Mirroring higher interest rates that have boosted borrowing costs, corporate bankruptcies in the U.S. are on pace to approach levels not see꧃n since the height of the Covid-19 pandemic and the wake of the global financial crisis.

Number Of Americ♋an Businesses Going Bankruptꦡ Is Rising

Corporate bankruptcy filings this year reached 402 at the end of July, surpassing the 373 recorded during all 2022, S&P Global Market Intelligence said a recent report.

S&P's monthly report tallies filings of public or private companies with at least $2 million in assets and public debt, in addition to private companies with at least $10 million in assets.

Sixty-four such companies filed for bankruptcy in July alone. That's just five shy of the total for the first seven months of 2020. That year, corporate bankruptcies totaled 639 all together.

Filing🦩s year-to-date mark the second most since 2010, when 530 U.S. companies declared bankruptcy in the first seven months of the year. By the end of that yeaཧr, corporate bankruptcies reached 827.

Rising Rates and Mounting Debt

Corporate borrowing costs have risen dramatically sin🍰ce the Federal Reserve began raising interest rates in March 2022—just as substantial am🤪ounts of corporate debt neared maturity.

The effective yield on the ICE BofA Corporate Index, reflecting aggregate U.S. corporate bond interest rates, fell to an all-time low of 1.79% in December 2020. It rose to 3.11% just prior to the Fed's rate-hike campaign, peaked at 5.98% in October, and hasn't dropped below 5% since then.

Meanwhile, entering 2023, U.S. companies had $3.1 trillion in corporate debt slated to mature within three years—almost double the combined profit of all S&P 500 Index firms in their most recently completed fiscal years.

A quarter of this year's bankruptcies consist of companies with more than $1 billion in assets at the time of filing. Another third is concentrated in three sectors: consumer discretionary (48), industrials (45) and healthcare (39).

Conversely, only three utility companies havꦰe filed for bankruptcy this year. Despite falling values for some types of commercial property in various🎉 cities, just four real estate firms have declared bankruptcy.

The number of July filiജngs rose to the highest level since March, when 70 U.S. companies declared bankruptcy, th♔e most in one month since July 2020.