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The coronavirus (COVID-19) pandemic had a dramatic impact on the bankruptcy and restructuring space. With government support schemes across multiple jurisdictions helping to keep many organisations afloat during the worst of the crisis, alongside robust credit markets offering low-cost debt on borrower-friendly terms, there was a dearth of insolvency and restructuring activity. However, this is no longer the case. With the phasing out of many government schemes over the last 12 months, activity has begun to rise, particularly among smaller and medium-sized enterprises.

UNITED STATES

Teneo

“Chapter 11 petitions have increased in the US by more than twofold, with 81 filings, through the first week of March 2023 versus the same period last year. While large, publicly traded companies continue to enjoy access to equity and debt capital markets for now, the majority of 2023’s bankruptcies have been filed by smaller, middle-market companies that cannot roll over bank debt or have otherwise been cut off from any additional sponsor capital.”

MEXICO

Hogan Lovells

“There has been considerable bankruptcy activity in Mexico over the last two years. From December 2020 to November 2022, 99 reorganisation petitions or lawsuits were filed. This is a notable figure and an increase of 28.5 percent from December 2018 to November 2020, which saw 73 bankruptcy petitions or lawsuits filed. From December 2020 to November 2021 there were 41 reorganisation petitions or lawsuits, and from December 2021 to November 2022 there were 58 petitions or lawsuits, an increase of 41.46 percent.”

COLOMBIA

Alvarez & Marsal

“Colombia is no exception to the global trends of high inflation and high interest rates. Moreover, a change of government, with the left party leader Gustavo Petro taking office in August 2022, intensified the deterioration of economic indices, including currency devaluation, and interest rates. Even though Colombia led the economic recovery in Latin America following the coronavirus (COVID-19) pandemic during 2021 and the first three quarters of 2022, the current situation and short-term economic outlook is not particularly positive, with individuals and companies expected to have difficulty in servicing financial debt.”

CAYMAN ISLANDS

Kroll (Cayman) Ltd

“The economic environment over the last 12 to 18 months has been impacted by the ongoing coronavirus (COVID-19) pandemic and supply chain disruptions, the Ukraine war and Russian sanctions, cryptocurrency crashes and the recent US banking failures resulting in financial pressures across a wide range of industries. We have seen businesses facing financial challenges in the construction, travel, tourism and aviation sectors, and early-stage technology companies, as revenue has reduced, supply chains have been disrupted and consumer demand has decreased.”

BRITISH VIRGIN ISLANDS

Mourant Ozannes

“Although we have not seen any marked increase in insolvencies in the last 12- 18 months, we are continuing to see an increased use of restructuring procedures as an alternative to liquidation – in particular, the use of schemes or plans of arrangement to restructure debt or equity interests. If a scheme is approved by 75 percent in value of the creditors or shareholders, as the case may be, and sanctioned by the court, it will be binding on all the creditors or shareholders.”

UNITED KINGDOM

Shearman & Sterling (London) LLP

“Unprecedented government support and robust credit markets, with low-cost debt available on borrower-friendly terms, meant many businesses avoided financial distress during the pandemic. Debtors took the opportunity – up until the end of 2021 when covenant-lite debt volumes peaked – to refinance debt stacks on attractive terms. However, the environment has changed in the last year. Factors including increased energy costs, inflationary pressures and interest rate rises have created a ‘perfect storm’ of challenges and mean the outlook for business is more uncertain.”

FRANCE

Quinn Emanuel Urquhart & Sullivan LLP

“In France, as elsewhere, after the coronavirus (COVID-19) pandemic, economic activity was curtailed by the energy crisis caused by the conflict in Ukraine in the second half of 2022. Through 2022, 42,500 insolvency proceedings were commenced in France. This number was up 50 percent on 2021. Although this is an unprecedented increase, it is still 10,000 fewer than in 2019. In France, the current trend is a return to a rate of 1 to 2 percent of companies in default.”

SWITZERLAND

Prager Dreifuss Ltd

“The coronavirus (COVID-19) pandemic has had a severe impact on the economy and on businesses failures. In 2020, the Swiss gross domestic product (GDP) saw its largest decline since 1975. In contrast to the economic downturn, bankruptcy proceedings in 2020 decreased compared to 2019 and did not substantially increase in 2021. The financial measures taken by the Swiss Federal Council to support businesses suffering from the effects of COVID-19 successfully prevented a sharp increase in bankruptcies in the short term. However, in 2022 the number of bankruptcies sharply increased by 22 percent, which can be attributed to the end of the financial support measures.”

ITALY

Norton Rose Fulbright Studio Legale

“In the first half of 2022, we saw fewer business failures in Italy as compared to the pre-coronavirus (COVID-19) pandemic era, especially among companies in the industrial and services sectors. This was because the Italian government provided funds to help these companies manage the impact of the pandemic. During this period, the drop in the number of bankruptcies was less pronounced for companies active in the construction sector. In the second half of 2022, and over the first three months of 2023, we saw an increase in the number of bankruptcies in Italy across all industries.”

HONG KONG

CMS

“There has been no significant increase in the number of compulsory winding-up petitions presented in the past 12 to 18 months. According to the Hong Kong Official Receiver’s Office statistics, the number of compulsory winding-up petitions presented in 2022 was 481, compared to 493 in 2021. The number of winding-up orders made in 2021 was 299 and in 2022 was 303.”

CONTRIBUTORS

Alvarez & Marsal

CMS

Hogan Lovells

Kroll (Cayman) Ltd

Mourant Ozannes

Norton Rose Fulbright Studio Legale

Prager Dreifuss Ltd

Quinn Emanuel Urquhart & Sullivan LLP

Shearman & Sterling (London) LLP

Teneo