The unprecedented wave of corporate bankruptcies sweeping the U.S. has seen a record 46 corporations with at least $1 billion in assets filing for Chapter 11 bankruptcy as of Aug. 17.
These business failures compare with the previous record of 38 billion-dollar businesses that closed during the same period in 2009 during the height of the Great Recession, according to data from BankruptcyData.com.
The industries worst-hit by COVID-19 demand destruction are retailing with 24 and oil and gas with 33 bankruptcies. Retail bankruptcies include J. C. Penney Co., Inc., Brooks Brothers - the oldest men's clothes seller in the U.S. founded in 1818 - and department store Neiman Marcus Group, Inc.
Retailers have been among the hardest hit by government-mandated lockdowns that prevented stores from opening while driving consumers to online retailers such as Amazon.com. This worsened the situation of already heavily indebted retailers.
The biggest casualties in the oil and gas industry were Fortune 500 company Chesapeake Energy Corp., Whiting Petroleum Corp. with assets of $7.6 billion and Texas-based Diamond Offshore Drilling, Inc.
Data show 157 companies with at least $50 million in liabilities had filed for bankruptcy as of Aug. 17. There have been many smaller-scale bankruptcies with as many as 424 companies declaring bankruptcy as of Aug. 9, according to S&P Global.
"It's going to be a bumpy ride," BankruptcyData.com owner New Generation Research chief executive Ben Schlafman said. "We are in the first innings of this bankruptcy cycle. It will spread far across industries as we get deeper into the crisis."
Analysts said the increase in business failures came to pass despite the U.S. Federal Reserve and the federal government intervening with a trillion-dollar rescue package. The Fed and the Department of Treasury have implemented programs ranging from buying corporate bonds to bailing out airlines and mailing stimulus checks to households.
"The COVID-19 pandemic is reshaping consumer buying habits," according to managing director of corporate restructuring at legal services provider Epiq, Deirdre O'Connor. "Therefore, we will continue to see large retail, energy and transportation businesses taking advantage of the tools provided by a formal bankruptcy to restructure to be more profitable and competitive in the long term."