The recent wave of corporate bankruptcies is being described as a consequence of the economic stagnation imposed by the COVID pandemic. For the most part, however, these are not casualties of the virus. These are businesses or industries that faced challenges that could be managed in a favorable environment of low interest rates and available capital -- until something, in this case COVID-19, tipped the scales. There will be more such casualties. The bigger question is whether healthier businesses and industries will succumb or survive.
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Tipping the scales
In the 2½ months since COVID-19 created a national emergency in the United States, dozens of companies have tilted into bankruptcy in the retail, travel and energy sectors, and a former bankruptcy judge predicts the turmoil will spread further through the economy in the coming months.