In this issue of Insolvency Now , we report on the data trends we are seeing at this point in 2024 in comparison with when we first started tracking data in 2019. Overall, we are seeing a marked increase in filings. However, we are not seeing the level of sector-specific distress that might have been expected in these filings. For example, we have not yet seen an impact on commercial real estate filings resulting from rising interest rates and changing work patterns that have affected commercial real estate values and occupancy rates. This effect will likely take time to be reflected in the data, with delayed response times to interest rate increases and cuts. In addition, we aren’t seeing a clear-cut pattern in retail and hospitality – sectors that continue to face significant challenges resulting from increased online competition and the lingering effects of the pandemic. While we do not report on personal insolvencies in Insolvency Now , we do note that personal insolvency rates have risen faster than corporate rates, and this too will have an impact on various corporate sectors. The inflationary pressures combined with debt accumulation during the pandemic and repayment terms coming due are likely significant contributors to the increase in filings. In particular, mortgage renewals at higher rates were prior to the Bank of Canada's recent rate cuts. We note that Q1 and Q2 of 2024 operated quite differently: Q1 experienced most of the increases in filings, whereas Q2 had returns to similar levels in the same quarter in 2023. In this issue of Insolvency Now , we also report on business openings and closings in the current period and compare this data with earlier data. Although Q1 2024 appeared to suggest an increase in insolvency filings across the board, we also saw an increase in net business openings in that quarter. In contrast, Q2 2024 experienced a drop in insolvency filings and a net decrease in business openings. This trend leads us to question whether there are, in fact, enough filings and it illustrates the importance of corporate insolvency and restructuring procedures for encouraging entrepreneurial risk-taking. Related to this observation, in this issue of Insolvency Now , we discuss the role and impact of stigma associated with corporate restructuring. The stigma associated with bankruptcy has been much explored in the context of consumer bankruptcy – that is, whether it still exists and how it affects individual debtor decisions to file. Much less has been written in the corporate restructuring context. Yet in our practice we are often confronted with this issue in the form of reluctance by a corporate debtor to initiate restructuring proceedings or denial that it is necessary. In this issue, we highlight the key points that are often raised in relation to corporate bankruptcy stigma and the associated reluctance to use restructuring procedures, despite the benefits and, particularly, the potential downside of not filing. Our commentary underscores the importance of addressing stigma to increase the effectiveness of reorganization legislation in the Canadian context and to improve outcomes across the board. In advising clients, our goal is to offer a set of restructuring options that can be understood as strategic tools for proactive recovery rather than as a mark of failure. Davies Insolvency Now is a publication authored by Natasha MacParland, Robin B. Schwill and Stephanie Ben-Ishai that analyzes key trends and developments in the insolvency and restructuring community.
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Davies Insolvency Now: Issue 11
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