U.S. corporate bankruptcies rose in June to their highest monthly total of the year so far, according to S&P Global Market Intelligence data.
There were 40 bankruptcy filings in June, up from 30 in May and the highest number since April 2021. As of June 30, 185 companies have filed for bankruptcy in 2022, the slowest first half of the year since at least 2010.
Consumer discretionary leads filings
Consumer discretionary overtook industrials in June as the sector with the most bankruptcies for the year. There were 32 consumer discretionary bankruptcies as of June 30; industrials had 30 filings in the same period.
Announced consumer discretionary bankruptcies in 2022 include companies in computer and electronics retail, home furnishings, leisure facilities and automobile manufacturing.
There were five bankruptcies in 2022 with more than $1 billion in liabilities, two of which, Revlon Inc. and TPC Group Inc., were filed in June.
Consumer discretionary stocks have struggled this year and attracted short sellers as investors expect that hot inflation will eat into household budgets.
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Although bankruptcies and defaults remain low, an increase is likely given the uptick in distressed debt.
Businesses that were having trouble prior to the pandemic basically received a life preserver from federal stimulus money, said Rob Hirsh, a partner in the bankruptcy and restructuring department at Lowenstein Sandler.
"Some of those companies actually were able to turn themselves around based on the liquidity infusion," Hirsh said during a June 23 S&P Global Market Intelligence bankruptcy outlook webinar. "But from what we're seeing, a large amount of those companies, it was just an extension of life support."
The pandemic also changed how secured lenders and bondholders decided to deal with troubled companies, including extending and restructuring loans.
Editor's note: This Data Dispatch is updated on a regular basis and the last edition was published June 7.
Bankruptcy figures include public companies or private companies with public debt with a minimum of $2 million in assets or liabilities at the time of filing, in addition to private companies with at least $10 million in assets or liabilities. Market Intelligence may remove companies from this list if it discovers that their total assets and liabilities do not meet the threshold requirement for inclusion.
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