US firms filing for bankruptcy at fastest pace since 2013: Report

During the last financial crisis, there were 8,614 company bankruptcies in the US in 2008, and the number rose to 12,644 in 2009, according to the report.

US companies were filing for bankruptcy at the fastest pace since 2013 as the fallout from the COVID-19 pandemic continues to ripple through the country, a media report said.

Citing data from legal services group Epiq, The Financial Times report said on Tuesday that a total of 3,427 companies have filed for Chapter 11 bankruptcy in the US this year, close to the 3,491 filings during the first half of 2008, reported China's Xinhua news agency.

"The data stand in contrast to an improving economic backdrop following hefty central bank support across the globe and economies starting to reopen," the report said, noting the pain already inflicted by the global pandemic is too much for some companies to recover from.

"It is very difficult for these companies to operate in a near zero-revenue environment," Sudeep Kesh, head of credit market research at S&P Global Ratings, was quoted as saying in the report.

"They are facing a lot of pressure."

During the last financial crisis, there were 8,614 company bankruptcies in the US in 2008, and the number rose to 12,644 in 2009, according to the report.

The report came as the Paycheck Protection Program (PPP), a US government aid program intended to help small businesses retain their employees during the COVID-19 crisis, was set to close on Tuesday with more than $130 billion left unused.

Treasury Secretary Steven Mnuchin said on Tuesday that President Donald Trump's administration supports legislation to repurpose the remaining funds in the PPP.

7,990 business people committed suicide in 2018; up 2.7 per cent: NCRB data

Karnataka leads the list with highest number of such suicides followed by Maharashtra and Tamil Nadu.

If an icon like Amitabh Bachchan can seek help, as he did when he asked Yash Chopra for a role during a financially difficult time, others need not feel ashamed to do so; say psychiatrists in Mumbai.

They may have good reason to offer this advice. Lack of awareness about mental health issues and social stigma have contributed to an increase in the number of business people dying by suicide in 2018, breaking a trend of declining numbers over the last two years. A total of 7,990 business people died this way in 2018, up 2.7 per cent from 7,778 the previous year, show government statistics from the National Crime Records Bureau (NCRB). This is based on data which looked at the profession of the people who committed suicide.

The largest number of such cases were in Karnataka (1,113). This is followed by Maharashtra (969) and Tamil Nadu (931). These states are also among the highest-ranked in terms of gross state domestic product, a measure of economic output.

“Now suddenly people feel that it’s become very difficult…even if you are working hard the whole day; it is not necessary that you may make money,” said psychiatrist and author Anjali Chhabria. "People are ashamed and are often made to feel helpless by factors that may not be in their hands," she said.

Separately NCRB data also shows causes of suicide. Over 4,970 individuals died by suicide because of bankruptcy or indebtedness in 2018. They accounted for 3.7 per cent of the total number of suicide deaths during the year.

Interestingly, this is slightly lower than the 5,151 such suicides seen in the previous year, which accounted for 4 per cent of the total suicides in 2017.

Mumbai-based psychiatrist Harish Shetty said that the number could be understated. Bankruptcy is not disclosed in a lot of instances and such cases are often attributed more vaguely to family issues. This is also because of the perceived shame associated with failure in business.

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India's mini-Lehman moment: Bankruptcies double at real estate developers

The growing number of insolvencies highlight Indian property developers' inability to complete apartments and meet their debt obligations amid the funding crisis.

The number of Indian real estate companies tipped into insolvency has doubled in less than a year since the collapse of a key shadow bank, an event often compared to the Lehman crisis that squeezed American funding markets a decade ago.

As many as 421 developers entered bankruptcy court by the end of June, up from 209 in September 2018, around the time when the government seized control of Infrastructure Leasing & Financial Services Ltd.

The move triggered a credit crunch for smaller financiers and property firms, which depend on funds from shadow lenders.

The numbers will probably increase, according to Vivek K. Chandy, joint managing partner at law firm J. Sagar Associates.

Of the 421 cases, 164 have been closed, he said, which means they were resolved, withdrawn, or the companies faced liquidation.

The growing number of insolvencies highlight Indian property developers’ inability to complete apartments and meet their debt obligations amid the funding crisis. The crunch is feeding into -- and worsened by -- an economic slowdown that is hitting Indians’ demand for goods and services.

“Banks have become more vigilant. Markets are not too good, money is tight, compliance has increased,” Chandy said. “Home owners have now become financial creditors by legislation, so they will be able to put more pressure on real estate companies and can start insolvency proceedings.”

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IBC resolution plans yielded 200% liquidation value for creditors: MS Sahoo

He explained that markets regulator Sebi has exempted acquisitions under resolution plans from making public offers under the Takeover Code.

Resolution plans under IBC have yielded 200 per cent of liquidation value for creditors in addition to rescuing viable firms, IBBI Chairperson M S Sahoo has said.

"They are realising, on an average, 45 per cent of their claims through resolutions plans under the Corporate Insolvency Resolution Process (CIRP), which takes on average 300 days and entails a cost on average of 0.5 per cent.

"This is significantly better as compared to the previous regime which yielded a recovery of 25 per cent for creditors through a process which took about five years and entailed a cost of 9 per cent," Sahoo was quoted as saying in a Ficci statement.

Addressing a conference on Insolvency and Bankruptcy Code (IBC) at Hong Kong on Thursday, he observed that "in addition to rescuing viable firms, which is the sole objective of IBC; resolution plans under IBC have yielded 200 per cent of liquidation value for creditors."

He noted that the repayment of debt is no longer an option, it is an obligation as tolerance for default has disappeared.

"A stakeholder may initiate CIRP of the firm when it fails to service its debt for the first time. If process is initiated, the Code shifts control from the debtor to creditors for resolution of insolvency.

"Through the process of resolution, the ownership often shifts to third parties. Thus, ownership of firm is no more a divine right and equity is no more the only route to own a company," the Insolvency and Bankruptcy Board of India (IBBI) Chairperson said.

He said the creditors also need to explain to themselves and their stakeholders why they initiated an insolvency proceeding or why they did not, in case of a default.

Consequently, there would never be a high value default if this law exists in the statute book.

Sahoo acknowledged the support of the judiciary, government and the regulators in facilitating implementation of the Code, both in letter and spirit.

He explained that markets regulator Sebi has exempted acquisitions under resolution plans from making public offers under the Takeover Code.

RBI has allowed external commercial borrowing for resolution applicants to repay domestic term loans and the Competition Commission of India has devised a special route for expeditious approvals for combinations envisaged under resolution plans, said Sahoo.

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