HAVE YOU SEEN THIS LEGAL PROCEEDING?

Surprisingly, the number of big bankruptcies plunged last year—a trend that may reverse soon enough

- Lauren Coleman-Lochner

No one would call 2021 an uneventful year. The U.S. Capitol was stormed in a would-be insurrection. Inflation surged to levels not seen in decades. And almost 300 million people worldwide were infected by Covid-19 as the emergence of variants wrecked any return to normalcy. But for bankruptcy, a sector usually goosed by global disruption, it was unusually quiet.

Large bankruptcies—those involving companies with at least $50 million in liabilities—dipped to 121 last year from 245 in 2020, according to Bloomberg data. That’s below the 10-year annual average of 130. But that could change this year as stimulus money wanes and companies and their creditors try to figure out what to expect.

“A lot of people have the view that you’re going to see an uptick in some combination of out-of-court restructurings, certainly by the second half of this year,” says Felicia Gerber Perlman, who heads the restructuring group at law firm McDermott Will & Emery, as lenders try to assess a new normal.

Last year’s shutdowns, from elective surgery to Broadway shows, froze the economy, making decisions on lending—or pulling the plug—tough. “It’s hard to determine what the correct capital structure for a company is, hard for a lender to evaluate the business in the midst of the uncertainty that we were facing last year,” Perlman says.

Filings were also scarcer last year because 2020’s initial pandemic upheaval sent some already struggling companies into bankruptcy. So rather than limp along for a year or two, “all the companies on the brink got pushed into 2020” filings, says Michael Eisenband, global co-leader of FTI Consulting’s corporate finance and restructuring unit.