FRANCE Trends and Developments Contributed by: Anne-Sophie Noury, Alicia Bali and Saam Golshani, White & Case
year. In this context, 69,000 insolvencies are forecast for 2025, representing a 3% increase compared with 2024. At the same time, corporate fundamentals are show - ing signs of strain. At the end of the first half of 2025, non-financial companies recorded a financing need for the first time in two years, driven by margin ero - sion and rising interest costs. Furthermore, demand continues to be subdued, influenced by the complex and uncertain political climate. Yet, despite this pressure, France’s business demog - raphy remains highly dynamic, with nearly 5.9 million companies in 2024 and an average annual growth of close to 5% over the past five years. This rapid expan - sion – driven mainly by microenterprises – goes hand in hand with a high level of churn, as more than 1.1 million firms were created in 2024 while almost 0.9 million closed down. Overall, the second quarter of 2025 confirmed the persistence of a high plateau of insolvency proceed - ings, but the pace of new filings has clearly slowed compared with the rapid growth observed in 2023 and 2024. The stabilisation of defaults among mid-sized companies, early signs of recovery in parts of retail construction, and sequential improvement month by month during the quarter all suggest that the French market may finally be moving past the phase of “catch-up” insolvency proceedings that followed the withdrawal of pandemic-era support. Key Takeaways The growing wave of insolvency has accentuated the transformation of the role of creditors. Tradition - al banks, constrained by regulatory and prudential requirements, have often been reluctant to provide fresh financing to distressed borrowers. As a result, private debt funds are increasingly being drawn into control situations through debt-to-equity conversions. In many instances, they have had to assume roles as shareholders and even appoint operational manag - ers – not by design but as a direct consequence of the restructuring process. This evolution highlights both the severity of the current distress and the nar - row range of viable solutions available to restructure corporate debt.
The stabilisation of insolvency levels in France in 2025 can only be described as a historically elevated pla - teau, which raises a fundamental question: why have defaults not yet returned to pre-crisis levels? The answer lies in a convergence of structural financial pressures, persistent macroeconomic fragilities and sector-specific disruptions. The first and most obvious factor is the continuing impact of state-guaranteed loans (p rêt garanti par l’État PGE). During the pandemic, more than 800,000 of these loans were issued, overwhelmingly to SMEs. At the time, they provided critical liquidity and offered an exceptionally low interest rate of around 1%. In 2025, however, the repayment schedule has become a heavy burden, particularly as refinancing is now only available at rates between 3% and 4%. For many busi - nesses, this shift has transformed what was once a lifeline into a long-term liability that compresses mar - gins and restricts investment capacity. This mecha - nism explains why so many insolvencies today con - cern companies that otherwise might appear viable in operational terms. A second decisive factor is the abrupt tightening of financial conditions. After more than a decade of mon - etary stability, the rapid rise in interest rates since 2022 has presented businesses with a funding environment they have never experienced before. Companies that had grown accustomed to abundant and inexpensive credit suddenly faced refinancing at punitive levels. Although the European Central Bank began to lower rates as inflation receded, the reprieve has been lim - ited, and for many overleveraged borrowers, the dam - age was already done. This leads directly to the third factor: the fragility of leveraged buyouts (LBOs) completed during the pandemic years. Transactions structured in 2020 and 2021 often relied on business plans drafted in uncertain conditions, with overly optimistic forecasts for growth and cash generation. Subsequent shocks – first inflation, then the energy crisis and now a con - text of geopolitical and commercial instability – have undermined those assumptions. In addition to the sharp rise in interest rates, many portfolio companies have also delivered disappointing operational perfor - mance, falling short of the ambitious projections on
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