The number of large corporate bankruptcies dropped by almost half in April from a year earlier, while the amount of tradable distressed debt fell to the lowest since the pandemic began.
There were 10 bankruptcy filings from companies with at least $50 million of liabilities in April, according to data compiled by Bloomberg. That’s down from 19 in the same period last year.
Secure Home Holdings, which provides home and commercial alarm systems, was the only large company in the U.S. to seek court protection last week. It owes lenders more than $200 million and entered bankruptcy with plans to hand control of the business to creditors.
Traditional bankruptcy restructurings have slowed as businesses start re-opening and capital markets remain “wide-open,” Ryan Dahl of law firm Ropes & Gray said in an interview. Instead, businesses are focused on out-of-court restructuring options, finding rescue financing and other ways to enhance liquidity, he said.
“If businesses survived till now and the future starts to look brighter than it did six or twelve months ago, a bankruptcy may not accomplish much,” said Randall Paulikens, a partner in the forensic, litigation and valuation services group at accounting and advisory firm Friedman. In bankruptcy, creditors “may not get paid back, anyway” so by filing “debtors may make their situation worse.”
Meanwhile, the amount of traded distressed bonds and loans fell to about $82 billion combined as of April 30, data compiled by Bloomberg show. That’s well below the pandemic peak of nearly $1 trillion.
The amount of traded distressed bonds dropped 11.7% week-on-week to about $59 billion as of April 30, data compiled by Bloomberg show. Distressed loans fell 2.3% to about $23 billion.
“The cycle will turn,” Dahl said. “If the markets shut off, then the music stops and restructuring activity will ramp up.”
Click here for a worksheet of distressed bonds and loans
There were 206 distressed bonds from 115 issuers trading as of Monday, down from 224 and 133, respectively, one week earlier, according to Trace data.
Diamond Sports Group LLC had the most distressed debt of issuers that hadn’t filed for bankruptcy as of April 30, Bloomberg data show. Its parent company, Sinclair Broadcast Group Inc., said in a March filing that it expects Diamond to have enough cash for the next 12 months if the pandemic doesn’t get worse.
|Top 5 Distressed Issuers||Debt ($B)|
|Diamond Sports Group LLC||8.0|
|AMC Entertainment Holdings Inc||1.7|
Click here for more news on distressed debt and bankruptcy. First Word is curated by Bloomberg editors to give you actionable news from Bloomberg and select sources, including Dow Jones and Twitter. First Word can be customized to your Worksheet, sectors, geography or other criteria by clicking into Actions on the toolbar or hitting the HELP key for assistance.
— With assistance by Jenny Sanchez