Large Numbers of US Companies Are Being Forced Into Covid-Driven Bankruptcy

There is a circular impact of healthcare concerns leading to layoffs which, in turn, lead to further layoffs that mean consumers have less income to spend. JL

Ben Winck reports in Business Insider:

US filings totaled 3,427 on June 24, (which) closes in on the financial-crisis reading of 3,491 companies entering bankruptcy in the first half of 2008. Some of the biggest names to file in 2020 include Hertz, JC Penney, J Crew, Chesapeake Energy and Cirque du Soleil. The outbreak initially tore into global supply chains and firms with exposure to China as the country issued strict lockdowns. As the virus spread across the rest of the world, quarantine orders stifled consumer spending and manufacturing activity.

• US companies are filing for Chapter 11 bankruptcy at the fastest pace since 2013.
• Year-to-date filings reached 3,427 on June 24, bringing the metric close to the 3,491 filings made in the first half of 2008.
• The wave of bankruptcies was largely driven by the coronavirus pandemic and its disruption to global supply chains, consumer spending, and manufacturing activity.
• Firms across a range of industries have entered insolvency, from car-rental chain Hertz to circus company Cirque du Soleil.

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The coronavirus' economic fallout is fueling Chapter 11 bankruptcy filings at the fastest pace since 2013, the Financial Times reported.

US filings totaled 3,427 on June 24, according to data from Epiq seen by the Times. The reading also closes in on the financial-crisis reading of 3,491 companies entering bankruptcy in the first half of 2008.

Chapter 11 bankruptcy is among the most popular options for businesses to restructure in the midst of insolvency. Some of the biggest names to file in 2020 include Hertz, JC Penney, J Crew, and Chesapeake Energy. Circus company Cirque du Soleil is one of the latest to join the pack after filing for bankruptcy on Monday.

The coronavirus pandemic attacked corporate income on all fronts through the start of the year. The outbreak initially tore into global supply chains and firms with exposure to China as the country issued strict lockdowns. As the virus spread across the rest of the world, quarantine orders stifled consumer spending and manufacturing activity. Companies were forced into months of frozen revenue streams.

Companies are still a ways away from repeating the bankruptcy trend seen during the last US recession. A total of 8,614 firms filed for bankruptcy protection in 2008 before an additional 12,644 companies filed the following year, according to the Times. Still, rising coronavirus case counts could prolong shutdowns and boost insolvency across industries.

The wave of bankruptcies isn't deterring companies from issuing debt to ride out the pandemic. Investment-grade bond sales surged past the $1 trillion threshold at the fastest pace in history in late May as companies rushed to take advantage of strong risk-on activity. The Federal Reserve's move into corporate debt markets prompted an influx of investors looking to buy companies' bonds. The same threshold wasn't breached until November in 2019.