Many are working overtime to avert disaster, writes Georgia Wilkins.
Highly geared companies backed by private equity could continue to come under pressure this year, particularly in the retail sector.
Private-equity groups were behind a number of high-profile company collapses last year, including music group Allans Billy Hyde and tomato sauce brand Rosella.
They follow collapses by apparel group Colorado, as well as bookstores Borders and Angus & Robertson, whose parent companies were also the projects of private equity until they collapsed, owing millions to their creditors.
While the industry says the hardest times are over, insolvency experts believe many firms are working overtime to avert disaster, with more pre-financial crisis debt contracts coming up for renewal in the year ahead and the outlook for some sectors looking grim.
Ian Carson, head of partners at PPB Advisory, said many companies were struggling to get investments to a point where they could exit them at a profit, due to investor concerns over their ability to service debt.
"There are plenty of examples of work going on right now, quietly behind the scenes, to repair balance sheets of deals that were struck pre-GFC," he said.
"Companies are working on trying to get costs down, become more efficient, merge businesses into each other, reduce duplication, focus on customer service, and delay payments to creditors."
Mr Carson said some private equity firms had paid too much for assets before the crisis, and as a result were struggling to turn companies around.
"They went in before the crash where they expected prices to go up, and then there was a downturn," he said. "As the saying goes, when the tide goes out, you see who hasn't got their bathers on."
Katherine Woodthorpe, the chief executive of the Australian Private Equity and Venture Capital Association, said the industry was facing its fair share of challenges, with the biggest one raising funds.
"There are a number of private equity managers who raised funds in 2006-07, who need to go back to the market in the next year or two," she said. "We've found that the domestic super industry is, although still investing significantly in private equity, also looking at opportunities abroad."
She said most of the high-risk deals entered into before the financial crisis had already been through a restructuring or refinancing processes and it was unlikely there would be more. "There might be one or two left over, but the majority have been through that," she said.
Many of last year's failed companies were operating in the beleaguered retail sector.
Family-owned confectioner Darrell Lea closed its doors after 85 years of trade in July, blaming soft retail conditions and the strong dollar for its fall.
Australian Convenience Foods, the country's biggest supplier of ready-to-eat sandwiches, biscuits and hot dogs, collapsed in September after making losses for the past 12 months. The company was backed by private equity firm CHAMP Ventures.
It has been two years of hard knocks for the retail industry, with the 23-year-old outdoors clothing chain Colorado closing its doors a little more than 18 months ago, crippled by weak trading conditions and about $400 million in debt run up by its owner, Affinity Equity Partners.
Bookshops Borders and Angus & Robertson fell weeks earlier after private equity owner Pacific Equity Partners was unable to pay down $118 million in debts. Pacific Equity also owns Hoyts cinemas, Peters ice cream and Spotless catering.
A host of fashion labels, including Fat, Claude Maus, Bettina Liano, Ojay, Brown Sugar and Fletcher Jones have also gone into administration in the past 18 months, with some being rescued at the last minute. David McCarthy, the head of Deloitte's restructuring services, said many of last year's failed businesses had simply failed to adjust to changes in their industry.
"Some of these businesses have just not been able to adapt their cost base to the shrinking revenue environment," he said.
"That's especially been the case in retail," he said. "Liquidity dries up and your financiers are not willing to back you."
Banks and super funds have grown wary of private-equity investments in recent years, with a range of collapses leaving shareholders with big losses.
Gourmet Food Holdings, the parent company of Australia's 100-year-old tomato sauce brand Rosella was placed in receivership last month, owing millions to the National Australia Bank.
Its ultimate owners, Crescent Capital, were also behind failed music company Allans Billy Hyde, which collapsed in October owing $56 million to NAB.
There have also been IPOs that left investors high and dry.
Myer was sold by TPG in November 2009 at a listing price of $4.10, and the shares are now worth $2.20.
Collins Foods, which owns some KFC and Sizzler restaurants, was floated by Pacific Equity Partners in August 2011 at $2.50 and is now trading at $1.30.
And Pacific Brands, which listed in 2004 at $2.50, last traded at 62¢.
McCarthy said many private equity firms were having to re-evaluate bank extensions on their pre-GFC private equity deals.
"A number of those will be coming up for refinancing in the next 12 months," he said. "That's an issue that needs to be dealt with."
He said some leverage deals had been backed by European banks, which were now repatriating funds back to Europe.
"You need someone to replace that debt, or it needs to be replaced with equity or written off," he said.