Waiting for the shoe to drop: Corporate bankruptcies are expected to tick up – Crain’s Detroit Business

"If you think about Michigan and automotive, it's mainly a middle-market business. You've got the OEMs and the Magnas, but for the most part it's a couple thousand suppliers with under $1 billion in revenue," said Wybo. "So if you think about an average middle-market industrial company, the government has really propped that up for the last 18 months."

Federal legislation passed just before COVID-19 slammed the U.S., as well as provisions in the CARES Act, passed in the wake of the pandemic, have also helped keep corporate bankruptcies at bay, according to Marc Swanson, a principal and bankruptcy group leader in the Detroit-based law firm of Miller Canfield Paddock & Stone PLC.

But Swanson and others in the bankruptcy space acknowledge it's unlikely to remain this quiet for much longer.

"It seems inevitable that more companies will have to turn to bankruptcy to reorganize and shore up their balance sheets," said Swanson.

Indeed, ongoing disruptions in supply chains sometimes called the "bullwhip effect" coupled with rising inflation means that companies all but assured to begin feeling pressure on their balance sheets and turn toward restructuring, said Wybo, who said he's not expecting a flood like was seen a decade ago, but still expects a substantial uptick in the coming months.

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Waiting for the shoe to drop: Corporate bankruptcies are expected to tick up - Crain's Detroit Business