Ground-hugging interest rates for more than a decade kept the inefficient and the incompetent in business. Now, the jig is up, with a Mother's Day weekend corporate massacre that saw the bankruptcies of seven corporations, each with liabilities of nine figures or more—in four cases, with more than a billion dollars in liabilities each.
This cluster of large bankruptcies happening in less than forty-eight hours is the most since 2008. Libby Cherry writes for Bloomberg (reprinted on Time): "Firms across every sector are struggling with higher interest costs—making it more challenging to refinance loans and bonds—while corporate executives are drawing more scrutiny from investors and creditors."
The corporate restructurings cover a wide range of businesses: Vice Media Group, KKR-backed Envision Healthcare, security company Monitronics International, chemical producer Venator Materials Plc, oil producer Cox Operating, fire protection firm Kidde-Fenwal, and biotechnology company Athenex.
The only thing these firms had in common was lots of debt that was unserviceable with today's higher interest rates. Murray Rothbard wrote in America's Great Depression:
The problem of the business cycle is one of general boom and depression; it is not a problem of exploring specific industries and wondering what factors make each one of them relatively prosperous or depressed. . . . What we are trying to explain are general booms and busts in business.