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Besides Burning & Looting Of Businesses, U.S. Bankruptcies Up 48%

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  • Reynolds
    Moderator
    • Oct 2018
    • 3237

    Besides Burning & Looting Of Businesses, U.S. Bankruptcies Up 48%


    “This Is Just The Start”: US Bankruptcies Soar 48% In May, Most Since Financial Crisis



    According to Bloomberg, restaurants, department stores, apparel merchants and specialty chains have been receiving notices from landlords – some of whom have gone as long as three months without receiving rent. “The default letters from landlords are flying out the door,” said Andy Graiser, co-president of commercial real estate company, A&G Real Estate Partners. “It’s creating a real fear in the marketplace.” Pressure from default notices and follow-up actions like locking up stores or terminating leases was cited in the bankruptcies of Modell’s Sporting Goods and Stage Stores Inc. Many chains stopped paying rent after the pandemic shuttered most U.S. stores, gambling that they could hold on to some cash before landlords demanded payment. An estimated $7.4 billion in rent for April hasn’t been paid (May numbers have yet to be released), or about 45% of what’s owed, according to a recent analysis by CoStar Group, which also found that just a quarter of of expected rent payments have been received by landlords.





    According to figures from legal-services firm Epiq Global, US bankruptcy courts recorded 722 businesses nationwide filing for chapter 11 protection last month, a yearly increase of 48% from 487 businesses in May of 2019. The surge was also seen on a month-over-month basis, which jumped by 28% from the 562 Chapter 11 filings in April. The number of corporate bankruptcies in May was the highest since May 2011, when the great financial crisis was still impacting corporate viability. In addition to numerous small and medium business, several iconic companies also filed for bankruptcy last month, including retailers J.C. Penney, Neiman Marcus and J.Crew along with the management company behind two leading Lasik surgery brands, the U.S. division of Le Pain Quotidien, Gold’s Gym and drugmaker Akorn. According to a separate report from Bloomberg, in May alone, some 27 companies reporting at least $50 million in liabilities sought court protection from creditors – the highest number since the Great Recession.




    In May 2009, 29 major companies filed for bankruptcy, according to data compiled by Bloomberg. And year-to-date, there have been 98 bankruptcies filed by companies with at least $50 million in liabilities – also the highest since 2009, when 142 companies filed in the first four months. A recent analysis from Goldman Sachs also found that the number of bankruptcy filings is now the highest since the financial crisis. The spike in filings – a consequences of the coronavirus shutdowns which swept the economy over the past three months – comes after a period of historic expansion for the U.S. economy, which had led to a lull for the corporate restructuring industry. “Hotels are not going to bounce back quickly. You’re going to see a long-term effect on office space,” she told the Journal. “The consequence of the quarantine around the world…It’s not going to magically go away as you reopen.”

    “I think we’re going to see an extraordinary number of large corporate bankruptcies, not just in the U.S. but across the globe,” Conlan said, and he is spot on: as we reported on Friday in its scramble to restore normalcy, the Fed forced companies to take on even more debt, much of which has been spent on dividends even as the newly indebted companies rushed to pursue mass layoffs. This means that merely another hiccup in the economy, another slowdown in revenues and cash flows will mean that an even greater array of companies will be facing bankruptcy.The wave of insolvencies is also at odds with U.S. credit markets, which are busier than ever: investment-grade corporations were able to cushion their balance sheets by borrowing over $1 trillion in the first five months of the year, the fastest pace on record… Read more ...

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