Polsinelli released the Polsinelli-TrBk Distress Indices for the second quarter of 2018, which slowed slowing distress in the U.S. economy. For the first time in three quarters, the Polsinelli-TrBK Distress Indices has recorded signs of slowing distress across all three indexes measured.
Specifically, the report – which is based on Chapter 11 bankruptcy filings with more than $1 million in assets – shows that economic distress in the broader U.S. economy remains relatively low, while the Health Care index has exceeded the benchmark of the fourth quarter of 2010 by more than 100 percent the past five quarters.
“What is significant this quarter is that the distress indices show that economic distress has slowed in all three areas we track,” said Jeremy Johnson, a bankruptcy and restructuring attorney at Polsinelli and one of the authors of the report. “Although the number of health care filings decreased on a rolling four-quarter basis, the index is up 122 percent compared with one year ago and is 240 percent above the benchmark period in 2010.”
The Polsinelli-TrBk Distress Indices are the backbone of a quarterly research report series that uses Chapter 11 filing data as a proxy for measuring financial distress in the overall U.S. economy, and breakdowns of distress specifically in the real estate and the health care services sectors.
The rise and fall of economic distress has various factors. For instance, in health care, tort liability and reimbursement issues continue to drive health care providers into bankruptcy to seek alternatives, Johnson says. The new distress relief for the health care industry shows that this trend may begin to change in the next few quarters.
The Chapter 11 Distress Research Index was 49.26 for the second quarter of 2018. The Chapter 11 Index decreased approximately five points since the last quarter and has increased three of the past four quarters. Compared with the same period one year ago, the index has increased approximately nine points, and compared with the benchmark period of the fourth quarter of 2010, it is down more than 51 points.
The Real Estate Distress Research Index was 32.42 for the second quarter of 2018. The Real Estate Index decreased by 1.5 points since the last quarter and has increased three of the past four quarters. Compared with the same period one year ago, the index has increased more than nine points, and compared with the benchmark period, it is down approximately 50 percent. This is the second highest the real estate index has measured since the third quarter of 2014.
The Health Care Services Distress Research Index was 340.00 for the second quarter of 2018. The Health Care Index decreased 115 points from last quarter. The index has experienced record or near-record highs in each of the past eight quarters. Compared with the same period one year ago, the index has increased approximately 132 points. Compared with the benchmark period of the fourth quarter of 2010, the index is up more than 240 percent.
On a trailing four-quarter average, the percentage of real estate filings among all index-measured Chapter 11 filings has decreased from 19.98 percent in 2010 to 13.15 percent now, increasing 0.6 points since last quarter. Health Care services filings have increased from 1.13 percent in 2010 to 7.80 percent, a decrease of 1.7 points from last quarter.
The Polsinelli-TrBK Distress Indices track the increase or decrease in all Chapter 11 filings with more than $1 million in assets since the fourth quarter of 2010. Unlike the public markets, the Polsinelli-TrBK Distress Indices include both public and private companies, creating a broader economic view and one that may show developing trends on Main Street before they appear on Wall Street.
To access the full report, included graphs and all past analysis, visit https://www.distressindex.com.