Urgent warning to Americans as key economic indicator hits highest level since 2008 financial crisis
US corporate bankruptcies are at their highest level since the 2008 financial crisis as Americans tighten their belts.
Companies are also increasingly struggling with spiraling debt – driven by high interest rates that have caused financing costs to soar.
In 2024, 686 companies filed for bankruptcy, an increase of 8 percent compared to 2023 – and almost more than in 2021 and 2022 combined. It also marks the most filings since 2010, according to data from S&P Global Market Intelligence.
In addition, more companies attempted to avoid bankruptcy through out-of-court actions last year, with these efforts outpacing actual bankruptcies by two to one, according to Fitch Ratings.
One of the biggest bankruptcies of the year came from Party City, which filed for Chapter 11 for the second time in just over a year.
The company announced it would close all 700 stores, citing inflationary pressures and cutting back on U.S. spending. The reasons are similar to those of other companies that are struggling.
Other big names such as Tupperware, Red Lobster and Spirit Airlines have also filed for bankruptcy in 2024. Even the popular vodka Stoli filed for bankruptcy in November.
“The persistently high costs of goods and services are weighing on consumer demand,” Gregory Daco, chief economist at EY, told the newspaper. FT. He said lower-income families are being hit the hardest.
Party City will immediately close all of its stores, ending nearly forty years of existence
Although the Federal Reserve has begun cutting interest rates, relief for businesses will be limited. Forecasts point to a rate cut of just half a point in 2025, keeping pressure on struggling companies.
Between 2021 and 2022 – when borrowing costs were low and Americans were still spending stimulus checks – only 777 bankruptcy filings were recorded.
This is in stark contrast to the 636 bankruptcy filings in 2023 and the 686 in 2024.
At least 30 of last year’s bankruptcy filings involved companies with debts of more than $1 billion, underscoring the scale of the financial strain.
An increasing number of companies have turned to “liability management” exercises: financial tactics aimed at avoiding bankruptcies by restructuring their debts.
Although these steps are becoming more common, experts warn that they are often only a temporary solution and can ultimately cause companies to go bankrupt.
Fitch Ratings’ Joshua Clark explains that these moves can hurt lenders because they typically mean taking on more debt and can push a company closer to collapse.
The most high-profile bankruptcies occurred among restaurant and retail chains, especially those with locations across America.
TGI Fridays continues to close restaurants, while another in Brick, New Jersey serves customers for the last time on Sunday. These are the Manhattan TGI Fridays
Tupperware is getting new life after a bankruptcy judge approved a deal to save the beloved food storage company
World of Beer is the latest restaurant chain to struggle
As of Dec. 20, Coresight Research tracked 48 retail bankruptcies in the U.S., compared to 25 in the same period a year ago.
And this year, at least 22 restaurant chains have filed for bankruptcy, the most since 2020, according to BankruptcyData, a company that tracks the records.
The most prominent restaurant was Red Lobster, which filed for bankruptcy in May but became a going concern after closing nearly 100 restaurants.
BurgerFi, Buca di Beppo and TGI Fridays also filed for bankruptcy. Just like World of Beer, which was one of the fastest growing in America just a decade ago.
The The most recent major retail failure was Container Storewhich filed for Chapter 11 protection on December 22. There is no news about it yet
The store – known for its homewares including closet organizers and storage bins – has been in business for 46 years.
Despite getting a boost from Marie Kondo’s hit Netflix show “Tidying Up” during the Covid-19 pandemic, the chain has struggled with mounting losses in recent years.
Earlier in December, Big Lots said it would suspend sales at all its U.S. stores after filing for bankruptcy in September. It now hopes to keep 200 open after finding a new investor.