Reuters Bankruptcy Trends to Watch in 2025
American Bankruptcy Institute reports that the same industries that made increased bankruptcy filings in 2024 year, can be expected to keep filing bankruptcy at increased rates in 2025 year:
Rising interest rates, inflation, higher labor costs, and post-pandemic shifts in consumer spending were common factors cited by companies that filed for bankruptcy in 2024, Reuters reported. Business bankruptcy filings rose 33.5 percent in the 12 months ending Sept. 30, 2024, according to statistics from the Administrative Office of the U.S. Courts. Bankruptcy experts expect those factors to continue to drive companies over the brink next year. Several particularly hard-hit industries that struggled in 2024 will continue to experience financial distress and restructuring activity in 2025, including health care, automotive, casual dining and retail.
– Health care companies of all kinds filed for bankruptcy in 2024, including hospital chains, nursing homes and medical device manufacturers. Health care companies — particularly ones with high debt or niche business models — are perennially at risk for bankruptcy due to frequent changes in government regulations and reimbursement spending, according to Ron Meisler, a partner in Skadden’s restructuring practice.
– The auto industry, including parts suppliers and electric vehicle companies, will also face continued stress in 2025. A drop in demand for electric vehicles wreaked havoc on companies that ran up debts or took investor cash to compete in that space, and prominent names like Swedish battery maker Northvolt and electric vehicle company Fisker went bankrupt in 2024.
– Casual dining saw a steep rise in bankruptcies in 2024, headlined by famous restaurant chains like Red Lobster and TGI Fridays. Several smaller chains like California Pizza Kitchen, Bucca di Beppo and Rubio’s Coastal Grill also went bankrupt in the past year. Some of those restaurant brands, backed by private equity, expanded too rapidly and then collapsed under their own weight, while others have cited higher labor costs, especially in states like California, when seeking bankruptcy protection. Restaurant chains will continue to contend with higher interest rates and inflation in food prices in 2025, forcing customers to re-evaluate whether they will continue spending on casual dining restaurants that were previously seen as offering good value for the money, according to Randall Klein of Goldberg Kohn.
[as reported in ABI e-newsletter of 1/2/25].