Spike in US Corporate Bankruptcies, Number of Filings Highest in Over a Decade

Corporate bankruptcies in the United States rose in May, based on the latest reports, with the first five months of 2023 seeing the highest number of filings since 2010. There were 54 corporate bankruptcy filings in May, up from 52 in April, according to a June 6 report published by S&P Global. In the first five months of 2023, there have been 286 corporate bankruptcy filings, more than double the 138 filings seen during the first five months of 2022. This is also the highest number of filings for a January to May period since 2010, when 402 filings were recorded. Consumer discretionary companies accounted for the most number of bankruptcy filings so far this year, with 37 filings in the sector. This was followed by industrials with 31 bankruptcy filings, healthcare with 25, financials with 22, and energy with 11 filings. Consumer staples and information technology saw 10 corporate filings each. Communication services had six filings, while utilities, materials, and real estate sectors registered three each. The largest bankruptcies in 2023 so far were Envision Healthcare, Kidde-Fenwal, Monitronics International, Whittaker Clark & Daniels, Bed Bath & Beyond, LTL Management, SVB Financial Group, Diamond Sports Group, Avaya, Serta Simmons Bedding, and Party City Holdco, with each of these bankruptcies carrying over $1 billion in liabilities. Rising Commercial Bankruptcies According to a June 2 press release by the American Bankruptcy Institute (ABI), commercial Chapter 11 bankruptcy filings rose by 105 percent in May 2023 from a year back. Chapter 11 filings for May 2023 came in at 680, up from 332 filings in May 2022, ABI said, citing data from partner Epiq Bankruptcy, the leading provider of U.S. bankruptcy filing data. Almost half of these filings were made by corporate subsidiaries. Small business filings rose by 31 percent during this period to 149 in May 2023. Meanwhile, overall commercial filings also jumped 31 percent to 2,324. “Rising interest rates, inflation, and elevated costs of borrowing can represent a daunting economic challenge to struggling families and businesses,” said ABI Executive Director Amy Quackenboss. “Amid these sustained economic pressures, bankruptcy provides financially distressed companies and households with access to a release valve.” Back in April, Bob Nardelli, the former CEO of Home Depot, had warned about more bankruptcies hitting America’s businesses. “I think we’re going to see a lot of bankruptcies, like Bed, Bath, and Beyond. We got Walmart not only laying people off but closing stores. We got Accenture laying people off. We got Amazon closing distribution centers. So, I think there’s a tremendous-mixed message,” he said in an interview with Fox. The former Home Depot CEO said he was seeing “inventory builds” in a lot of public and private businesses. He pointed to the 2007–09 period when the banking meltdown took “everything down.” Bankruptcies and Recession In a May 12 video on Twitter, researcher and economist Peter St Onge cited a UBS study stating that $10 million plus bankruptcies are now “running almost eight per week,” nearly double the peak level during the COVID-19 lockdowns. The worst of the bankruptcies don’t usually come early in a recession, he pointed out. Instead, they come a “year or two” into a recession. “And yet, here we are seeing them before the show even begins,” Onge said, indicating that a large number of bankruptcies are happening even though the United States is still to be hit by a recession. Going by what happened during the 2008 financial crisis, “whatever happens in the first year of the crash, you’re in for three to four times more bankruptcies by the time it’s over.” Onge attributed the rise of recent bankruptcies to a key factor—“Banks aren’t lending.” “Banks are battening down the hatches, hogging their bailout money instead of lending it out,” he said. “That credit crunch means not only do we get bankruptcies like in any recession, on top of that, we get a lending wall that cuts off even the healthy businesses. Of course, their jobs go down with them.” Jobs cuts quadrupled during the first quarter, registering the highest first-quarter cuts since 2020, according to data from an April 6 report (pdf) by outplacement firm Challenger, Gray & Christmas Inc., with worries about the economy and market being the number-one reason for the layoffs. During the first quarter of 2023, U.S.-based employers announced 270,416 job cuts, which is a 396 percent increase compared to the 55,696 cuts in the first quarter of 2022. This is also the highest first-quarter job cut number since 2020, as well as the highest quarterly job cut since the third quarter of 2020.

Spike in US Corporate Bankruptcies, Number of Filings Highest in Over a Decade

Corporate bankruptcies in the United States rose in May, based on the latest reports, with the first five months of 2023 seeing the highest number of filings since 2010.

There were 54 corporate bankruptcy filings in May, up from 52 in April, according to a June 6 report published by S&P Global. In the first five months of 2023, there have been 286 corporate bankruptcy filings, more than double the 138 filings seen during the first five months of 2022. This is also the highest number of filings for a January to May period since 2010, when 402 filings were recorded.

Consumer discretionary companies accounted for the most number of bankruptcy filings so far this year, with 37 filings in the sector. This was followed by industrials with 31 bankruptcy filings, healthcare with 25, financials with 22, and energy with 11 filings.

Consumer staples and information technology saw 10 corporate filings each. Communication services had six filings, while utilities, materials, and real estate sectors registered three each.

The largest bankruptcies in 2023 so far were Envision Healthcare, Kidde-Fenwal, Monitronics International, Whittaker Clark & Daniels, Bed Bath & Beyond, LTL Management, SVB Financial Group, Diamond Sports Group, Avaya, Serta Simmons Bedding, and Party City Holdco, with each of these bankruptcies carrying over $1 billion in liabilities.

Rising Commercial Bankruptcies

According to a June 2 press release by the American Bankruptcy Institute (ABI), commercial Chapter 11 bankruptcy filings rose by 105 percent in May 2023 from a year back.

Chapter 11 filings for May 2023 came in at 680, up from 332 filings in May 2022, ABI said, citing data from partner Epiq Bankruptcy, the leading provider of U.S. bankruptcy filing data. Almost half of these filings were made by corporate subsidiaries.

Small business filings rose by 31 percent during this period to 149 in May 2023. Meanwhile, overall commercial filings also jumped 31 percent to 2,324.

“Rising interest rates, inflation, and elevated costs of borrowing can represent a daunting economic challenge to struggling families and businesses,” said ABI Executive Director Amy Quackenboss. “Amid these sustained economic pressures, bankruptcy provides financially distressed companies and households with access to a release valve.”

Back in April, Bob Nardelli, the former CEO of Home Depot, had warned about more bankruptcies hitting America’s businesses.

“I think we’re going to see a lot of bankruptcies, like Bed, Bath, and Beyond. We got Walmart not only laying people off but closing stores. We got Accenture laying people off. We got Amazon closing distribution centers. So, I think there’s a tremendous-mixed message,” he said in an interview with Fox.

The former Home Depot CEO said he was seeing “inventory builds” in a lot of public and private businesses. He pointed to the 2007–09 period when the banking meltdown took “everything down.”

Bankruptcies and Recession

In a May 12 video on Twitter, researcher and economist Peter St Onge cited a UBS study stating that $10 million plus bankruptcies are now “running almost eight per week,” nearly double the peak level during the COVID-19 lockdowns.

The worst of the bankruptcies don’t usually come early in a recession, he pointed out. Instead, they come a “year or two” into a recession. “And yet, here we are seeing them before the show even begins,” Onge said, indicating that a large number of bankruptcies are happening even though the United States is still to be hit by a recession.

Going by what happened during the 2008 financial crisis, “whatever happens in the first year of the crash, you’re in for three to four times more bankruptcies by the time it’s over.” Onge attributed the rise of recent bankruptcies to a key factor—“Banks aren’t lending.”

“Banks are battening down the hatches, hogging their bailout money instead of lending it out,” he said.

“That credit crunch means not only do we get bankruptcies like in any recession, on top of that, we get a lending wall that cuts off even the healthy businesses. Of course, their jobs go down with them.”

Jobs cuts quadrupled during the first quarter, registering the highest first-quarter cuts since 2020, according to data from an April 6 report (pdf) by outplacement firm Challenger, Gray & Christmas Inc., with worries about the economy and market being the number-one reason for the layoffs.

During the first quarter of 2023, U.S.-based employers announced 270,416 job cuts, which is a 396 percent increase compared to the 55,696 cuts in the first quarter of 2022. This is also the highest first-quarter job cut number since 2020, as well as the highest quarterly job cut since the third quarter of 2020.