Secondly, the structure of corporate debt is much different than before the global financial crash. Still, S&P 500 earnings have begun to slow this year, falling over 5% in the second quarter compared to last year.
While some companies have cut costs, others have hiked prices in an inflationary environment, creating buffers for rising interest payments. This can be explained in part by stronger than anticipated profits seen in 2022. corporations have been resilient despite the sharp rise in borrowing costs and economic uncertainty.
With a vast share of debt coming due this year, the company was unable to make payments due to higher borrowing costs. It once made up nearly 20% of bedding sales in America. Mattress giant Serta Simmons filed for bankruptcy early this year. Among the most notable are retail chain Bed Bath & Beyond and the parent company of Silicon Valley Bank. This year, 16 companies with over $1 billion in liabilities have filed for bankruptcy. These additional costs, combined with higher wages, energy, and materials, among others, mean that companies may be under greater pressure to cut costs, restructure their debt, or in the worst case, fold. corporate interest costs have increased 22% annually compared to the first quarter of 2021. Historically, both sectors carry significant debt on their balance sheets compared to other sectors, putting them at higher risk in a rising rate environment. Represents public or private companies with public debt where either assets or liabilities are greater than or equal to $2 million, or private companies where assets or liabilities are greater than or equal to $10 million at time of bankruptcy.įirms in the consumer discretionary and industrial sectors have seen the most bankruptcies, based on available data. Corporate bankruptcies are rising at the fastest pace since 2010 (barring the pandemic), and are double the level seen this time last year.īelow, we show trends in corporate casualties with data as of July 31, 2023: So far in 2023, over 400 corporations have gone under. This graphic shows the surge in corporate bankruptcies in 2023 based on data from S&P Global. Overstretched balance sheets coupled with 11 interest rate hikes since last year have added to mounting challenges for companies across many sectors. While many expected a wave of bank failures to follow, much of this has since been averted-but cracks have begun to emerge with Moody’s recent downgrading of 10 small and mid-sized banks.Īcross the wider corporate landscape, bankruptcies have begun to tick higher. In March, Silicon Valley Bank collapsed, plunging its parent company SVB Financial Group into bankruptcy a week later.
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