• Sat. Apr 20th, 2024

Surge in Corporate Bankruptcies: 9 Filings in just Three Days, with Delaware’s High Number of Incorporations Factors in

BySamantha Jones

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

Bankruptcy filings are on the rise, with a significant increase in major corporate bankruptcies over the past 20 months. This week has been one of the busiest three-day periods for major corporate bankruptcies on record, according to data compiled by Bloomberg.

Nine companies have filed Chapter 11 cases since Sunday, including two telecommunication and two pharmaceutical companies. 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 Michael 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 Jones

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