressive financial policies with limited long-term prospects. Focusing on immediate financial gains can lead to significant mismanagement and economic instability, contributing to higher bankruptcy rates among private equity-owned firms.

A critical driver of this instability is the widespread use of leveraged buyouts. A leveraged buyout is a strategy in which a private equity firm finances its acquisition of a company using debt secured by the company it is acquiring rather than using its capital or taking on the debt itself. This tactic saddles private equity-owned companies with substantial debt, often draining resources that could otherwise be invested in innovation, workforce development, or adapting to market changes. Instead, firms under private equity ownership must channel much of their revenue toward servicing this debt, leaving them vulnerable to financial distress and bankruptcy.

Bankruptcies are a key bellwether signaling the broader risks associated with private equity investments. For investors and the public alike, bankruptcy trends mark a critical moment and highlight the industry’s need for regulation and transparency.

^[1]https://www.reuters.com/business/retail-consumer/forever-21-creditors-face-large-losses-under-bankruptcy-plan-2025-04-15/

^[2]https://www.msnbc.com/opinion/msnbc-opinion/forever-21-closures-fast-fashion-nostalgia-rcna197556

^[3]https://wwd.com/business-news/retail/forever-21-chapter-11-authentic-brands-group-1237049076/

^[4]https://www.cvc.com/media/news/2021/2021-11-22-cvc-fund-viii-and-hps-investment-partners-to-acquire-stakes-in-authentic-brands-group/

^[5]https://www.cnbc.com/2025/03/17/forever-21-files-for-second-bankruptcy-blames-shein-and-temu.html

^[6]https://www.cnbc.com/2025/03/17/forever-21-files-for-second-bankruptcy-blames-shein-and-temu.html

^[7] Forever 21 closing 355/ 540 stores. It employed 43,000

https://www.msnbc.com/opinion/msnbc-opinion/forever-21-closures-fast-fashion-nostalgia-rcna197556;

https://www.forever21.com/us/aboutus/aboutus.html;

^[8]https://www.reuters.com/legal/litigation/zips-car-wash-files-bankruptcy-cut-279-million-debt-2025-02-06/;

^[9]https://bondoro.com/zips-car-wash/#:~:text=The%20Company%20reported%20%24303%20million,to%20%2410%20billion%20in%20liabilities.

^[10]https://focusbankers.com/washing-away-debt-zips-car-wash-and-the-cost-of-private-equity-ambition/

^[11]https://www.digitalcommerce360.com/2024/04/30/joann-to-emerge-from-bankruptcy-with-no-store-closures/

^[12]https://www.forbes.com/sites/pamdanziger/2025/02/26/major-retail-job-losses-at-party-city-joann-este-lauder-starbucks-walmart-kohls-and-more/, https://www.retaildive.com/news/joann-bankruptcy-chapter-11/737421/

^[13]https://www.privitas.com/leonard-greens-twice-bankrupt-joann-a-cautionary-tale

^[14]https://www.cbsnews.com/news/prospect-medical-holdings-bankruptcy-private-equity/

^[15]https://hbsdealer.com/news/leonard-green-partners-completes-purchase-container-store

^[16]https://www.cnn.com/2024/12/23/investing/container-store-bankruptcy/index.html

^[17] Hospital Locations | Prospect Medical Holdings, Inc.” Accessed October 24, 2023. https://www.pmh.com/locations/hospital-locations/

^[18]https://www.healthcaredive.com/news/private-equity-healthcare-senate-report/736826/#:~:text=When%20Leonard%20Green%20sold%20its,due%20to%20outstanding%20rent%20payments.

^[19] O’Grady, Eileen. “UPDATE: Leonard Green-Led Ownership Collected $658 Million in Dividends and Fees from Prospect Medical Holdings despite Challenges, Commitment to Regulators to Forgo Dividends.” Private Equity Stakeholder Project, May 2020. https://pestakeholder.org/wp-content/uploads/2020/05/UPDATE-Leonard-Green-Prospect-Medical-Dividends-PESP-051420.pdf

^[20] “Decision Re: Initial Application of Chamber Inc.; Ivy Holdings Inc.; Ivy Intermediate Holdings, Inc.; Prospect Medical Holdings, Inc.; Prospect East Holdings, Inc.; Prospect East Hospital Advisory Services, LLC; Prospect CharterCARE, LLC; Prospect CharterCARE SJHSRI, LLC; Prospect CharterCARE RWMC, LLC.” State of Rhode Island Office of the Attorney General, June 1, 2021. https://riag.ri.gov/sites/g/files/xkgbur496/files/documents/Prospect_Chamber_Ivy_AG_HCA_Decision.pdf.

^[21] https://www.healthcaredive.com/news/prospect-medical-holdings-close-crozer-health/746117/

^[22] https://penncapital-star.com/health-care/one-of-pas-most-populated-counties-could-be-down-to-two-hospitals-soon/