US corporate bankruptcy filings at 10-year high as COVID-19 pandemic inflicts economic hardship
U.S. business bankruptcies are poised for a decade high, underscoring the economic pain inflicted by the COVID-19 pandemic and efforts to limit the spread of the disease.
The total number of bankruptcies announced by US companies so far this year stands at 470, the most for any comparable period since the start of 2010, according to S&P Global Market Intelligence.
S&P’s analysis considered both public and private companies with public debt.
Most bankruptcies were concentrated in retail, energy and manufacturing, with the largest defaults such as JC Penney and Chesapeake Energy occurring exclusively in these sectors. Analysts say many of these companies were already facing significant headwinds before the coronavirus hit.
This largely explains why the high number of bankruptcies has not dampened investor optimism in the corporate credit markets, where major US corporations raise funds.
Even for bonds from below-investment-grade issuers, or “junk” debt, their yields were 5.62% on Tuesday, half their level from their peak in mid-March, according to ICE. Data Services.
Much of the resilience of companies with access to public capital markets is due to the Federal Reserve’s rapid deployment of its emergency lending facilities. Support from the US central bank has helped prop up bond issuance, allowing companies to raise funds to weather the coronavirus crisis.
But businesses more reliant on bank loans and other forms of credit have been left behind as financial institutions pulled back to protect their balance sheets, according to an August report from the Bank for International Settlements.