The COVID-19 Credit Crisis

CreditRiskMonitor® anticipates tighter access to credit in the years ahead and an escalation in bankruptcy filings – we’re not merely trending towards a recession, it may be a depression.

Public company bankruptcy risk is rising in these unprecedented times. The pandemic is increasingly affecting global commerce and trade creditors are and likely will continue to scrutinize corporate debt with even more vigilance in the wake of COVID-19.

Recessions are bad enough, but COVID-19 is complicating the normal story. We have seen a sweeping trend in the lowering of FRISK® scores. Proprietary to CreditRiskMonitor, the FRISK® score is a metric that blends stock market capitalization and volatility, financial ratios (such as the ones leveraged in the Altman Z"-Score model), bond agency ratings from Fitch, Moody's and DBRS Morningstar, and subscriber crowdsourced sentiment data to deliver public company bankruptcy risk prediction that has proven to be 96% accurate.

Below, you will find some graphical views which illustrate the growing danger in not only specific global regions, but also several important multinational industries:

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Changes in Bankruptcy Risk Related to COVID-19

   

 
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This is a working capital crisis.

Credit and procurement risk professionals need to have a clear understanding of where the biggest risks lie in their company’s A/R portfolios and supply chains. This economic downturn when combined with the highest historically public company debt on record, defaults at public companies are likely to drive $1.2 trillion in losses to bondholders. The losses could be much worse if COVID-19 leads to a deeper and more protracted downcycle. Worst of all, unsecured trade creditors are at the bottom of the creditor capital structure and will be fully wiped out before any bondholders are impacted in a bankruptcy. 

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Our Coronavirus Coverage

Blog Post

The fall of car rental giant Hertz Global Holdings, Inc. proves the point that the health of an entire supply chain, from raw material harvesting to finished products, is critical to understand relative to assessing bankruptcy risk potential.

Blog Post

In a pandemic period when major public company bankruptcies are hitting hard daily, reliance on payment performance and/or financial statement analysis provides a whole new slew of dangers.

Blog Post

Part of CreditRiskMonitor's Mid-Year Review series, we focus on the volatile state of casual dining establishments and how the FRISK® score is helping credit and procurement managers stay ahead of bankruptcy risk.

Bankruptcy Case Study
CreditRiskMonitor

Hertz Global Holdings, Inc., a global superstar in rent-a-car, was taken out of the driver's seat and into bankruptcy thanks to many factors - including a propensity to load up on debt and the ongoing coronavirus pandemic.

Blog Post

Unless there is a rapid economic recovery, more retailers are going to go the way of J. C. Penney, Pier 1 Imports, Neiman Marcus and J.Crew. That is: bankruptcy.

Blog Post

The harsh downturn in several end markets has resulted in overcapacity in key industrial commodity markets, causing base metal prices to break materially lower. We note where bankruptcy is most probable.

High Risk Report
CreditRiskMonitor

Time is running out for health retailer GNC Holdings, Inc. to shape up. The popular house of nutrition is suffering mightily under the weight of debt.

Blog Post

It’s just not working out: the coronavirus pandemic is forcing the hand of financially weak American fitness operations to pursue bankruptcy, with many involving permanent location closures.

Bankruptcy Case Study
CreditRiskMonitor

Canadian women's apparel staple Reitmans is being forced to restructure, its options exhausted from the outbreak of COVID-19. Yet signs of their bankruptcy potential were revealed by our FRISK® score a year prior to their filing.

Bankruptcy Case Study
CreditRiskMonitor

J. C. Penney Company, Inc., an American shopping mall icon, has lost in its fight to avoid bankruptcy. In this COVID-19 pandemic, struggling public retailers that have stayed alive by loading up on debt are running out of time.

Bankruptcy Case Study

Louisiana-based Hornbeck Offshore Services, Inc., an operator of oil supply and support vessels, opted for bankruptcy after an acute collapse in energy prices.

Bankruptcy Case Study
CreditRiskMonitor

Ultra Petroleum Corporation has filed for Chapter 11 protection for the second time in four years, torpedoed in large part by persistently weak natural gas prices.

Blog Post

Thomas Cook and Virgin Australia, two massive airliners, have filed bankruptcy. Could American Airlines be next?

Bankruptcy Case Study
CreditRiskMonitor

Retail Apocalypse Now: Houston-based Stage Stores, Inc. has filed for Chapter 11 bankruptcy protection, just one of several large U.S. retailers to do so thus far in the month of May.

Bankruptcy Case Study
CreditRiskMonitor

While COVID-19 provided the final push to propel Neiman Marcus into a Chapter 11 filing, a long history of leveraging up gave our subscribers ample time to reduce exposure to this retail giant.

Bankruptcy Case Study
CreditRiskMonitor

Being one of the first major retailers derailed by COVID-19? Hardly fashionable. How did it all go wrong for J.Crew?

Blog Post

The longer the coronavirus persists, the harder it will be for health services operators to avoid bankruptcy, quite similar to what recently transpired with Quorum Health Corporation.

Bankruptcy Case Study
CreditRiskMonitor

Grounded in Oz: Airliner Virgin Australia Holdings Ltd entered into voluntary administration and later Chapter 11 bankruptcy, as the company succumbed to an overwhelming debt load.

Bankruptcy Case Study
CreditRiskMonitor

As the world reels from the effects of COVID-19, Quorum Health Corporation - a major American healthcare provider and operator of hospitals in 13 U.S. states - has filed for bankruptcy. 
 

Bankruptcy Case Study
CreditRiskMonitor

Whiting Petroleum Corporation's well has run dry, as the Denver-based company became the first big independent oil producer in the U.S. to succumb to the coronavirus pandemic.

Blog Post

The FRISK® score downgraded retailers and restaurants in February and March following the market sell-off stemming from coronavirus.

Blog Post

The coronavirus has reduced air travel across key channels worldwide. Equity markets are souring on airliners, especially those that already carry excessive debt and are strapped for cash.

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The pandemic is increasingly affecting global commerce and trade creditors are and likely will continue to scrutinize corporate debt with even more vigilance in the wake of COVID-19.

An economic downturn appeared inevitable given the unprecedented length of the 11-year benign credit cycle and the surge of nonfinancial corporate debt relative to GDP.

This pandemic is providing a painful declaration: the “risk on” decade is done.

Now is your last chance to adjust. If you wait any longer, leaving you and your company exposed, you will recoup literal pennies on the dollar. CreditRiskMonitor is here to help you with getting that better process of monitoring public companies started.

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