For the past year, both the Biden White House and the Fed have been desperate to usher in a (mild) recession in the US to break the back of runaway inflation and the wage-price spiral with little success. But judging by the surge in bankruptcy filings, they are about to get their wish.
One month ago, when looking at the recent pace of large bankruptcy filings (those with more than $50MM in liabilities), we noted a troubling trend: in the first month of the year, the number of US bankruptcies topped 20, the highest in any other January dating back to 2010. Back then, 25 filings were seen as the economy was still reeling from the aftermath of the GFC.
The spike in defaults was not a fluke, and according to Bloomberg data, one month later – as of the end of February – no less than 39 large companies had filed for bankruptcy in the US so far this year, as February’s pace matches that of January; the YTD total represents the fastest pace of companies filing for bankruptcy since the immediate aftermath of the global financial crisis in 2009. By comparison, US bankruptcy courts had seen 63 large filings at this point in 2009.
Last week’s seven large filings — those tied to at least $50 million of liabilities — include the liquidation of generic drugmaker Akorn and the Chapter 11 filing of Covid-19 testmaker Lucira Health
This year, some of the most notable bankruptcy filings have been festive retailer Party City Holdco Inc, mattress maker Serta Simmons Bedding LLC, and cryptocurrency lender Genesis Global Holdco.
The pile of dollar-denominated corporate bonds and loans in the Americas trading at distressed levels rose to $237.2 billion in the week ended Friday, about a 1.63% increase from $233.4 billion a week earlier, according to BBG data.
Some more details from Bloomberg:
- The US accounts for the greatest volume of distressed debt in the Americas
- The media sector had the greatest amount of distressed debt as of the latest week
- Bausch Health Cos. had the most distressed debt outstanding of any issuer as of Feb. 17, data compiled by Bloomberg shows