At least seven companies declared bankruptcy in the last 48 hours, a reported 15-year record.
Among the firms seeking Chapter 11 protection were digital media group Vice Media and — as reported here Monday (May 15) — private equity-backed healthcare firm Envision.
According to a Bloomberg News report, this was the largest number of bankruptcy filings recorded for a two-day stretch since at least 2008.
Among the other weekend bankruptcies were biotech firm Athenex, oil producer Cox Operating, fire protection company Kidde-Fenwal, home security provider Monitronics International and chemical company Venator Materials.
Bloomberg notes that companies across a range of industries are coping with higher interest costs, making it harder to refinance loans and bonds, while executives are under more scrutiny from their investors and creditors.
As PYMNTS wrote last week, a new Federal Reserve report shows that banks expect to continue tightening lending standards across all loan categories for the remainder of the year.
“Banks most frequently cited an expected deterioration in the credit quality of their loan portfolios and in customers’ collateral values, a reduction in risk tolerance and concerns about bank funding costs, bank liquidity position and deposit outflows as reasons for expecting to tighten lending standards over the rest of 2023,” the Fed report said.
The report also found that lending standards for government-sponsored enterprise (GSE)-eligible and government residential mortgages stayed the same, while those for all other categories of residential real estate (RRE) loans tightened during the first quarter. Demand weakened across all REE loan categories, the Fed said.
Meanwhile, tightening demand has led banks and FinTechs to connect small businesses with other lenders.
Speaking with PYMNTS’ Karen Webster recently, Rohit Mathur, head of Bridge built by Citi, explained that “There’s not many out there helping connect borrowers and lenders in the $250,000 to $10 million space.” His company, he said, has more than 60 lenders, including community banks and CDFIs (Community Development Financial Institutions) that are focused on lending to small businesses.
PYMNTS also explored the issue in the report Digital Banking Rises To Meet SMB Needs, an NCR collaboration. That study found that 75% of small and medium-sized businesses (SMBs) in need of working capital were the most likely to work with a digital-only bank as their main financial institute in this business lending climate.
“The pressure to find the right working capital solution is increasing, with one survey finding that big banks’ approval rate for business loans dipped to just below 15%, a 10-month low,” the report said.
“Alternative lending saw the biggest increase at nearly 2%, meaning small businesses are increasingly looking to FinTechs and digital-first offerings to deal with cost pressures.”
Written and published by PYMNTS ~ May 15, 2023
