Business failures surged in August as companies sought court protection from creditors amid rising interest rates and economic headwinds.
The number of business bankruptcies rose nearly 17% in August from July, according to data firm Epiq Bankruptcy. It marked the 13th straight month of year-over-year increases in total bankruptcies, including households and individuals, according to the National Bankruptcy Institute.
By one measure — the number of filings under Chapter 11 of the Bankruptcy Code — bankruptcies rose 54% in August from a year earlier. This number may be inflated by repeated filings, as large corporations often file several petitions to cover all of their different divisions.
Even with that in place, however, the surge in business failures, especially large ones, has been noticeable, said Ed Flynn, a consultant for the ABI who studies bankruptcy statistics.
“I think a lot of it is interest rates,” Flynn said. “The number of large cases is unusually high.”
Last week alone, U.S. bankruptcy courts recorded six new large filings involving assets of at least $50 million, according to data compiled by Bloomberg. There were at least 23 major filings in the last month.
Companies have struggled to repay low-cost debt as it comes due over the past year as the Federal Reserve has raised interest rates to lower inflation. That has put some in trouble, including aircraft leasing company Voyager Aviation Holdings, which filed for bankruptcy on July 27, blaming in part rising interest rates.