Jeremy Johnson

The number of Chapter 11 bankruptcy filings in the third quarter hit its highest level since 2010, according to results from the latest Polsinelli-TrBK Distress Indices Report. This firm expects the trend to continue into 2021.

The third quarter showed clear signs of the pandemic’s effect on bankruptcy filings and is a continuation of the filing spike from the previous quarter. The filings occurring now either are defensive – to stop creditor enforcement actions – or offensive – to implement a restructuring agreement with creditors, said Polsinelli shareholder Jeremy Johnson, a bankruptcy and restructuring attorney and co-author of the report. 

The Health Care Services Distress Research Index was 468.33 for the third quarter of 2020, a decrease of 42 points from the second quarter and an increase of 86 points from a year ago. 

Within senior living/care in particular, however, Johnson told the McKnight’s Business Daily, COVID-19 has put significant pressure on operators, but the firm hasn’t seen it forcing too many operators into bankruptcy just yet. 

“It appears that a combination of various government funding programs, a willingness of lenders to work with operators, and general uncertainty about the long-term impact of COVID has slowed the rate of senior care filings the last two quarters,” he said. “That being said, we believe this sector is still experiencing significant financial distress, and we expect to see more senior care provider bankruptcy filings over the next several quarters as these bills come due and some clarity emerges on the long-term impact of COVID on senior living.”