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Parkwest News Brief 3

Corporate Bankruptcies End 2020 at 10-Year High

In all, 630 companies declared bankruptcy during the year.

By Les Shaver | January 07, 2021

As the economic repercussions from the COVID pandemic continue to unfold, corporate bankruptcies are piling up.

S&P Global Market Intelligence says US corporate bankruptcies reached their worst levels since 2010 when 900 companies declared bankruptcy. In all, 630 companies declared bankruptcy during the year. In 2019, 578 companies declared bankruptcy, while 513 declared bankruptcy in 2018.

S&P’s analysis is limited to public companies or private companies with public debt where either assets or liabilities at the time of the bankruptcy filing are at least $2 million.

As COVID forced lockdowns across the country, many retailers suffered. The high-profile bankruptcies included Neiman Marcus Group Inc., J. C. Penney Co. Inc., Ascena Retail Group Inc., Tailored Brands Inc., Fieldwood Energy Inc. and Chesapeake Energy Corp, according to S&P.

The bankruptcies didn’t stop at the end of the year. Neno Cab Corp., financing solutions provider Renovate America Inc. and Adeptus Health LLC, which operates a network of independent emergency rooms, were among the 23 companies seeking bankruptcy protection between Dec. 14, 2020, and Dec. 31, 2020, with 23 companies going bankrupt. However, December recorded the lowest number of monthly filings for 2020 at 39, according to S&P.

Unfortunately, the pace of bankruptcies probably won’t slow in 2021.

Next year, there will likely be an increase in bankruptcies and foreclosures across retail segments, particularly those that were already struggling before the pandemic.

“There will be continued retail bankruptcies and store closures in 2021,” Alex Zikakis, president and founder of Capstone Advisors, told in an earlier interview. “Many of the bankruptcies and store closures will be in the categories that were already in decline, such as department stores and apparel, but will also temporarily affect service and entertainment categories such as sit-down restaurants, fitness, and group entertainment venues.”

Bankruptcy, though, does force a landlord into a restructuring process, says Luis Martinez-Monfort, founding partner of law firm Gardner Brewer Martinez-Monfort.

They might go into bankruptcy with a working business model,” Martinez-Monfort told in an earlier interview. “They can pay their regular monthly payments, and they have to while they’re using the lease space in bankruptcy. All they need is for the judge to approve a plan to pay back the arrears–the five or six months they haven’t paid. They are going to pay that back over time.”