Corporate bankruptcies in the United States surged during the first quarter of the year, reaching levels not seen since 2010. According to S&P Global Market Intelligence, 188 large U.S. companies filed for bankruptcy between January and March, a notable increase from the 139 filings during the same period in 2024, which was a 14-year high at the time. These recent figures are the highest for a first quarter since 2010, when 254 bankruptcies were recorded as the economy struggled in the aftermath of the financial crisis.
“Companies, especially those with fragile balance sheets, are encountering significant challenges as they face maturing debts that require refinancing at higher interest rates than those available during issuance,” noted S&P Global Market Intelligence.
Among the notable bankruptcy filings this year were electric vehicle maker Nikola and crafts retailer Joann Fabrics. The report highlighted that non-investment-grade companies are experiencing heightened debt pressures and are slightly less capable of covering their interest payments with available cash. This financial strain is evident in the fact that the largest number of bankruptcies occurred in the industrials sector, with 32 filings, followed by the consumer discretionary sector, which had 24.
S&P Global also reported that the industrials and consumer discretionary sectors of the S&P 500 experienced declines of 0.53% and 13.97% respectively in the first quarter. Other significant companies that filed for bankruptcy protection include F21 OpCo LLC, owner of the Forever 21 apparel chain, restaurant chain Hooters, and genetic testing company 23andMe.
Despite the rise in bankruptcies compared to the previous year, the figures remain substantially lower than those during the peak of the financial crisis in 2009, when 1,836 companies declared bankruptcy. The highest monthly total for bankruptcy filings since 2020 was recorded in July 2020, with 74 filings.
Economic Impact and Consumer Concerns
The increase in corporate bankruptcies is a reflection of broader economic challenges that could have significant implications for both consumers and businesses. As companies grapple with high debt levels and increased refinancing costs, there could be potential job losses and a reduction in consumer confidence. This might lead to decreased spending, further slowing economic activity.
Industries experiencing the highest bankruptcy rates, such as industrials and consumer discretionary, may face additional strain as they navigate financial pressures. Consumers may notice changes in the availability of goods and services, stemming from company closures or restructuring efforts. For communities that rely heavily on these industries, particularly those with significant employment in these sectors, the financial instability could have far-reaching social and economic effects.
While the current bankruptcy levels do not yet match those seen during the financial crisis, the trend warrants close attention. Policymakers and economic stakeholders will need to monitor these developments to mitigate potential negative impacts on the broader economy and to support affected sectors and communities.
