With bankruptcy filings dropping across industries in the third quarter of 2021, professionals expect a wave of activity over the next year, as seen in the newest Polsinelli-TrBK Distress Indices Report. The report’s overall filing numbers are at the lowest point since the benchmark period – nearly 11 years ago.
Overall, general Chapter 11 filings have dropped to their lowest since the second quarter of 2019, marking the third consecutive quarter of lower filings. Real estate filings have stabilized, while health care is still well below the benchmark.
“I don’t recommend filing unless it’s a defensive claim – one that will stop a creditor from taking enforcement action, or offensive – one implementing a deal with lenders or other creditors,” said Polsinelli Shareholder Jeremy Johnson, a bankruptcy and restructuring attorney and co-author of the report. “With the rapid decrease in filings, we anticipate filing numbers will increase. These situations include poorly written deals made to survive immediate problems, lenders continuing to work with borrowers despite restrictions, an uncertain post-COVID landscape, and a potential end to government support.”
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.
The report, released today by Am Law 100 firm Polsinelli, also highlights economic distress in the real estate industry. The industry is still experiencing a slow, steady stream of bankruptcies as experts await the anticipated increase in filings from post-pandemic lifting of eviction moratoria.
Other significant updates in the report include:
- The Chapter 11 Distress Research Index was 48.94 for the third quarter of 2021. The Chapter 11 Index decreased over 17 points since the last quarter. Compared with the same period one year ago, the Index has decreased over 32 points and compared with the benchmark period of the fourth quarter of 2010, it is down over 51 points.
- The Real Estate Distress Research Index was 21.68 for the third quarter of 2021. The Real Estate Index has decreased less than one point since the last quarter. Compared with the same period one year ago, the Index decreased more than seven points and compared with the benchmark period of the fourth quarter of 2010, it is down over 78 points.
- The Health Care Services Distress Research Index was 88.33 for the third quarter of 2021. The Health Care Index increased 25 points since the last quarter. Compared with the same period one year ago, the Index has decreased over 380 points and compared with the benchmark period of the fourth quarter of 2010, it is down over 21 points. After significantly exceeding the benchmark period for the last several quarters, the Index has been below the benchmark the last two consecutive quarters.
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 analyses, 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.