Commercial Chapter 11 filings in July rose 52% year-over-year, adding to a feverish streak of corporate bankruptcies this year following the Covid-19 outbreak, new data show.
In July, businesses filed 642 Chapter 11 filings, compared to 423 during the same month last year, according to a report released Wednesday by bankruptcy software developer Epiq Systems Inc. More than 4,200 commercial restructuring cases have been filed in the U.S. since the beginning of the year, it said
The “significant” growth in July was expected, as the pandemic that shuttered businesses has reshaped consumer buying habits, Deirdre O’Connor, Epiq’s managing director of corporate restructuring, said in a statement.
“Therefore, we will continue to see large retail, energy, and transportation businesses taking advantage of the tools provided by a formal bankruptcy to restructure to be more profitable and competitive in the long-term,” she said.
Epiq’s latest data follows its report last month that commercial cases had increased 26% year-over-year in the first half of the year. June’s filings represented a 43% increase compared to the same month last year.
Bankruptcy filings in 2019 already had started to rise after eight years of decline.
A considerable number of Chapter 11 filings in 2020 are for subsidiaries of larger corporations, but the economic impact of Covid-19 has already pushed several large distressed companies into bankruptcy.
Ann Taylor parent Ascena Retail Group Inc., Chesapeake Energy Corp., Hertz Global Holdings Inc., J.C. Penney Co., and Chuck E. Cheese parent CEC Entertainment Inc. are among some of the big companies that were felled by the pandemic.
Fewer individuals have filed for bankruptcy so far this year compared to 2019, as government-backed programs provided direct cash payments and injected liquidity into the markets. But the number of Chapter 7 and Chapter 13 filings have steadily increased each month since April, according to Epiq.
“Perhaps these numbers are early indications of the pending personal bankruptcy spike expected to start later this year as the longer-term impact of the COVID-19 begins to manifest,” Epiq Senior Vice President Chris Kruse said in a statement.