Bankruptcy Filings Jump 58% in 2023
According to the latest data from Debtwire’s Restructuring Insights report, corporate bankruptcies in the United States experienced a significant increase last year. The report revealed that bankruptcy filings rose by 58%, with the number climbing from 179 in 2022 to 282 in 2023.
Health Care Sector Witnesses a 117% Surge in Bankruptcies
The health care industry, in particular, bore the brunt of these bankruptcies, as cases soared by 117%, representing 21% of all the bankruptcy filings. Prominent examples include Envision Healthcare, which sought bankruptcy protection with a debt of $9.4 billion, and Aukumin, which accumulated $1.3 billion in debt before going bankrupt.
Catherine Corey, Debtwire’s global head of restructuring data, explained that major cases like these “defined the restructuring landscape last year, highlighting persistent challenges in the healthcare sector.” Factors such as declining patient numbers, insufficient reimbursement rates from Medicare and Medicaid, and staffing shortages with demands for higher wages contributed to the industry’s financial struggles.
Real Estate Takes the Second Spot
Following the health care industry, the real estate sector accounted for the second-highest number of bankruptcy filings, amounting to 11% of the total cases. Notably, Chinese real estate giant Evergrande’s Chapter 15 bankruptcy protection filing in a Manhattan court stood out with a staggering $38.86 billion debt, overshadowing all other cases in the report.
WeWork, the beleaguered office-sharing behemoth, was another prominent real estate company mentioned in the report. The company’s bankruptcy filing in 2023 marked a spectacular downfall from its once-estimated valuation of $47 billion.
Other Notable Bankruptcies from Last Year
The report also highlighted other significant bankruptcies from 2023, including pharmacy chain Rite Aid, trucking giant Yellow Corp., and Silicon Valley Bank.
Challenges and Factors Behind the Surge in Bankruptcies
“The 58% spike in bankruptcies in 2023 signaled a major shift in lenders’ attitudes, unwilling to prolong support for struggling companies,” said Catherine Corey. She pointed to a convergence of challenges that contributed to this surge, including the withdrawal of government support post-pandemic, inflation, rising interest rates, supply chain disruptions, global unrest, and stricter lending requirements. These factors created a perfect storm, making it increasingly difficult for struggling companies to sustain themselves.
The rise in corporate bankruptcies in the United States, particularly in the health care industry, underscores the tough financial circumstances faced by many companies. As economic challenges persist, it remains crucial for businesses to adapt and find innovative solutions to navigate these uncertain times.