NEW YORK–Corporate bankruptcies in the U.S. are now on pace to hit their highest levels in a decade, and analysts are projecting even more companies will file for bankruptcy as the coronavirus pandemic and resulting economic slowdown continues.
According to analysis by S&P Global Market Intelligence, some 424 companies have gone bankrupt this year as of Aug. 9. That number exceeds the number of filings during any comparable period since 2010 as the U.S. economy contracts and the coronavirus takes its toll on numerous industries, especially those relying on consumer spending, S&P noted.
S&P Global Market Intelligence's bankruptcy analysis includes public companies or private companies with public debt. Public companies included in the list of companies with public debt must have at least $2 million in either assets or liabilities at the time of the bankruptcy filing. In comparison, private companies must include at least $10 million, it said.
Companies that have gone bankrupt recently include Men's Wearhouse owner Tailored Brands Inc., which filed a Chapter 11 petition Aug. 2; Prysm Inc., which develops large display screens; oil driller Fieldwood Energy Inc.; and Summit Gas Resources Inc., which acquires, explores and develops domestic onshore natural gas reserves.
Other Filings
S&P Global noted apparel retailer Tailored Brands filed for bankruptcy after securing a restructuring agreement that could cut the company's debt by at least $630 million, with more than 75% of its senior lenders. Prysm sought bankruptcy protection with a prepackaged reorganization plan, under which Texas-based investment company ESW Capital LLC has agreed to acquire its cloud-hosted collaboration software business for at least $12 million.
Summit Gas Resources filed for Chapter 11 bankruptcy protection in July with assets of $33.72 million and liabilities of $6.24 million at the time of filing. Fieldwood Energy filed a Chapter 11 petition in August, marking its second turn to bankruptcy after its first filing in 2018.
“Bankruptcies have impacted a wide swath of sectors so far in 2020 amid the coronavirus pandemic, though consumer-focused industries were disproportionately hurt,” S&P Global said.
Over 100 consumer-focused companies went bankrupt this year. This included high-profile filings of retailers like Ascena Retail Group Inc., J.Crew Group Inc., Lord & Taylor LLC, J. C. Penney Co. Inc. and Neiman Marcus Group Inc.
Accelerated Pressure
Some of the companies that sought bankruptcy protection were already facing issues before coronavirus, and the crisis accelerated the pressure, experts said.
"Anybody who was more physical or in trouble in the retail space to begin with got hammered and they're there," John Blank, chief equity strategist for Zacks Investment Research, told S&P Global.
Overall, 35 companies that filed for bankruptcies year-to-date reported more than $1 billion in liabilities, S&P Global reported.
Experts told S&P Global they expect to see more bankruptcies, especially in consumer-facing industries.
"Brick-and-mortar retail is not going to work out," Blank said, adding that airlines and regional banks with overexposure to retail could "blow up" without government assistance.