Meanwhile, only three companies with at least $50 million of liabilities filed for bankruptcy in January.
U.S. corporate bankruptcies dropped to their lowest level last year since 2006.
That information came from the Wall Street Journal, which didn’t specify a source or what the level is.
Bloomberg does offer some specific numbers. It reported that only three companies with at least $50 million of liabilities filed for bankruptcy last month, the lowest January total since at least 2008, according to Bloomberg data.
The number of bankruptcies that size plunged 50% in 2021 from the bulging level caused by the Covid pandemic in 2020.
The drop stems largely from the huge fiscal stimulus. That spending gave a cash infusion to many troubled companies and many consumers who pay for their products.
The willingness of financial institutions and investors to lend to these companies, with restrictions on the financing often eased from the past, also has made a difference, the Wall Street Journal reports. Low interest rates helped encourage the lending, as investors searched for higher yields.
Even with the Federal Reserve poised to raise rates starting next month, experts say bankruptcies are likely to stay low through next year and possibly beyond, the Journal reports. Even after Fed hikes, interest rates will be lower than historical averages.
“There’s so much capital out there, anything can get financed,” Tod Trabocco, director of strategy and research at investment firm ITE Management, told the Journal. “What drives distress is lack of liquidity. There’s no shortage of liquidity today.”
Bloomberg Intelligence analyst Phil Brendel said he also has an optimistic view.
“There’s no need for most companies to file for bankruptcy if they haven’t filed already,” he told Bloomberg News. “Companies did whatever they could in a very liquid environment to raise cash.”
