First Quarter Bankruptcy Filings Dip Dramatically

Arizona recorded a dramatic drop in middle market business bankruptcy and receivership filings during the first quarter of 2022, according to data in the Resolute Index, a bankruptcy report published today by Resolute Commercial Services.

The Grand Canyon State recorded only two middle market bankruptcies and one middle market receivership, a 67% decrease in middle market bankruptcies and receiverships compared to Q4 2021.

While Arizona has the second largest population in the 10-state Rocky Mountain West Region, accounting for 20% of the region’s population, only 8% of the region’s middle market bankruptcies and receiverships were recorded in the state during the first quarter.

Overall business bankruptcies in the United States reached their lowest point in more than 40 years in 2021, according to a report from the U.S. Courts. But, first quarter results vary by state. Arizona saw a large decrease in middle market bankruptcies in the first quarter of 2022, while Montana and Utah saw large increases.

“A reckoning is coming,” said Jerry Foster, president and founder of Resolute. “We’re still waiting to see the full impact of the COVID-19 pandemic, the Great Resignation, gas prices and inflation on businesses. It can take years to see the full impact of a jolt to the economy, but the record low bankruptcy rates we’ve seen over the past couple years won’t continue forever,” Foster added.

Middle market companies are generally defined as those with $10 million to $500 million in annual earnings. States in the Rocky Mountain West region include Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.

Identifying Regional Trends

The Resolute Index is a quarterly summary of noteworthy trends in bankruptcy filings and receivership appointments in the 10-state Rocky Mountain West region.

Key findings for the other Rocky Mountain West region states with the most notable numbers of bankruptcies and receiverships during the first quarter of 2022 include:

• Utah reports the same number of middle market bankruptcies in one quarter as in all of 2021. The state recorded three middle market bankruptcies in the first quarter of 2022, compared with three total middle market bankruptcies in all of 2021.
• Colorado reports its lowest level of middle market bankruptcies in more than 18 months. The state recorded 64% fewer bankruptcies in Q1 of 2022 compared to Q4 of 2021. However, with four middle market business bankruptcies and four middle market receiverships, during the first quarter, Colorado came in second only to Washington for most combined bankruptcies and receiverships in the Rocky Mountain West region.
• Nevada ties Washington and Colorado for most middle market bankruptcies during Q1. With four middle market bankruptcies filed in Nevada during the first quarter, the Silver State saw a 33% decrease in bankruptcies compared to the fourth quarter of 2021. For a state home to only 8% of the population residing in the Rocky Mountain West, Nevada accounted for 17% of all bankruptcies and receiverships in the region.
• Washington ranks first in Rocky Mountain West for combined bankruptcies and receiverships. Washington state recorded four middle market bankruptcies and five middle market receiverships in Q1. However, the high numbers of receiverships middle market businesses experienced in the first half of 2021 have not been seen so far in 2022, with 16 receiverships in Q1 2021 and only five receiverships in Q1 2022.

Key Takeaways

During the first quarter of 2022, Washington accounted for 25%, Colorado for 22% and Nevada for 17% of all middle market business bankruptcies and receiverships with at least $1 million in liabilities in the Rocky Mountain West region.

New Mexico and Wyoming were the only states in the region to record no middle market bankruptcies or receiverships during the first quarter of 2022.

A free copy of the full Resolute Index, with detailed information broken out by state and by quarter, can be found here.

Resolute is an independent business advisory firm focused on diagnosing and resolving the challenging issues impacting middle market companies with annual earnings between $10 million and $500 million. Resolute provides solution-oriented fiduciary, financial, business, and real estate advisory services. Its services are utilized by businesses, financial institutions, law firms, and state and federal courts.

Since its founding in 2008, Resolute has provided services in 33 states, with a strong presence in the Southwest and Rocky Mountain West regions. Its experienced staff has managed over $1 billion in distressed assets and sold more than 75 assets/enterprises with a total value of more than $250 million.