Twisted Bailout Economy: Chapter 11 Bankruptcies Surged, But Commercial Chapter 13 Bankruptcies Plunged. 420,000 Small Businesses Closed Quietly, Highest Rate Ever

Twisted Bailout Economy: Chapter 11 Bankruptcies Surged, But Commercial Chapter 13 Bankruptcies Plunged. 420,000 Small Businesses Closed Quietly, Highest Rate Ever

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Stimulus and bailouts had a huge impact, for those that got them, and for those that didn’t.

By Wolf Richter for WOLF STREET.

In the world of struggling businesses, debt defaults, bankruptcies, and closures, there is now a clear dividing line.

On one side are those businesses that got bailed out by the government, whether they needed it or not, such as the $25 billion in grants and loans for a handful of airlines, or the $525 billion in PPP loans handed to 5.2 million business entities, from minuscule to large, and some fraudulent. On the same side are businesses with access to the capital markets that got bailed out by the Fed whose corporate bond buying programs drove credit markets into frenzy, eager to fund nearly anything.

But on the other side, are those businesses who didn’t get any of this – neither from the government, nor from the Fed, nor from the frenzied credit markets; and those businesses, often already limping for a while, got run over by the Pandemic.

In terms of publicly traded companies.

In September, another 54 large companies filed for bankruptcy, after 54 had already filed for bankruptcy in August, according to S&P Global Market Intelligence, bringing the total for the year as of October 4 to 509, the highest for the same period since 2010.

These are companies that are either publicly traded (minimum $2 million in assets or liabilities), or are private companies with debt that is publicly traded (minimum $10 million).

The largest bankruptcy filers in September included two Texas-based oil and gas producers: Oasis Petroleum, with over $3 billion in liabilities; and Lonestar Resources with $626 million in liabilities.

Energy companies were only in third place among the sectors with the most bankruptcy filings year-to-date. Here are the S&P’s top five bankruptcy sectors, with the number of filings so far:

  • Consumer discretionary: 103
  • Industrials: 70
  • Energy: 58
  • Healthcare 47
  • Consumer staples: 27

The long list of chain-store retailers that have filed for bankruptcy during the Pandemic got longer in September with filings, among others, by off-price department store Century 21 (Sep 10), candy-seller It’Surgar (Sep 23), and Forever 21 (Sep 30).

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.