• Sat. Apr 20th, 2024

Surge in Corporate Bankruptcies: The Impact of Higher Interest Rates and Decreased Consumer Spending

BySamantha Nguyen

Apr 3, 2024
Increase in Business Bankruptcies as Slow Decline Transforms into Rapid Failure

Bankruptcy filings have been steadily on the rise over the past 20 months, with this week being one of the busiest three-day periods for major corporate bankruptcies on record. Nine companies have filed big Chapter 11 cases since Sunday, including two telecommunication and two pharmaceutical companies. This trend has been attributed to higher interest rates and a decrease in consumer spending according to Michael Hunter, vice president at Epiq.

Interestingly, five of these cases were filed in Delaware, a main hub for restructuring cases due to the high number of companies incorporated there. Pre-bankruptcy deal-making has also become more common among companies seeking restructuring, with the goal of reducing costs and the time required under court supervision.

Despite the increase in business bankruptcies, bankruptcy lawyer Derek Abbott notes that this doesn’t necessarily indicate broader economic trouble. He has seen a rise in restructuring work in recent months, even as the US economy avoided predictions of a recession when the Federal Reserve increased interest rates. Abbott highlights that certain sectors such as telecom, retail, and pharmaceutical are facing challenges that contribute to the rise in bankruptcy cases.

Commercial insolvencies saw a significant jump of 43% in the first three months of 2024 compared to the same quarter the previous year, and Hunter anticipates that filings will continue to rise throughout the year. The diverse nature of the US economy means that even in times of overall growth, some sectors will continue to struggle, leading to an increase in bankruptcy cases.

By Samantha Nguyen

As a content writer at newsskio.com, I weave words to craft compelling narratives that captivate readers and bring stories to life. With a keen eye for detail and a passion for storytelling, I strive to create engaging and informative content that resonates with our audience. Whether I'm delving into the latest news trends or exploring unique angles on various topics, my goal is to deliver quality content that informs, entertains, and inspires. Join me on this journey as we uncover the news stories that matter most.

Leave a Reply