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US Corporations Are Filing For Bankruptcy At The Fastest Pace Since 2010

US Corporations Are Filing For Bankruptcy At The Fastest Pace Since 2010

One would not know it from looking at the S&P which just hit…

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2 days ago

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US Corporations Are Filing For Bankruptcy At The Fastest Pace Since 2010

One would not know it from looking at the S&P which just hit a 2023 high, but there is a bit of a bankruptcy crisis sweeping the US where companies are filing for bankruptcy at the fastest pace in 13 years, in a clear sign of a tightening credit squeeze as interest rates rise and financial markets have locked out all but the strongest borrowers.

The increase is most visible among large companies, where there were 236 bankruptcy filings in the first four months of this year, more than double 2022 levels, and the fastest YTD pace since 2010 according to S&P Global Market Intelligence.

Several large recognizable companies with hundreds or thousands of workers have filed for bankruptcy protection in recent weeks, including Bed Bath & Beyond and Vice Media, although their financial troubles predated the recent economic turmoil.

The bankruptcies did not slow down in May, when just the past week saw eight companies with more than $500 million in liabilities file for Chapter 11 bankruptcy, including five in a single 24-hour stretch last week, making this the busiest week for chapter 11 filings so far this year. In 2022 the monthly average was just over three filings.

Last week’s eight large filings, those with at least $50 million of liabilities, included those of now defunct woke "media empire" Vice Media, Envision Healthcare and Monitronics International. Prior to last week, the busiest seven-day stretch this year belonged to a week in late February that saw firms including Covid-19 testmaker Lucira Health, generic drugmaker Akorn and former SPAC Starry Group kick off insolvency proceedings

In total, twenty-seven large debtors have filed for bankruptcy so far in 2023 compared to 40 for all of 2022, according to figures compiled by bankruptcydata.com.

Among all types of companies, large and small, the increase in bankruptcies is somewhat more muted, with filings remaining below pre-pandemic levels and historic norms, according to Mark Zandi, chief economist at Moody’s Analytics. However filings, especially among large, unprofitable companies, are ramping at a frenzied pace as interest rates rise, pandemic-era government support dries up and sales growth slows amid a cooling economy.

There were about 16,200 bankruptcy filings among all types of companies in U.S. District Courts in the first quarter — up from 12,200 a year earlier, but still well below the 21,000-or-more-a-quarter in the pre-pandemic period, data from Moody’s Analytics shows. Even those pre-pandemic numbers were relatively low in historic terms, in part because low interest rates made it easy for companies to borrow.

Now, S&P Global forecasts that the 12-month trailing default rate for speculative-grade securities will jump from the current 2.5% to 4.5% by early 2024.

“The era of low interest rates and pandemic-related government support programs helped keep companies afloat that may have otherwise had few other options," S&P analysts said of their large-company data. “Now that interest rates are back to pre-Great Recession levels and pandemic support programs are largely over, we’re seeing a fresh uptick in a possible sign that companies are running out of time.”

Yields on junk bonds have more than doubled from less than 4% in mid-2021, as measured by the Bloomberg US High Yield Index. The Fed has warned that lenders could further contract the supply of credit to businesses after recent turmoil in the banking sector.

“Our general view is that we are going to see an increase in ‘hard restructurings’, driven by the combination of higher debt levels from the borrowing binge of Covid and rising interest rates. The triggers will be running out money and inability to refinance maturing debt,” said Bill Derrough, an investment banker at Moelis who advises clients across distressed situations. “Some companies have used every trick in the book and now have run out of tricks.”

Companies that sell nonessential consumer items have been harder hit than other sectors as Americans curb their spending amid high inflation, S&P said. Plant-Based Pizza Boston, catalogue retailer AmeriMark Interactive and the Party City retail chain are among the recent casualties.

Last month, the dress retailer David’s Bridal filed for bankruptcy for the second time in 5 years, and said it was seeking a buyer, days after informing state labor departments that it planned to lay off more than 9,000 employees nationwide. The 70-year-old company said its business was weighed down by “the post-covid environment and uncertain economic conditions.”

Perhaps the most notable recent bankruptcy was that of long-struggling Bed Bath & Beyond, which filed for bankruptcy in late April, got a boost from the wave of consumer spending during the pandemic — when Americans spent more time at home. But when the economic climate shifted and stubbornly high inflation reduced discretionary purchases, the retailer’s fortunes tumbled.

Recent filings make clear how some large, indebted companies were clobbered by the end of easy money. A Vice Media bankruptcy filing last week disclosed that the company had been cash flow negative for several years, forcing it to borrow heavily to fund operations. As interest rates rose, it became costlier for Vice to refinance those loans. For a delightful read on the collapse of the faux-woke media empire, which at one point was valued by idiots at almost $6 billion, read the following FT report.

Turmoil in the banking business in March also contributed to a small rise in bankruptcy filings in that sector this year, S&P said. The most notable filing was SVB Financial Group, the parent company of Silicon Valley Bank, which collapsed after a run on the bank’s deposits.

Tyler Durden Fri, 05/26/2023 - 18:00

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“What’s More Tragic Is Capitalism”: BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

"What’s More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years…

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May 28, 2023

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"What's More Tragic Is Capitalism": BLM Faces Bankruptcy As Founder Cullors Is Cut By Warner Bros

Authored by Jonathan Turley,

Two years ago, I wrote columns about companies pouring money into Black Lives Matter to establish their bona fides as “antiracist” corporations. The money continued to flow despite serious questions raised about BLM’s management and accounting. Democratic prosecutors like New York Attorney General Letitia James showed little interest in these allegations even as James sought to disband the National Rifle Association (NRA) over similar allegations. At the same time, Black Lives Matter co-founder Patrisse Cullors cashed in with companies like Warner Bros. eager to give her massive contracts to signal their own reformed status. It now appears that BLM is facing bankruptcy after burning through tens of millions and Warner Bros. cut ties with Cullors after the contract produced no — zero — new programming.

Some states belatedly investigated BLM as founders like Cullors seemed to scatter to the winds.

Gone are tens of millions of dollars, including millions spent on luxury mansions and windfalls for close associates of BLM leaders.

The usual suspects gathered around the activists like former Clinton campaign general counsel Marc Elias, who later removed himself from his “key role” as the scandals grew.

When questions were raised about the lack of accounting and questionable spending, BLM attacked critics as “white supremacists.”

Warner Bros. was one of the companies eager to grab its own piece of Cullors to signal its own anti-racist virtues.  It gave Cullors a lucrative contract to guide the company in the creation of both scripted and non-scripted content, focusing on reparations and other forms of social justice. It launched a publicity campaign for everyone to know that it established a “wide-ranging content partnership” with Cullors who would now help guide the massive corporation’s new programming. Calling Cullors “one of the most influential thought leaders in American public life,” Warner Bros. announced that she was going to create a wide array of new programming, including “but not limited to live-action scripted drama and comedy series; longform/event series; unscripted docuseries; animated programming for co-viewing among kids, young adults and families; and original digital content.”

Some are now wondering if Warner Bros. ever intended for this contract to produce anything other than a public relations pitch or whether Cullors took the money and ran without producing even a trailer for an actual product. Indeed, both explanations may be true.

Paying money to Cullors was likely viewed as a type of insurance to protect the company from accusations of racial insensitive. After all, the company was giving creative powers to a person who had no prior experience or demonstrated talent in the area. Yet, Cullors would be developing programming for one of the largest media and entertainment companies in the world.

One can hardly blame Cullors despite criticizism by some on the left for going on a buying spree of luxury properties.

After all, Cullors was previously open about her lack of interest in working with “capitalist” elements. Nevertheless, BLM was run like a Trotskyite study group as the media and corporations poured in support and revenue.

It was glaringly ironic to see companies like Warner Bros. falling over each other to grab their own front person as the group continued boycotts of white-owned businesses. Indeed, if you did not want to be on the wrong end of one of those boycotts, you needed to get Cullors on your payroll.

Much has now changed as companies like Bud Light have been rocked by boycotts over what some view as heavy handed virtue signaling campaigns.

It was quite a change for Cullors and her BLM co-founder, who previously proclaimed “[we] are trained Marxists. We are super versed on, sort of, ideological theories.” She denounced capitalism as worse than COVID-19. Yet, companies like Lululemon rushed to find their own “social justice warrior” while selling leggings for $120 apiece.

When some began to raise questions about Cullors buying luxury homes, Facebook and Twitter censored them.

With increasing concerns over the loss of millions, Cullors eventually stepped down as executive director of the Black Lives Matter Global Network Foundation, as others resigned.  At the same time, the New York Post was revealing that BLM Global Network transferred $6.3 million to Cullors’ spouse, Janaya Khan, and other Canadian activists to purchase a mansion in Toronto in 2021.

According to The Washington Examiner, BLM PAC and a Los Angeles-based jail reform group paid Cullors $20,000 a month. It also spent nearly $26,000 on meetings at a luxury Malibu beach resort in 2019. Reform LA Jails, chaired by Cullors, received $1.4 million, of which $205,000 went to the consulting firm owned by Cullors and her spouse, according to New York magazine.

Once again, while figures like James have spent huge amounts of money and effort to disband the NRA over such accounting and spending controversies, there has been only limited efforts directed against BLM in New York and most states.

Cullors once declared that “while the COVID-19 illness is tragic, what’s more tragic is capitalism.” These companies seem to be trying to prove her point. Yet, at least for Cullors, Warner Bros. fulfilled its slogan that this is all “The stuff that dreams are made of.”

Tyler Durden Sun, 05/28/2023 - 16:00

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Biden reaches ‘tentative’ US debt ceiling deal: Report

United States President Joe Biden has urged the United States Congress to “pass the agreement right away.“
Amid growing concerns…

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1 day ago

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May 28, 2023

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United States President Joe Biden has urged the United States Congress to “pass the agreement right away.“

Amid growing concerns of a potential default by early June, United States President Joe Biden and House majority leader Representative Kevin McCarthy have reportedly reached an “agreement in principle” to raise the federal government’s multitrillion-dollar debt ceiling.

According to a May 28 report from Reuters citing two sources familiar with the negotiations, the “tentative” agreement to raise the $31.4 trillion debt ceiling was reached after a 90-minute phone call between Biden and McCarthy on May 27.

Since publication time, Biden has confirmed via Twitter the existence of an “agreement in principle," explaining that it will prevent the U.S. from facing a “catastrophic default.“

Biden noted that “over the next day,” the agreement would go to the U.S. House of Representatives and Senate. He urged both chambers to “pass the agreement right away.“

Meanwhile, McCarthy also took to Twitter to confirm the agreement in principle, alleging that Biden “wasted time and refused to negotiate for months.“

Reuters reported that while “the exact details of the deal were not immediately available,” an agreement has been made to limit the U.S. government’s spending for the next two years, excluding expenses related to national security.

“Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025,” a source familiar with the deal said.

Related: Debt ceiling crisis: Best practices to navigate this market

This comes only weeks after U.S. Treasury Secretary Janet Yellen warned of a default risk as soon as June 1 if the debt limit isn’t suspended or raised, urging Congress to “act as soon as possible.“

Additionally, The U.S. Congressional Budget Office published a report on May 12, emphasizing that if the debt limit remains unchanged, there is a significant risk “that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations.“

In recent times, several analysts have shared a similar view that raising the debt ceiling could see more capital inflow into Bitcoin (BTC).

On May 17, MacroJack, a former Wall Street trader, warned his followers in a tweet that the U.S. debt ceiling talks are “all show.“

He emphasized how important it is to own hard assets as the dollar will be “printed into oblivion,” while stating that Bitcoin is the “fastest horse in the race.“

Meanwhile, Jesse Myers, chief operating officer of investment firm Onramp, reminded his 50,100 Twitter followers of what happened during the COVID-19 pandemic, stating that “Bitcoin was the winner during the last round of stimulus.“

He proposed the idea that history might repeat itself if the debt ceiling were to be raised, as it would prompt the Federal Reserve to print more money.

Update on May 28, 2023, at 03:15: This article has been updated to include United States President Joe Biden's tweet.

Magazine: Visa stablecoin plan, debt ceiling’s effect on Bitcoin price: Hodler’s Digest, April 23-29

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Biden reaches ‘tentative’ US debt ceiling deal: Report

United States President Joe Biden has urged both the United States House and Senate to "pass the agreement right away."
Amid growing…

Published

1 day ago

on

May 28, 2023

By

United States President Joe Biden has urged both the United States House and Senate to "pass the agreement right away."

Amid growing concerns of a potential default by early June, the United States President Joe Biden and Republican Kevin McCarthy have reportedly reached an "agreement in principle" to raise the federal government's multi-trillion dollar debt ceiling.

According to a May 28 report from Reuters, citing two sources familiar with the negotiations, the "tentative" agreement to raise the $31.4 trillion debt ceiling was reached after a 90-minute phone call between Biden and McCarthy on May 27.

Following the publication of this article, Biden has since confirmed via Twitter the existence of an "agreement in principle," explaining that it will prevent the U.S. facing a "catostrophic default."

Biden noted that "over the next day," the agreement will go the U.S. House and Senate. He urged both chambers to "pass the agreement right away."

Meanwhile, McCarthy also took to Twitter to confirm the agreement in principle, alleging that Biden "wasted time and refused to negiotate for months."

Reuters reported that while "the exact details of the deal were not immediately available," an agreement has been made to limit the U.S. government's spending for the next two years, excluding expenses related to national security. 

"Negotiators have agreed to cap non-defense discretionary spending at 2023 levels for one year and increase it by 1% in 2025" a source familiar with the deal said.

Related: Debt ceiling crisis: Best practices to navigate this market

This comes only weeks after U.S. Treasury Secretary Janet Yellen warned of a default risk as soon as June 1 if the debt limit isn't suspended or raised, urging Congress to "act as soon as possible."

Additionally, The U.S. Congressional Budget Office (CBO) published a report on May 12, emphasizing that if the debt limit remains unchanged, there is a significant risk "that at some point in the first two weeks of June, the government will no longer be able to pay all of its obligations."

In recent times, several analysts have shared a similiar view that raising the debt ceiling could see more capital inflow into Bitcoin (BTC)

MacroJack, a former Wall Street trader, warned his followers in a tweet on May 17 that the U.S. debt ceiling talks are "all show."

He emphasized how important it is to own hard assets as the dollar will be "printed into oblivion," while stating that Bitcoin is the "fastest horse in the race."

Meanwhile, Jesse Myers, chief operating officer of investment firm Onramp reminded his 50,100 Twitter followers of what happened during the Covid-19 Pandemic, stating that "Bitcoin was the winner during the last round of stimulus."

He proposed the idea that history might repeat itself if the debt ceiling were to be raised, as it would prompt the Federal Reserve to print more money.

Update on May 28, 2023, at 03:15: This article has been updated to include United States President Joe Biden's tweet.

Magazine: Visa stablecoin plan, debt ceiling’s effect on Bitcoin price: Hodler’s Digest, April 23-29

Read More

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