The economic disruptions caused by COVID-19 has sparked a wave of large corporate bankruptcy filings in 2020.
According to a new report by Cornerstone Research, this trend is particularly notable among companies with more than $1 billion in reported assets.
The report, Trends in Large Corporate Bankruptcy and Financial Distress: 2005–Q3 2020, found that 138 companies with more than $100 million in assets filed for Chapter 7 or Chapter 11 bankruptcy protection in the first three quarters of 2020. That figure is 84% higher than the 75 bankruptcies by companies with more than $100 million in assets filed during the same period in 2019. Courts in Delaware, the Southern District of Texas and the Southern District of New York accounted for 80% of the bankruptcy filings during the first three quarters of 2020.
There were 52 mega bankruptcies (those filed by companies reporting more than $1 billion in assets) in the first three quarters of 2020, more than the number of mega bankruptcies in any full year between 2005 and 2019 except for 2009, which had 57 mega bankruptcies.
“Mega bankruptcy filings were concentrated in two industry sectors — mining, oil and gas, and retail trade — as oil prices collapsed and remain depressed, and traditional retailers faced an increasingly difficult environment,” Allie Schwartz, co-author of the report and a principal for Cornerstone Research, said. “Those two industries accounted for more than half of the mega bankruptcies in the first three quarters of 2020.”
In each of the first three quarters of 2020, 34, 55 and 49 companies with more than $100 million in assets filed for bankruptcy, respectively, compared with the quarterly average of 19 for the 2005–2019 period. The second quarter’s 55 filings marked the second-highest total for any quarter since 2005, only behind the 65 bankruptcies in Q1/09 during the 2008 financial crisis. However, bankruptcy filings appear to have returned to lower levels after peaking in July 2020. There were 14 and 11 such bankruptcies in August 2020 and September 2020, respectively, compared with 24 in July 2020.
