The rise of the MEGA bankruptcy: 459 US companies filed for bankruptcy this year – the most since 2020 – and 16 had more than $1 billion in assets
- Economists warn that large-scale bankruptcies could have devastating consequences
- So far this year, 459 companies have filed for bankruptcy – more than in 2021
- Bed Bath and Beyond, trucking company Yellow and Silicon Valley Bank are among the biggest victims
Large-scale corporate bankruptcies are at their highest levels since 2020 as high interest rates continue to plague businesses.
This year, giants like Bed Bath and Beyond, trucking company Yellow and wedding retailer David’s Bridal filed for bankruptcy thanks to a perfect storm of rampant inflation, high tariffs and supply chain disruptions.
So far this year, some 459 companies have filed, already surpassing the 373 in 2022 and the 408 in 2021, according to figures from S&P Global. InsideR.
Moreover, the number of so-called ‘megabankruptcies’ – those of companies with more than $1 billion in assets – reached 16 in the first half of the year.
By comparison, figures from consultancy Cornerstone Research show that between 2005 and 2022 there have been an average of eleven ‘megabankruptcies’ in the first six months of each year.
So far this year, some 459 companies have filed, already up from 373 in 2022 and 408 in 2021, according to S&P Global figures cited by Insider.
Cornerstone analysts added that the largest corporate failure this year was SVB Financial Group, the parent company of Silicon Valley Bank, which had $175.4 billion in customer deposits at the time of filing.
Economists warn that the increase in large-scale collapses could have devastating consequences for the economy.
For example, the demise of trucking company Yellow — which reportedly had $2.15 billion in assets at the time of the filing — reverberated through the domestic shipping and real estate markets on Wall Street.
The rise in bankruptcies combined with a weakening stock market and a sharp rise in credit card delinquencies has led to fears that the US is heading for a recession.
But Steven Blitz, chief US economist at GlobalData TS Lombard, stressed that any recession would be less severe than the 2007-2009 recession.
He told the Wall Street Journal: “You won’t see the kind of bankruptcies and balance sheet stress you saw during that period again.”
He added that the economy was not “heading into a doom-death loop.”
In addition, the number of so-called “megabankruptcies” – those of companies with more than $1 billion in assets – reached 16 in the first half of the year. Bed Bath and Beyond reportedly had assets worth $4.4 billion when it closed in April filed for bankruptcy
Figures from the US Labor Department show that employers added 336,000 jobs in September. The unemployment rate also remained at 3.8 percent last month.
And consumer spending has remained strong, after rising 0.4 percent in August (according to the latest available figures).
Still, companies are struggling to keep up with higher interest rates. Many built up debt when interest rates were extremely low, making them vulnerable to any rate hikes.
The Fed rate is currently between 5.25 and 5.5 percent – up from 0.5 percent in April 2020 – after deciding to hold it steady at last month’s meeting. Economists predict another surge will occur before the end of the year.
Amy Quackenboss, executive director of the American Bankruptcy Institute, told the WJ: ‘Companies have survived in recent years by taking advantage of ultra-low interest rates.
“But a lot of these companies are now seeing those loans mature, and they’re having trouble refinancing because interest rates are significantly higher now.”
Aircraft leasing company Voyager Aviation Holdings is among those attributing its bankruptcy, filed this summer, to higher interest rates.