First, the good news: Corporate bankruptcies in 2022 have been running below average. Now, the bad: That is about to change. Big time.
Government stimulus, post-pandemic demand, and historically low interest rates combined to give companies the edge during the first half of 2022. Organizations that survived the pandemic shutdowns thrived as the world recovered.
In fact, Cornerstone Research, which tracks business bankruptcy trends in Chapter 7 and Chapter 11 bankruptcy filings by companies with assets of $100 million or more, says in its midyear 2022 update report that there were only 20 bankruptcies filed by companies with $100 million plus in asset during the first six months of the year. It’s the lowest midyear total since the second half of 2014.
But the US Federal Reserve is waging war on inflation with historically fast increases in interest rates – more than 3 percentage points in just six months. That, coupled with the threat of a global economic recession, is spelling trouble for highly leveraged companies and underperforming firms.
We asked two turnaround specialists to walk us through the highly charged bankruptcy landscape as 2023 looms.