Recent Bankruptcy Risk Report January 5th, 2025

BRAINKRUPTCY estimated the measure of bankruptcy risk of 4,512 listed US companies.

The distribution of the measure of bankruptcy risk shows that the vast majority of listed US companies are solvent. 3,743 listed US companies exhibit a measure of bankruptcy risk that is below the cut-off-rate. If the measure of bankruptcy risk is above the cut-off-rate, this indicates that the company is in severe financial distress. This applies to 769 listed US companies. That group of financially distressed companies specifically includes listed US companies which are at imminent risk of filing for bankruptcy within the next 12 months.

An enhanced analysis of a company’s financial distress looks at the current measure of bankruptcy risk and its 1-month change. The bankruptcy risk matrix shows six areas that can be distinguished by the specification of three characteristics:

• A) Healthy companies with upcoming concerns (a company’s current measure of bankruptcy risk is below the cut-off-rate; a company’s current measure of bankruptcy risk increased during the previous 1-month period; a company’s measure of bankruptcy risk that was estimated one month before is below the cut-off-rate): 1,237 (yellow)
• B) Companies with upcoming financial distress (a company’s current measure of bankruptcy risk is above the cut-off-rate; a company’s current measure of bankruptcy risk increased during the previous 1-month period; a company’s measure of bankruptcy risk that was estimated one month before is below the cut-off-rate): 52 (brown)
• C) Perishing companies (a company’s current measure of bankruptcy risk is above the cut-off-rate; a company’s current measure of bankruptcy risk increased during the previous 1-month period; a company’s measure of bankruptcy risk that was estimated one month before is above the cut-off-rate): 283 (red)
• D) Struggling companies (a company’s current measure of bankruptcy risk is above the cut-off-rate; a company’s current measure of bankruptcy risk decreased during the previous 1-month period; a company’s measure of bankruptcy risk that was estimated one month before is above the cut-off-rate): 434 (orange)
• E) Cured companies (a company’s current measure of bankruptcy risk is below the cut-off-rate; a company’s current measure of bankruptcy risk decreased during the previous 1-month period; a company’s measure of bankruptcy risk that was estimated one month before is above the cut-off-rate): 79 (turquoise)
• F) Healthy companies (a company’s current measure of bankruptcy risk is below the cut-off-rate; a company’s current measure of bankruptcy risk decreased during the previous 1-month period; a company’s measure of bankruptcy risk that was estimated one month before is below the cut-off-rate): 2,427 (green)

Based on the six areas of the bankruptcy risk matrix six subsamples of listed US companies can be composed:

• Number of listed US companies that are financially healthy:
  A + E + F = 1,237 + 79 + 2,427 = 3,743
• Number of listed US companies that exhibit severe financial distress:
  B + C + D = 52 + 283 + 434 = 769
• Number of listed US companies with increasing measure of bankruptcy risk:
  A + B + C = 1,237 + 52 + 283 = 1,572
• Number of listed US companies with decreasing measure of bankruptcy risk:
  D + E + F = 434 + 79 + 2,427 = 2,940
  
• Number of listed US companies that exhibited severe financial distress one month before:
  C + D + E = 283 + 434 + 79 = 796
• Number of listed US companies that were financially healthy one month before:
  A + B + F = 1,237 + 52 + 2,427 = 3,716

The number of listed US companies that exhibit severe financial distress decreased during last month (769 < 796). The number of listed US companies that are financially healthy increased during last month (3,743 > 3,716). The number of listed US companies with increasing measure of bankruptcy risk is lower than the number of listed US companies with decreasing measure of bankruptcy risk (1,572 < 2,940).

The mean measure of bankruptcy risk decreased in most SIC 1 industries during the last month. The mean measure of bankruptcy risk rose only slightly in the wholesale and retail trade and in the financial sector.