DIP Deal Opportunities: Record Number of Corporations Filing for Bankruptcy

For those factoring brokers and consultants following the latest economic news, you were served with the news that several large, recognizable companies (with hundreds or thousands of workers) have filed for bankruptcy protection including Bed Bath & Beyond and Vice Media. May’s bankruptcies did not slow down either when just the past week saw eight companies with more than $500 million in liabilities file for Chapter 11 bankruptcy, including five in a single 24-hour stretch, making this the busiest week for chapter 11 filings so far this year. In 2022 the monthly average was just over three filings.  In total, twenty-seven large debtors have filed for bankruptcy so far in 2023 compared to 40 for all of 2022, according to figures compiled by bankruptcydata.com.  According to Mark Zandi, chief economist at Moody’s Analytics, bankruptcy filings, especially among large, unprofitable companies, are ramping at a frenzied pace.  Much of this relates to government support drying up, a general cooling of the economy. and of course significant bank failures.

There were about 16,200 bankruptcy filings among all types of companies in U.S. District Courts in 2023’s first quarter, up from 12,200 a year earlier.  Now that interest rates are back to pre-Great Recession levels and COVID pandemic support programs are over, bankruptcies are featuring a fresh “uptick”.  With banks no longer lending, small and mid-size companies may simply running out of time.

DIP Deal Opportunities

For professional freelance consultants, these fresh bankruptcy statistics mean big business opportunities for those that understand how factoring can play an important part in DIP (Debtor-In-Possession) financing.  Factors are one of the few resources for capital when a company files Chapter 11 or 5 restructuring.  For professional brokers, this is the time to double your “content creation” efforts to touch on how DIP financing can mean the difference between life and death for small, under capitalized companies.  And that’s not all.  Traditionally healthy, smaller companies may also find themselves in need of ready financing solutions if they have been supplying goods and services to the large customers now seeking shelter in bankruptcy court.  With their accounts receivable still due and payable from larger, troubled corporations, they will find themselves in that unenviable position of unsecured creditor.  Factoring their existing accounts of creditworthy customers may me vitally necessary to weather this storm.