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| less than a minute read

Rise in Interest Rates Contributing to More Bankruptcy Filings

It appears that we are beginning to see the fallout from the Federal Reserve's campaign to reign in inflation by gradually increasing interest rates. Bankruptcy filings have recently increased across several industries - from retailers like Bed, Bath & Beyond and Tuesday Morning to the former news darling, Vice Media. Many companies with cumbersome debt loads can simply no longer afford to service such large balances, and with the banking industry under duress following the failure of Silicon Valley Bank, once plentiful opportunities to refinance have vanished. Creditors can mitigate their risks by keeping a more watchful eye on customers' financial statements and cash flow. Additionally, now may be a good time for companies to consider tightening their payment terms.  

Data from Moody's suggests that the bankruptcy trend is just getting underway. The ratings giant expects defaults for companies with speculative-grade debt to rise to 4.9% by March 2024, up from 2.9% at the end of the first quarter of 2023, and exceeding the long-term average of 4.1%.


pettie_jason, financial institutions, current events, insights, bankruptcy