Companies are defaulting on their loans and filing for bankruptcy in what is expected to be a record wave of insolvencies and defaults.
Interventions from the Fed and Congress and excitement about the removal of lockdown orders have boosted equity and debt markets, the real economy is quietly collapsing.
So far this month, 27 firms that report at least $50 million in liabilities have sought bankruptcy protection, Bloomberg reports.
- That’s the highest monthly total since May 2009.
What to watch: Already this year, 88 companies globally have defaulted on their debt, according to S&P Global. That’s nearly double the number of corporate defaults to this point in 2019 (49) and more than double 2018’s total (43).
- Of the 88 defaults, 59 have been the result of missed interest and principal payments or bankruptcy.
Distressed debt investors and law firms are gearing up for the onslaught of bankruptcies, insolvencies and liquidations expected this year–congressional leaders were warned that federal bankruptcy courts are likely to “be overwhelmed by this flood of cases.”
- Centerbridge Partners recently activated a roughly $3 billion capital pool that had been on standby for four years to direct at distressed assets, the firm’s co-managing partner Jeffrey Aronson told the Wall Street Journal.
“You have to recognize that this recession, as tough as it is, has just started,” Aronson said.