The next big wave of U.S. bankruptcy filings won’t happen until mid-2021, when companies that borrowed heavily to survive COVID-19 hit a wall, Bloomberg News reported. A distressed debt surge in the second or third quarter of 2021 will include bankruptcies and restructurings, said bankruptcy attorney James Sprayregen of Kirkland & Ellis. Debt-for-equity swaps will also leave some companies with new owners, he said. After a boom in corporate distress when economies shut down to deal with the pandemic, 2020 had been expected to be the biggest bankruptcy year ever. The pace of bankruptcies was widely expected to pick up after last month, which was slower than May-July, but still the worst August on record. In the past week there were just four filings by companies with more than $50 million in liabilities, including iconic New York department store chain Century 21 Stores. That’s down from six filings a week, on average, from April to July, but in line with August’s weekly average. There have been 187 bankruptcy filings year-to-date by companies with more than $50 million in liabilities, according to data compiled by Bloomberg. That’s the most for any comparable period since 2009, when there were 271 in the full year, the data show. Global corporate defaults picked up after slowing in August, with five issuers added to the default tally last week, according to a Sept. 11 report from S&P Global Ratings, which highlights risk in CCC rated debt. “So far in 2020, 152 out of 171 defaults, or nearly 90%, were from entities rated CCC and below before default,” said Sudeep Kesh, head of S&P Global Credit Markets Research. Read more.
Sprayregen will be among the speakers at the Insolvency 2020 Virtual Summit kicking off today. Click here for more information and to register.
