While landlord forbearances in government aid continue to flow to both individuals and corporations, a recent analysis by S&P global market intelligence reveals that we have already reached a 10 year high for business bankruptcies for the year to date. The initial sectors impacted by bankruptcies the most include retail, energy, and manufacturing. Companies in those industries have scores of creditors. The Pier One Imports bankruptcy alone is estimated to have between 100,000 and 150,000 creditors.
The energy industry, particularly in exploration and production also involves a wide range of companies up and down the value chain, creating a tremendous ripple of creditors throughout the industry when one company goes bankrupt. Of course, manufacturers also purchase many inputs, ranging from parts to packaging material to capital equipment, each of which represent a phalanx of creditors as well.
The Federal Reserve’s Main Street Lending Program has reduced the risk for banks to continue to loan money and provide liquidity to these companies and a strong stock market has kept yields low on publicly issued corporate debt, even that which might be classified as “Junk.” This capital availability still cannot compensate for changes in demand patterns, such as far less purchasing of energy. For certain sectors of the energy industry, a greater emphasis on electric vehicles, will continue to pressure the industry as well.
What does it mean for you and your business? Fasten your seatbelts. Odds are quite high you will end up as a creditor and one or more bankruptcies. Fortunately, Proxifile can help you pursue your claims with minimal effort and cost for yourself. The world has not ended: people will continue to use energy, buy manufactured goods and even make purchases from retailers once travel restrictions are lifted or existing supplies run low. This means that most of these companies should be able to reorganize and they still have valuable assets that can provide recompense to their creditors.