In the last 2 years, the volume of bankruptcy filings has fluctuated because of the circumstances triggered due to the outbreak. All sectors of the economy were not prepared for an event and rushed to manage the financial impact. The industries that were hardest hit in the initial phase of the epidemic were travel, entertainment, retail food, hospitality, restaurants and energy. Even though there are still a lot of uncertainties in the near future, businesses are working hard to get back on track. However, most government assistance has been cut off or is coming to an end as well as rising inflation and stricter monetary policy will affect the ability of some businesses to sustain their financial stability. This means that we can make more realistic predictions for 2022. And what may be on the horizon is a surge the number of this Georgia Bankruptcy noted petitions.
Bankruptcy Review 2020 and 2021
In this uncertain and chaotic period, businesses across all industries are required to redesign their processes to be able to adapt. All over the globe, people have changed their routines, including the frequency with which they left their homes, the way they used their money, and even their careers. The global economic recession began. In conjunction with the government’s stimulus measures, have led to an increase in bankruptcy. Here’s a brief overview of the most prominent patterns of bankruptcy seen during the outbreak:
- In the year 2020 there was an increase of 40% in commercial deposits. The mandatory closures that will begin in March 2020 have affected numerous businesses since they’ve noticed a sudden decrease in the demand for their goods and services. Three sectors hit hard are energy, retail and foodservice. The filings for bankruptcy jumped significantly in the third and second quarters due to the fact that many businesses would not be able to survive the consequences from the pandemic. *
- Many had predicted that the number of commercial bankruptcy filings would continue to be excessive in 2021. However, it was not the situation. The economic conditions improved in the beginning of 2021 as a result of various things, including the massive introduction of vaccines and the reduction of restriction on customer and business transactions as well as lower unemployment rates historically low rates of interest and the greater distribution of government assistance. This resulted in a record year for filing bankruptcy claims by businesses according to data compiled by Epiq which saw a decrease of 50% when compared to the year prior. While some struggling businesses were waiting to see what would happen and hoped that assistance from government continued, some saved themselves from bankruptcy by restructuring their operations in order to ensure their businesses were able to survive. For instance, many restaurants and retail establishments have made improvements to their web presence or have introduced curbside and contactless services.
- The majority of bankruptcy filings for commercial companies in 2021 involved small and mid-market firms as evidenced by small business data found in Chapter 11, Subchapter V that was collected by Epiq. There were a few large or mega Chapter 11 case filed in 2021. With access to a large capital market and easily accessible finance, big companies are able to modify and extend the maturity of their loans. One notable exception to this was Chapter 11 filing of Nordic Aviation which is a regional aviation lessor. The filing of December permitted Nordic to refinance $6.3 billion of debt.
Bankruptcy Predictions for 2022
There are many unanswered questions in the midst of the ongoing pandemic however, the majority of people are returning to work and considering the reality of the economy’s slow recovery. Organisations that have lost assistance or were waiting to find out how things would play out are now faced with difficult financial choices. Restructuring could be the best solution to ensure that operations continue to be successful or to avoid devastating losses. These are some 2022 forecasts that are based on the bankruptcy pandemic that has been observed in the past:
- The economy is expected to recover gradually as well as in waves. Companies operating in industries that have greater risk factors articulated for bankruptcy are likely to see the largest number of filings this year and over the next few years up until effects from the pandemic subside and the economic situation improves. improve. Risk factors for this include shortages, disruptions to supply chain as well as interest rate hikes prices rising, as well as a lack of virtual services. The emergence of coronavirus variants can increase the chance of bankruptcy for companies that rely with models that require physical presence, since many of the travel and entertainment industries are hanging by an inch. With all of these variables and the Industries that are most susceptible to the risk of bankruptcy is the travel, hospitality, and retail.
- Healthcare has been an essential sector during the outbreak because of the urgent need for hospitals as well as other medical facilities to remain in the face of new conditions. Healthcare bankruptcies were comparatively minimal in 2021 with only 13 filings in businesses with more than 10 million of debt. One of the biggest bankruptcy filings of 2021 is Golf Coast Health Care, LLC which manages 28 assisted and skilled nursing facilities across Florida, Georgia and Mississippi. The sector was in financial strain prior to the outbreak however, hospitals and the health system’s revenues have plummeted because of COVID 19 and the COVID 19 epidemic. Hospitals have put off elective surgeries and many have delayed screenings, along with the primary care and specialty appointments. In the meantime the cost of purchasing PPE and other medical equipment has increased dramatically. Companies that have managed to delay restructuring might be forced to look into bankruptcy options in the coming year.
- Many experts believe that the student loan bubble is likely to pop. The federal student loan payment was delayed again in May. It’s not known whether there will be another extension, or if payments will resume at a certain time this year. If there’s no extension, a reasonable prediction would be the possibility that the bubble burst idea could come to fruition. Inflation, as well as other debt maturing on its own is likely to make it more difficult for many to make payments in the same way as they would before the epidemic.
This is the time of year for companies to look closely at their financial position and devise a sustainable strategy. The bankruptcy process can be an effective option to organize the debt and improve operations in order to get on a way to achieve profit.
If you enjoyed it, then you might want to read The Future of Student Loans and Bankruptcy Are There a Bubble waiting to burst?
Note: Statistics on shared commercial bankruptcies is available via Analysis of Epiq bankruptcies.