Corporate Bankruptcies in the U.S. Reach Highest Level in 14 Years - FT

Forex - High interest rates and weakening consumer demand are punishing struggling groups, while corporate bankruptcies in the U.S. have reached their highest level since the global financial crisis. According to S&P Global Market Intelligence data, at least 686 U.S. companies filed for bankruptcy in 2024; this figure represents an approximate 8% increase compared to 2023 and is higher than any year since the 828 filings in 2010.

Fitch Ratings reported that out-of-court maneuvers to escape bankruptcy also increased last year, with bankruptcy numbers rising nearly twofold. Consequently, lenders offering priority credit to issuers with at least $100 million in total debt experienced the lowest recovery rates since at least 2016.

The collapse of party supplies retailer Party City exemplified the typical corporate failures of 2024. At the end of December, it filed for bankruptcy for the second time in many years after exiting Chapter 11 proceedings in October 2023. Party City stated it would close its 700 stores nationwide after struggling in "a highly challenging environment driven by inflationary pressures on costs and consumer spending, among other factors."

As the effects of the COVID-19 pandemic diminished, consumer demand decreased, adversely affecting companies reliant on discretionary consumer spending. Other significant bankruptcies last year included food storage manufacturer Tupperware, restaurant chain Red Lobster, Spirit Airlines, and cosmetics retailer Avon Products.

EY's chief economist Gregory Daco remarked, "The continuous rise in the costs of goods and services is exerting pressure on consumer demands." He noted that this burden is particularly heavy for families at the lower end of the income spectrum, but even those in the middle and upper tiers are behaving more cautiously.