U.S. bankruptcy filings continued to mount in September, leaving 2023 on track to potentially surpass 2020 as the worst year for corporate bankruptcies in more than a decade.
S&P Global Market Intelligence recorded 62 bankruptcy filings in September, bringing the total for the third quarter to 182, up from 157 during the second quarter. That brings the total for 2023 so far to 516.
To put that in context, 518 bankruptcy filings were recorded through the end of the third quarter in 2020, meaning the pace of filings this year has been roughly equivalent to a year that saw a punishing if short-lived recession driven by the advent of the COVID-19 pandemic.
Also, so far there have been more corporate bankruptcy filings in 2023 than in all of 2021 or 2022, S&P data show.
And a slight acceleration in the pace of filings heading into the end of the year could feasibly push the total for 2023 past the total for 2020, which would make 2023 the worst year for corporate bankruptcies since 2010, when 827 companies sought protection from creditors.
SmileDirectClub Inc. was responsible for the quarter’s biggest bankruptcy. With more than $1 billion in liabilities, the oral-care company was the only billion-dollar bust-up during the third quarter, down from two during the second quarter, according to S&P Global.
This year has seen its fair share of high-profile bankruptcies, including filings from retailer Bed Bath & Beyond and trucking company Yellow Corp.
Concerns that the U.S. economy could tilt into recession re-emerged during the quarter as yields on long-dated Treasurys climbed to their highest levels in 16 years, while the Federal Reserve signaled it planned to keep interest rates higher for longer.
Companies with investment-grade credit ratings have been more insulated from rising borrowing costs because they largely locked in low interest rates during the depths of the COVID-19 pandemic. However, corporations with lower credit ratings that were forced to rely on loans with floating interest rates are looking increasingly vulnerable, credit analysts have warned.
A team from Goldman Sachs Group warned earlier this week that nearly half of all publicly-traded companies in the U.S. are unprofitable, leaving them particularly vulnerable to rising rates.
Growing concerns about a recession are also looming over U.S. corporations. Wall Street luminaries from Dr. Ed Yardeni to Paul Tudor Jones have said this week that a recession is looking increasingly likely.
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