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Corporate Bankruptcies Hit Highest Level in Since April 2023 Amid High Interest Rates

U.S. corporate bankruptcies reached their highest level in a year in April.

That’s according to a Sunday (May 12) report by Seeking Alpha, citing data from S&P Global Market Intelligence which shows companies pressured by continued high interest rates.

The data showed 66 new bankruptcy filings last month, up from 61 in March. S&P Global said the rate of bankruptcies has accelerated since the beginning of the year, though the 210 filings logged through April are down somewhat from the 224 recorded during the same time period last year.

The S&P report also says that the Federal Reserve’s decision not to cut interest rates likely dampened the hopes of businesses hoping to enjoy reduced borrowing rates. 

The report noted that three companies had upwards of $1 billion in liabilities when they filed for bankruptcy protection last month: apparel seller Express, Number Holdings, the parent company of discount retailer 99 Cents Only, and cloud computing company ConvergeOne

“This was an extremely difficult decision and is not the outcome we expected or hoped to achieve,” 99 Cents Only interim CEO Mike Simoncic said at the time.

“Unfortunately, the last several years have presented significant and lasting challenges in the retail environment, including the unprecedented impact of the COVID-19 pandemic, shifting consumer demand, rising levels of shrink, persistent inflationary pressures and other macroeconomic headwinds, all of which have greatly hindered the company’s ability to operate.”

In the case of Express, the bankruptcy came months after CEO Stewart Glendinning acknowledged the chain had not kept up with its shoppers’ habits.

“We’d gotten a little bit away from where our consumer was buying, and we were serving out [a] set of products that were not aligned with the customer set,” he said, adding that customers have been looking to dress more casually in the post-COVID era.

The Seeking Alpha report also cited recent findings by bankruptcy experts Epiq showing that total commercial Chapter 11 bankruptcies jumped 43% year over year in the first quarter of this year to 1,894.  Epiq also found that March marked the twentieth straight month in which total bankruptcies — both individual and commercial — saw month-over-month increases.

“Factors contributing to this trend are the higher cost of funds and interest rates, a reduction in consumer discretionary spending, higher housing costs, and a continued drawdown of excess savings,” Michael Hunter, vice president of Epiq AACER, said in a statement.