Reuters Bankruptcy Trends to Watch in 2025​​​

Rising interest rates, inflation, higher labor costs, and post-pandemic shifts in consumer spending were common factors cited by companies that filed for bankruptcy in 2024, Reuters reported. Business bankruptcy filings rose 33.5 percent in the 12 months ending Sept. 30, 2024, according to statistics from the Administrative Office of the U.S. Courts. Bankruptcy experts expect those factors to continue to drive companies over the brink next year. Several particularly hard-hit industries that struggled in 2024 will continue to experience financial distress and restructuring activity in 2025, including health care, automotive, casual dining and retail.

- Health care companies of all kinds filed for bankruptcy in 2024, including hospital chains, nursing homes and medical device manufacturers. Health care companies — particularly ones with high debt or niche business models — are perennially at risk for bankruptcy due to frequent changes in government regulations and reimbursement spending, according to Ron Meisler, a partner in Skadden's restructuring practice.

- The auto industry, including parts suppliers and electric vehicle companies, will also face continued stress in 2025. A drop in demand for electric vehicles wreaked havoc on companies that ran up debts or took investor cash to compete in that space, and prominent names like Swedish battery maker Northvolt and electric vehicle company Fisker went bankrupt in 2024.

- Casual dining saw a steep rise in bankruptcies in 2024, headlined by famous restaurant chains like Red Lobster and TGI Fridays. Several smaller chains like California Pizza Kitchen, Bucca di Beppo and Rubio's Coastal Grill also went bankrupt in the past year. Some of those restaurant brands, backed by private equity, expanded too rapidly and then collapsed under their own weight, while others have cited higher labor costs, especially in states like California, when seeking bankruptcy protection. Restaurant chains will continue to contend with higher interest rates and inflation in food prices in 2025, forcing customers to re-evaluate whether they will continue spending on casual dining restaurants that were previously seen as offering good value for the money, according to Randall Klein of Goldberg Kohn.

Read more.

Big Retail Gets Bigger as Smaller Players Struggle​​​

Big retailers already dominate Americans’ lives, and their grasp on consumers is only getting stronger, the Wall Street Journal reported. The three biggest retailers by revenue in the U.S. — Costco, Walmart and Amazon — accounted for about 11% of total retail sales back in 2014, based on their reported figures measured against national retail sales data from the Commerce Department. Their share of the market has been growing since then. In their last three reported quarters, these behemoths selling everything from groceries to appliances made up about 17% of retail sales and roughly 57% of retail sales growth over that period. Supermarkets have been a chronic casualty of the big retailers’ rise. Grocery stores accounted for about two-thirds of food-at-home spending in the U.S. in 2000, but their share shrank to 54% in 2023, according to the U.S. Department of Agriculture. Over the same period, warehouse clubs and supercenters such as Costco and Walmart nearly doubled their market share to 23%. Amazon hasn’t grown its share of the grocery market much, but it captures a sizable share of everything else: About three-fourths of U.S. households have Amazon Prime, its paid membership program, according to a 2024 survey from Evercore. Among some recent casualties are dollar stores, which industry analysts say are losing share to Walmart. The big-box retailer has drawn low-income consumers with a membership program that is half-price for those on government assistance. More than a fifth of Walmart+ members are on food stamps, according to survey results from Evercore. On its December earnings call, Dollar General said that it was testing out same-day home delivery from its stores — a move that looks like an effort to play catch-up with Walmart. (Subscription required.) Read more.

Subchapter V Experiences to Share? ABI Wants to Hear from You!

ABI is continuing its study of Subchapter V, and it needs your help! We are particularly interested in learning more about the real-world impact of Subchapter V. So our question is, do you have a story about a distressed business or creditor who has used or benefited from the subchapter? If so, could that case still happen under the lower debt cap for Subchapter V debtors? Any and all responses are welcome. Submit your story at https://abi.org/subvstories.
 

U.S. Unemployment Claims Fall to 211,000, the Lowest Level Since March​​​

The number of Americans applying for unemployment checks dropped last week to the lowest level since March, suggesting that most U.S. workers continue to enjoy unusually high job security, the Associated Press reported. Jobless claims dropped by 9,000 to 211,000 last week, the Labor Department reported Thursday. The four-week average of claims, which strips out week-to-week ups and downs, fell by 3,500 to 223,250. The overall numbers receiving unemployment benefits fell by 52,000 to 1.84 million, the lowest since September. Thomas Simons and Sam Saliba, economists at Jefferies, called the drops "encouraging'' in a commentary, but cautioned that seasonal adjustments around the holidays can throw off the numbers. The U.S. job market has cooled considerably from the red-hot hiring days of 2021-2023, when the economy was rebounding from COVID-19 lockdowns. Through November, employers added an average of 180,000 jobs a month in 2024, down from 251,000 in 2023, 377,000 in 2022 and a record 604,000 in 2021. Still, even the diminished job creation is solid and a sign of resilience in the face of high interest rates. Read more.

U.S. Mortgage Rates Rise to Highest Since Early July, Suppressing Demand​​​

U.S. mortgage rates climbed to an almost-six-month high during the Christmas holiday week, suppressing applications for home purchases and severely undercutting refinancing activity, Bloomberg News reported. The contract rate on a 30-year mortgage advanced 8 basis points to 6.97% in the period ended Dec. 27 after rising 14 basis points the previous week, according to Mortgage Bankers Association data released Thursday. The group’s index of home-purchase applications slid nearly 7% to the lowest level since mid-November. The refinancing gauge slumped more than 23% to a one-year low. While the figures are adjusted for seasonal effects, they are still prone to wide swings around the year-end holidays. Mortgage rates track Treasury yields, which continued to climb in late December after Federal Reserve policymakers projected a slower pace of interest-rate cuts in 2025 amid sticky inflation. Mortgage News Daily, which updates home financing costs more frequently, put the 30-year fixed rate at 7.07% on Tuesday. Read more.

Record Number of Activist Investors Joined Shareholder Rebellion in 2024​​​

A record number of activist shareholders mounted campaigns at global companies in 2024, a Barclays report showed on Thursday, as their pressure tactics produced strong returns, and further growth is likely this year, Reuters reported. "Looking back to 2024, it feels almost as if there was a shareholder revolt," said Jim Rossman, global head of shareholder advisory at Barclays. In 2024, 160 investors such as hedge funds pushed companies to make moves like improving strategy and operations or firing chief executives, including 45 who deployed the strategy for the first time, Barclays said. That's up more than 18% from 135 investors in 2023, which included 31 first-timers. The number of campaigns launched last year, 243, surpassed 229 in 2023 but was slightly below the record of 249 in 2018. Looking ahead to 2025, bankers, lawyers and analysts believe more companies will face shareholder attacks as last year's returns and expectations for continued equity market strength embolden investors. "Investors are no longer willing to sit and wait for promised improvements and are saying, 'We want the companies where we are invested to change right now,'" Rossman said. While performance figures for 2024 are not yet available, investors said several high-profile firms had returns approaching 30% last year. The S&P 500 rose a bit more than 23% over the same period. Read more.

Tenth Circuit Accepting Applications for Bankruptcy Judge Vacancy in Utah​​​

The U.S. Court of Appeals for the Tenth Circuit is seeking applications for a bankruptcy judgeship in the District of Utah. Bankruptcy judges are appointed to 14-year terms pursuant to 28 U.S.C. § 152. The position is located in Salt Lake City and will be available July 1, 2025, pending successful completion of a background investigation. The current annual salary is $223,836. Go to https://ca10.uscourts.gov/hr/jobs to view the position requirements and download the application. The deadline for applications is Wednesday, January 22, 2025.

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