While many Idaho businesses are concerned about the current economic uncertainty and how it might impact their operations, recent data about large corporate business bankruptcy filings in 2022 shows a downward trend. Corporate bankruptcy filings in the first half of 2022 were significantly lower than during the first half of 2021, indicating that large corporations have benefitted from stimulus programs implemented by the government in the past few years. However, the situation might change in 2023 with increasing inflation and higher interest rates.
Decline in large corporate bankruptcy filings
During the first half of 2022, only 20 companies with assets of $100 million or more filed for bankruptcy protection under Chapter 7 or Chapter 11. By contrast, 43 large corporations with assets of $100 million or more filed for business and commercial bankruptcy during the first half of 2021, and 89 did so during the first half of 2020. Among large corporations with assets of $1 billion or more, four filed for bankruptcy during the first half of 2022, 20 did during the first half of 2021, and 60 did during the first half of 2020.
What’s behind the decline in large corporate bankruptcies?
During the past few years, the government has implemented some stimulus programs to prop up the flagging economy, and interest rates were low, allowing companies to borrow at lower rates. Large corporations also benefitted from high levels of debt forbearance.
While the decline in bankruptcy filings among large corporations over the past few years is good news, some experts worry that the filing rates will increase during 2023. The Federal Reserve has increased interest rates several times, making borrowing more expensive for businesses of all sizes. Some companies with high levels of debt also face inflationary pressures when purchasing needed products, and they might be unable to keep up with their debt repayment schedules. This could lead to a need to restructure debts and the possibility of more bankruptcy filings in the near future.