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US Retail Sector Leads Corporate Defaults

But reorganizations, not liquidations, chosen by most troubled companies

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Party City is one of several retailers to file Chapter 11 bankruptcy this year. iStock, Rabbitti

The number of corporate defaults in the U.S. for the first two months of 2023 was at its highest since 2009, and retail led the way, with seven out of 23 defaults. Those stats were contained in a recently released S&P Global Ratings report that was covered by Retail Dive.

S&P noted that companies in the consumer staples sector favored reorganization over liquidation in 2022 and year-to-date with nearly 86 percent of such companies seeking reorganization. Party City, Serta Simmons, Bed Bath & Beyond and 99 Cents Only Stores are among the retailers that have either defaulted or filed bankruptcy so far this year.

Retail “continues to face challenges from logistics, labor and supplier cost inflation, all squeezing margins for both retailers and their suppliers. Nearly half of retail issuers rated B- or lower have negative S&P outlooks or credit watch implications. As a result, “further downgrades as well as a potential increase in defaults” is possible, S&P said.

Bankrupt companies are increasingly seeking reorganization over liquidation. According to a separate S&P report, 78 percent of corporate entities that filed for bankruptcy through February sought reorganization, the highest in at least 14 years.

Click here to see the full article by Retail Dive.

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