Surge in Corporate Bankruptcies Marks Highest Level Since 2010

According to new data from S&P Global Market Intelligence, the first quarter of 2023 witnessed a significant rise in corporate bankruptcies among U.S. companies, reaching the highest figures since 2010.

Highlights from Q1 2023 Bankruptcy Filings

From January to March 2023, a total of 188 bankruptcies were filed by large companies. This represents an increase from the earlier figure of 139 filings recorded in the first quarter of the previous year, which had already marked a 14-year high.

The surge in bankruptcies this year is the most pronounced in the first quarter since the aftermath of the financial crisis over a decade ago, where 254 companies filed for bankruptcy in the same period of 2010.

“Companies, particularly those with weaker balance sheets, continue to face challenges as debt matures and needs to be refinanced at higher interest rates than at the time of issuance,” stated a representative from S&P Global.

Sector Breakdown of Recent Bankruptcies

Among the sectors experiencing the most significant impact, the industrials sector led the way with 32 filings, followed closely by the consumer discretionary sector, which recorded 24 bankruptcies. Together, these sectors accounted for nearly 30% of all bankruptcy filings in Q1.

In terms of performance, the S&P 500’s industrials and consumer discretionary segments reported declines of 0.53% and 13.97% respectively during the same timeframe.

Key Players Facing Bankruptcy

Notable companies that declared bankruptcy in the first quarter include:

• F21 OpCo LLC, the owner of the Forever 21 apparel brand.
• Electric vehicle manufacturer Nikola.
• Crafts retailer Joann.
• Restaurant chain Hooters.
• Genetic testing company 23andMe.

Comparison with Previous Years

Despite the rise in bankruptcies seen in early 2023, the numbers remain significantly below the peak levels observed during the financial crisis, which saw as many as 1,836 bankruptcies in 2009. Notably, the highest monthly total of filings since 2020 occurred in July 2020, with 74 bankruptcies recorded.

Conclusion

The ongoing increase in corporate bankruptcies emphasizes the mounting financial pressures faced by many U.S. companies. As debt burdens grow under higher refinancing costs, businesses, particularly in vulnerable sectors, must navigate an increasingly challenging economic landscape.

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