Going for broke: NJ a top venue for corporate bankruptcy filings

When it comes to corporate bankruptcy filings, New Jersey is becoming one of hottest venues in the country.

After Delaware and the Southern District of Texas, New Jersey was the third most popular jurisdiction for large bankruptcy cases over the past year, according to a new report from San Francisco-based consulting firm Cornerstone Research.

For the Garden State, it marks the first time the state’s bankruptcy caseload topped the Southern District of New York. It also furthers the local trend of growing corporate filings.

In recent years, the U.S. Bankruptcy Court in New Jersey has seen a surge of bankruptcy cases from big names like Bed Bath & Beyond , David’s Bridal , Sam Ash , Rite Aid , BlockFi and WeWork.

Up until 2023, when New Jersey saw seven large cases, the state, had about two big filings a year since 2005, on average. According to Cornerstone, there were eight cases filed in New Jersey between the second half of 2023 and first half of 2024.

Overall, there was a “notable” uptick in Chapter 7 and Chapter 11 filings across the U.S. among public and private companies with assets exceeding $100 million, the report says.

Of the 113 large companies that filed for bankruptcy between the second half of 2023 and first half of 2024, 24 of those entities were considered “mega bankruptcies” because they companies reported assets over $1 billion.

The biggest case within the last 12 months was office-sharing company WeWork, which filed for Chapter 11 in November 2023 in New Jersey . At the time, it reported $15.1 billion in assets.Other mega bankruptcy cases heard in New Jersey include retail pharmacy chain Rite Aid, medical apparel company Careismatic and consumer goods company Thrasio Holdings Inc.

Rising costs, COVID impacts

According to the report, the industries with the most filings were services and manufacturing. Finance, insurance and real state also had a rise in cases, it says.

Matt Osborn, a principal at Cornerstone and co-author of the report, said, “The recent rise in large corporate bankruptcies, with an 8% increase in filings over the past 12 months, reflects the challenging economic environment many major companies have been navigating amid high inflation and interest rates.”

“As the economic landscape continues to evolve, it is clear that the rising costs, lingering effects from the COVID-19 pandemic, and increased competition have continued to take a toll on many large and established companies,” he said.

The most commonly cited factors among the largest bankruptcies were rising costs due to high inflation/interest rates and lingering impacts of the pandemic.

As the economic landscape continues to evolve, it is clear that the rising costs, lingering effects from the COVID-19 pandemic, and increased competition have continued to take a toll on many large and established companies.

Matt Osborn , Cornerstone

When Red Lobster filed for Chapter 11 relief in May in Florida , the casual-dining brand said "macroeconomic factors,” like inflationary pressures and minimum hourly wage increases “weighed [it] down in recent years."

 

WeWork noted COVID’s affect on the commercial real estate landscape particularly in cities. The company's shared office network has a large footprint in such areas.

Companies also identified contributing factors including increased competition for products or services and unsuccessful strategic initiatives, Cornerstone says.

In filing for bankruptcy protection in October 2023, Rite Aid pointed to growing competition from drugstores, supermarkets, mass merchandisers and online retailers.

Both Red Lobster and Rite Aid recently emerged from Chapter 11 with reduced footprints, decreased debt and new leadership.

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