KKR’s Latest Bankruptcy Deal Is a Bad Omen for Lenders

As corporate failures surge this year, debt investors are in a fight to salvage as much money as they can from the wreckage. The early skirmishes are going very badly.

The bankruptcy of GenesisCare, a cancer treatment specialist backed by private equity powerhouse KKR & Co. and China Resources Pharmaceutical Group Ltd., is the latest cautionary tale of how much value is being destroyed when companies go bust now.

In previous default cycles, leveraged-loan providers would expect to get 70% to 80% of their cash back from failing companies. Those days are over. Some GenesisCare investors are bracing ...