Corporate bankruptcy risks grow heading into 2023 – The Average Joe
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    Corporate bankruptcy risks grow heading into 2023


    January 9, 2023

    Enjoying your Tuesday? Don’t read the following.

    Despite all the recession talk in 2022, bankruptcies were largely absent. That is… until December.

    • In the final month of 2022, US bankruptcy filings reached a peak for the year and rose ~20% compared to the previous.
    • Distressed debt is rising and hasn’t been this high since September 2020 — a big red flag.

    The concern is rising that more companies will default on debt payments – leading to more bankruptcies.

    Why’s this happening? Rising operational costs and declining profits have been major concerns in 2022. Increasing interest rates adds another pressure point: The rising cost of debt.

    Two companies are already starting the new year off with a bang.

    1/ Meme stock Bed Bath & Beyond (NASDAQ:BBBY) had a major run in early 2022 — but started 2023 with bankruptcy on its mind. Behind the army of traders was a business that had declining sales, increasing losses and a growing debt balance.

    And results from December — the most important time of the year for retailers — isn’t expected to be much better.

    2/ Party supply retailer Party City (NYSE:PRTY) is also preparing to file for bankruptcy in the coming weeks, according to WSJ. With $PRTY 98% below its 2021 peak, it seems like a rebrand is in order: Party City.

    Per international law firm Clark Hill, the retail sector is among the industries most at risk of bankruptcies — including auto, aerospace and healthcare.

    Investors, godspeed.

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