In the first quarter of 2025, large US companies filed for bankruptcy at the highest rate in 15 years. A total of 188 bankruptcies were recorded through March, surpassing the 139 filings seen in the same period in 2024.
This marks the largest number of filings since 254 were reported in the first quarter of 2010. The increase reflects a notable trend in corporate financial distress among large entities.
Corporate Debt Loads Under Pressure
That surge in early 2025 speaks volumes about the mounting pressure on corporate balance sheets, particularly amongst public and private firms with high debt loads. The fact we are witnessing levels not seen since the aftermath of the financial crisis casts a long shadow over corporate credit conditions. It also suggests that many businesses, especially those previously bolstered by low interest rates, are now faltering under increased borrowing costs and tighter lending practices.
From our perspective, the sheer pace of filings hints at something more than isolated cases of mismanagement—it points to widespread shifts in liquidity access and refinancing risks. Companies operating on narrow margins or relying on aggressive expansion via leverage appear to be facing a stark reality. And while defaults can have ripple effects across multiple sectors, it’s the predictability of these events that matters to us.
For traders, timing and clarity are everything. When defaults rise this steeply, volatility in related debt instruments and credit derivatives rises alongside. CDS spreads have the potential to widen quickly, especially in sectors where sentiment is already fragile. This can reposition entire strategies around credit protection, where we may prefer short-dated contracts to capture accelerated repricing activity.
There’s also something to learn in the sectors represented by this trend. These bankruptcies have not been limited to fringe players; many of them are embedded within broader supply chains or consumer markets. When a large name collapses, its counterparty risk becomes instantly visible in ways that often escape early-stage analysis.
Impact Of Bankruptcy On Corporate Strategies
We should also not ignore the timing. The first quarter tends to carry forward sentiment and trends from the close of the previous year. The momentum seen here was likely building from late 2024—gathering steam as financing options narrowed, profit warnings intensified, and private equity-backed firms began to show cracks.
Expect higher frequency of downgrades and guidance revisions across leveraged credit. That said, the transformation of pricing mechanisms in credit markets is where most of the trading opportunity lies. When long-term corporate assumptions break down, near-term derivative contracts have a tendency to misprice risk.
We’ve been observing early reactions in index options and tranche markets—particularly the BB and single-B rated credit spaces. If this trend continues, spreads among these riskier classes could detach from their peers, offering a cleaner directional bet for those positioned for more turbulence.
What’s essential now is to monitor policy signals, corporate earnings calls, and debt maturity walls—not from a general standpoint, but with the aim of identifying where funding gaps may emerge. The pressures are broad, but dislocations are often temporary and localised. That gives us trading entries tied to specific maturities and structures, based on stress channels rather than macro shifts.
To that end, expect further recalibration in exposure models. Firms with high interest burdens or opaque financing deals, especially those still relying on pandemic-era funding, could bring sharp repricing in names not yet on broader default radar. Market reactions will likely be fast and binary.
Ultimately, we are not only reacting to a higher number of bankruptcies but to the pace and nature of their unfolding. That changes how risk hedges behave—and makes timing our roll decisions more important than ever.
