Coronavirus could push US bankruptcies to worst levels in 10 years
More than 420 companies have gone bankrupt so far in 2020
The coronavirus pandemic has pushed U.S. companies to go bankrupt at a rate that could make 2020 the worst year for bankruptcies since 2010 during the fallout of the Great Recession, according to a new report from S&P Global.
More companies have gone bankrupt through Aug. 9 of this year compared to the same period in previous years going back to 2010. Four hundred twenty-four companies have gone bankrupt in 2020 through Aug. 9, compared with 546 over the same period in 2010.
DISCOUNT DEPARTMENT STORE STEIN MART FILES FOR BANKRUPTCY, MAY CLOSE ALL 281 STORES
Experts think 2020 could match or exceed 2010 for business bankruptcies – 2010 saw 819 companies file for bankruptcy, according to S&P Global.
Companies that have filed for bankruptcy amid the coronavirus pandemic include rental car company Hertz, luxury department store Lord & Taylor, and, most recently, discount clothing and home goods retailer Stein Mart.
In this Jan. 2, 2019, file photo, women peer in the front door of Lord & Taylor's flagship Fifth Avenue store which closed for good in New York. (AP Photo/Kathy Willens, File)
"In those types of cases, the big restaurant chains, big retail chains, more often than not they don’t just disappear a la Toys 'R' Us," John Sparacino, an attorney with McKool Smith who specializes in bankruptcy, told FOX Business. "Usually the more common outcome is you might see a significantly smaller footprint. You might see 800 locations go to 400 locations."
Consumer-focused businesses were disproportionately affected, with more than 100 going bankrupt in 2020, according to S&P Global. Many businesses in the energy space were also hurt.
"The retail story and the energy story is somewhat obvious," Sparacino said. "We’re starting to see some of the restaurant chains dip into bankruptcy also, like California Pizza Kitchen."
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S&P Global's analysis applied to public and private companies with public debt; the public companies had at least $2 million in assets or liabilities at the time of the bankruptcy filing, while the private companies had at least $10 million.
Thirty-five of the companies that filed for bankruptcy this year reported over $1 billion in liabilities, including oil and natural gas producer Chesapeake Energy, according to S&P Global.