Dive Brief:
- 138 companies with $100 million or more in assets filed for bankruptcy protection in the first three quarters of 2020, an 84% increase over the same period last year, a Cornerstone Research study finds.
- Of these, 52 involve companies with $1 billion or more in assets, which researchers call mega bankruptcies. Most of these (46) filed in the second and third quarters, suggesting the pandemic played a singular role in their troubles.
- The Hertz Corporation, with $25.8 billion in assets, is the year's biggest bankruptcy.
Dive Insight:
The bulk of the mega bankruptcies involve two types of companies: those in extraction industries — mining, oil and gas — and those in retail. Combined, these industries accounted for 30 of the mega bankruptcies, or 58% of the total.
Problems in the extraction sector predated the pandemic. Companies ran into trouble starting with the 2014 collapse in oil prices and then again in 2019. Problems arose again this year.
"Oil prices collapsed in March and April and still remain depressed," said Allie Schwartz, a Cornerstone principal and a co-author of the research.
The trajectory of the retail industry’s problems is different; the pandemic hit brick-and-mortar stores hard, before which "there were few mega bankruptcies," the report said.
Unlike during the 2008-09 financial crisis, manufacturing and real estate have fared relatively well. Both of these sectors saw a bankruptcy spike in 2009, while this time around bankruptcies have remained low.
Two of the best performing sectors, in terms of bankruptcies, are agriculture and construction, neither of which have had mega bankruptcies in years.
Wholesale trade and finance, which includes real estate, are two other sectors with minimal mega bankruptcies.
Big hits
As with Hertz, virtually all the biggest bankruptcies were filed after the start of the pandemic. Of the 20 biggest by asset size, only one occurred before the economy was put on lockdown: McDermott International, a mining, oil and gas company.
Three of the largest — Hertz, LATAM Airlines and Avianca Holdings — involve travel, suggesting their hit came from the pandemic.
Retail appears similarly affected. Ascena (parent of Ann Taylor and Lane Bryant), J.C. Penney and Neiman Marcus were among the mega-filers.
