Bankruptcy Trends: What can we expect going forward?

Bankruptcy Trends: What can we expect going forward?

For those of you who have been on the Dore Rothberg McKay Bankruptcy Alert distribution list since before 2020, you know things have been slowing down quite a bit. In a February 3rd article, the Wall Street Journal predicted the low levels of corporate bankruptcies to continue at least in the near term.

To paraphrase, the article identifies two main reasons: (1) there is so much capital that anything can get financed; and (2) the loosening or in some cases elimination of debt covenants. Whereas previously these covenants often prevented companies from restructuring their debt out of court, loans nowadays seem to carry fewer stipulations requiring borrowers to meet financial targets. This has likely allowed companies to avoid defaults even when their earnings begin to drop.

?As a visual, here is some data I pulled from a separate reporting service to help show you how staggering the difference in business bankruptcy filings has been since 2019, all industries. Note the blue line (2022 so far):

?Additionally, here is some data on where we have seen bankruptcy industry trends shift away from oil and gas over the past 12 months:

?Although you are hearing from us less on the Bankruptcy Alert end, I want to remind you all that Dore Rothberg McKay is still watching for new filings every day, and we will have your back if/when your customers start filing bankruptcy again (don’t worry—I knocked on wood as I typed that).

?As a reminder, our firm is also home to an ace litigation team—that is expanding. Keep us in mind if you have a customer that isn’t paying timely, or you run into any job disputes. But for now, we will celebrate oil prices breaking $90 again. Stay warm and have a great weekend.

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