The Polsinelli-TrBK Distress Indices Monitor on a Rolling Four-Quarter Basis
As the country continues to grapple with how to handle the coronavirus outbreak, the first signs of COVID-19’s economic impact are beginning. As detailed in the newest Polsinelli-TrBK Distress Indices Report, both the overall economic distress and distress in the health care industry grew in the second quarter of 2020, leading many to believe a volatile economy could linger much longer than originally expected.
Just eight months in, 2020 has proven to be an unpredictable year. Congress has passed new legislation and created new programs aimed at fighting the financial impact of the pandemic and shutdown, including the CARES Act, the Families First Coronavirus Response Act and the Paycheck Protection Program. With new updates and changes coming almost weekly, it’s become nearly impossible for business leaders to keep up, let alone strategize for the future.
“Between PPP loans, unplanned layoffs and furloughs, incredibly high unemployment rates and an impending election, it’s difficult for anyone to predict what the economy will do the rest of 2020,” said Polsinelli shareholder Jeremy Johnson, a bankruptcy and restructuring attorney and co-author of the report. “Companies should focus on being proactive, communicating with key constituencies, managing cash flow and observing corporate formalities.”
The report, released today by Am Law 100 firm Polsinelli, also highlights the continued distress in the health care industry. Although some hospitals and preventive care clinics recently saw a short-term surge in revenue because of the virus, those serving the at-risk senior population – including senior living communities and home health companies – are on the opposite end of the spectrum and will be burdened with added costs, not to mention potential litigation.
“From what we’ve seen in the second quarter, I expect health care filings to continue to accelerate in a post-coronavirus world, especially in the senior care, senior living and skilled nursing fields,” Johnson said. “It will be more difficult for skilled nursing facilities or independent senior living communities to market to new residents and patients. The impact of the virus will last much longer in those industries.”
The Polsinelli-TrBK Distress Indices are the backbone of a quarterly research report series that uses Chapter 11 filing data – bankruptcies with more than $1 million in assets – as a proxy for measuring financial distress in the overall U.S. economy and breakdowns of distress specifically in the real estate and health care services sectors. It is the only current measurement that tracks both Main Street and Wall Street statistics.
Other significant updates in the report include:
- The Chapter 11 Distress Research Index was 68.50 for the second quarter of 2020. The Chapter 11 Index increased just over 14 points since the last quarter. Compared with the same period one year ago, the Index has increased over 17 points and compared with the benchmark period of the fourth quarter of 2010, it is down approximately 31 points.
- The Real Estate Distress Research Index was 30.25 for the second quarter of 2020. The Real Estate Index decreased less than 1 point since the last quarter. Compared with the same period one year ago, the Index has increased over 6 points and compared with the benchmark period of the fourth quarter of 2010, it is down approximately 70 points.
- The Health Care Services Distress Research Index was 510.00 for the second quarter of 2020. The Health Care Index increased more than 276 points since the last quarter. Compared with the same period one year ago, the Index has increased 85 points and compared with the benchmark period of the fourth quarter of 2010, it is up 410 points. This Index has exceeded the benchmark score for the last 18 quarters and continues to track significantly higher than the other indices.
The Polsinelli-TrBK Distress Indices track the increase or decrease in all Chapter 11 filings with more than $1 million in assets since the fourth quarter of 2010. Unlike the public markets, the Polsinelli-TrBK Distress Indices include both public and private companies, creating a broader economic view and one that may show developing trends on Main Street before they appear on Wall Street.
To access the full report, graphs and all past analysis, visit www.distressindex.com.
Polsinelli is an Am Law 100 firm with 900 attorneys in 21 offices nationwide. Recognized by legal research firm BTI Consulting as one of the top firms for excellent client service and client relationships, the firm’s attorneys provide value through practical legal counsel infused with business insight, and focus on health care, financial services, real estate, intellectual property, middle-market corporate, labor and employment and business litigation. Polsinelli PC, Polsinelli LLP in California.