FirstFT: Corporate bankruptcies rise as US credit squeeze tightens

More large US companies are taking shelter in bankruptcy court, a sign of a tightening credit squeeze as interest rates rise and financial markets become less hospitable to borrowers.

Eight companies with more than $500mn in liabilities have filed for Chapter 11 bankruptcy this month, including five in a single 24-hour stretch last week. In 2022 the monthly average was just over three filings. 

Twenty-seven large debtors have filed for bankruptcy so far in 2023 compared to 40 for all of 2022, according to figures compiled by Recent companies to succumb to creditors include Envision Healthcare, Vice Media and Kidde-Fenwal, a maker of fire control systems facing thousands of lawsuits over its use of so-called forever chemicals. 

S&P Global forecasts that the 12-month trailing default rate for speculative-grade securities will jump from the current 2.5 per cent to 4.5 per cent by early 2024. 

Here’s what else is happening in the days ahead:

  • US debt ceiling: Negotiators hope to finalise a deal to avoid a default ahead of a looming June 1 deadline, when the country could run out of cash to pay its financial obligations.

  • Economic data: France publishes consumer confidence data today, while the UK releases retail sales figures for last month and the University of Michigan publishes its consumer sentiment survey for the US.

  • Cannes: The film festival concludes on Saturday in the south of France. Read Raphael Abraham’s reviews.

  • Elections: Voters head to the polls on Sunday for the presidential election runoff in Turkey, the second round run-offs for municipal elections in Italy and Spain’s regional and municipal elections.

Five more top stories

1. UK ministers are considering reshaping the £39bn Pension Protection Fund to boost investment in businesses. The fund currently has a restricted role in providing a safety net for pension schemes when their employer fails and cannot meet members’ retirement payment promises in full. Read the full story.

2. Exclusive: Norway’s $1.4tn oil fund will side with climate activists against ExxonMobil and Chevron at the companies’ annual meetings next week in an attempt to force the US majors to introduce targets for cutting emissions from the use of its products. Read more from the FT’s interview with the world’s largest sovereign wealth fund.

3. The UK’s failure to create post-Brexit rules for the chemicals sector risks “irreparable damage” to British businesses, the industry has warned, after 18 months of talks with the government failed to bear fruit. Senior industry figures complain their concerns have not been addressed.

4. Exclusive: The UK’s Financial Conduct Authority is probing the market for green loans by interviewing bankers and borrowers, and may bring in a voluntary code of conduct to set out best practices for loan design. Here’s why the regulator is pushing for transparency.

5. JPMorgan Chase is cutting about 1,000 First Republic employees, or about 15 per cent of the California-based bank’s 7,000 workers across all its businesses, said people familiar with the matter. More on JPMorgan’s move after its rushed takeover.

How well did you keep up with the news this week? Take our quiz.

News in-depth

An analysis by the Financial Times has given further proof to what many in the City already fear: London is the European stock exchange most at risk of suffering big departures to the US. Among the 111 European companies assessed, London listings make up half of the top 10. See the full listing here.

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Chart of the day

Official immigration figures yesterday showed net long-term arrivals to the UK reached an all-time high of 606,000 last year, reflecting several coinciding factors — the opening of humanitarian routes for people from Ukraine and Hong Kong, a post-Covid surge in cross-border hiring and a government drive to attract foreign students.

Take a break from the news

Every meal tastes better when it is seasoned with sunshine — a peach will somehow taste peachier, peas are bright and vivid, a tomato more grassy and robust. Don’t miss this perfect menu for an outdoor meal.

Additional contributions by Gordon Smith and Emily Goldberg

Read the author’s full story here

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