Rising bankruptcies and falling interest rates pose threats
- Signs of distress at retailers Big Lots, Express, and Children’s Place
- Corporate bankruptcies on the rise
- Uptick in bankruptcies threatens commercial real estate
- Commercial-real-estate values have fallen 21% from pandemic peak
- Growing risk for regional and community banks
Retailers Big Lots, Express, and Children’s Place are showing signs of distress, which could have negative implications for the struggling commercial-real-estate market, warns Barclays Research. Corporate bankruptcies have been increasing since the pandemic lull, with January seeing the highest level of filings since 2020. The buffer of low pandemic interest rates is disappearing, along with government stimulus payments, contributing to the uptick in bankruptcies. This trend poses a growing threat to commercial real estate, as tenants can reject their leases in bankruptcy court. Commercial-real-estate values have already fallen 21% from their peak, and a wave of maturing debt is looming, putting borrowers and lenders at risk. Regional and community banks are particularly vulnerable to write-offs on soured loans. Investors should be cautious as the retail sector continues to face challenges.
Public Companies: Big Lots Inc. (BIG), Express Inc. (EXPR), Children’s Place Inc. (PLCE)
Private Companies:
Key People: Lea Overby (Research team leader at Barclays)
Factuality Level: 7
Justification: The article provides information about distress signs at retailers and their potential impact on the commercial-real-estate market. It cites sources such as Barclays Research, Epiq, Bloomberg News, and the Wall Street Journal. However, the article lacks in-depth analysis and fails to provide a comprehensive view of the situation. It also includes some speculative statements without sufficient evidence.
Noise Level: 3
Justification: The article provides relevant information about signs of distress at retailers and their potential impact on the commercial-real-estate market. It mentions corporate bankruptcies, financing issues, and debt restructuring. The article also discusses the potential risks to investors in commercial-mortgage bonds and the impact on commercial-real-estate values. It includes some data on stock performance. However, the article lacks in-depth analysis, scientific rigor, and actionable insights. It also contains some repetitive information and does not provide a comprehensive view of the overall situation.
Financial Relevance: Yes
Financial Markets Impacted: The distress signs at retailers Big Lots Inc., Express, and the Children’s Place could have an impact on the commercial-real-estate market and investors in commercial-mortgage bonds.
Presence of Extreme Event: No
Nature of Extreme Event: No
Impact Rating of the Extreme Event: No
Justification: The article discusses the potential trouble for the reeling commercial-real-estate market due to distress signs at retailers. While there is no mention of an extreme event, the financial implications of the retailers’ situations are relevant to the financial markets.
www.marketwatch.com 
