One Step Ahead: Restructuring Considerations in an Uncertain Economic Climate
The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2024”.
As 2023 concludes, economic indicators remain mixed on whether there will be a recession or a soft landing over the next year. Either way, it is likely that a significant number of companies, across industries, will need to restructure their financial debt and operations. 2023 brought a significant increase in chapter 11 filings, with a 61% percent increase compared to the same period in 2022, and filings across industries, including such notable companies as Bed Bath & Beyond, Envision Healthcare, Rite Aid and WeWork. Other companies have avoided formal bankruptcy filings by undertaking liability management transactions that increase near-term liquidity through additional borrowings. However, as several high profile filings this year have shown, it is likely that many of these transactions may simply delay, rather than prevent, bankruptcy filings in the future.
The current climate presents an ideal time for all companies to refresh their internal planning and to proactively consider the risks and opportunities that are presented when suppliers, customers and competitors encounter financial distress.
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