Chapter 7 and Chapter 11 Bankruptcy Filings

The COVID-19 pandemic has disrupted the global economy and triggered a wave of corporate bankruptcies. In particular, the number of mega-bankruptcies (over $ 1 billion in reported assets) increased significantly in the second and third quarters of 2020.

This report examines trends in Chapter 7 and 11 bankruptcy filings between January 2005 and September 2020 by companies with more than $ 100 million in assets.[i]

In the first three quarters of 2020, 34, 55 and 49 companies with more than $ 100 million in assets filed for bankruptcy, respectively, compared to the quarterly average of 19 for the period 2005-2019. The 55 bankruptcy filings in the second quarter of 2020 were the second highest total of any quarter since 2005, just behind the 65 bankruptcies in the first quarter of 2009.

A total of 138 companies with more than $ 100 million in assets filed for bankruptcy in the first three quarters of 2020. This number is 84% ​​higher than the number of bankruptcies (75) filed during the same period. ‘last year.

There has been a substantial increase in the number of “mega-bankruptcies” (that is, those filed by companies with more than $ 1 billion in reported assets) in the second quarter of 2020. times the quarterly average (five ) during the period 2005-2019, respectively.

The mega-bankruptcies were concentrated in two sectors: mining, oil and gas; and Retail. These two industries accounted for 58% of mega-bankruptcies in the first and third quarters of 2020.

The largest bankruptcy of the first three quarters of 2020 was filed by The Hertz Corporation, which had estimated assets of $ 25.84 billion at the time of filing.

Figure 1: Key trends in bankruptcy filings

2005 – Q3 2020

2005–2019
Quarterly average

Q1 2020

Q2 2020

Q3 2020

Chapter 11 Bankruptcy filings

18

33

54

49

Chapter 11 mega-bankruptcies

5

6

31

15

Chapter 11 Bankruptcy filings by public enterprises

11

8

34

26

Chapter 11 Bankruptcy filings by private companies

7

25

20

23

Chapter 7 Bankruptcy filings

1

1

1

0

Average value of assets at time of deposit (in billions)

$ 2.21

$ 0.66

$ 3.01

$ 1.52

Source: BankruptcyData

Note: Only Chapter 11 and 7 bankruptcy filings by companies (public and private) with more than $ 100 million in reported assets are included. For companies whose exact assets are not known, the lower bound of the estimated range is used. Asset values ​​are not adjusted for inflation. Mega-bankruptcies are defined as those of companies whose reported assets exceed $ 1 billion at the time of filing for bankruptcy.

Reading COVID-19 pandemic triggers wave of corporate mega-bankruptcies

Read the report, Trends in Bankruptcies and Financial Hardship of Large Firms: 2005 – Q3 2020.


[i] This report is based on data obtained from BankruptcyData. It focuses on the value of assets at the time of bankruptcy filings due to the higher prevalence of missing liability information in BankruptcyData. Some other publications have focused on liabilities because of potential concerns about whether the book values ​​of assets overstate the valuations of bankrupt companies (see, for example, Edward Altman, “COVID-19 and the Credit Cycle,” Credit Risk Journal 16, no. 2 (2020): 1-28 to 13-14). Using the available liability data in this report would not significantly change any of the conclusions.

Copyright © 2021 Cornerstone ResearchRevue nationale de droit, volume X, number 309

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