How will regulatory uncertainty impact restructuring decisions? has been saved
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How will regulatory uncertainty impact restructuring decisions?
Insights from US Restructuring Outlook 2025
The combination of economic pressures, regulatory changes, and cautious capital markets will necessitate strategic and flexible approaches to debt restructuring and management this year. Our 2025 US Restructuring Outlook delves into the evolving bankruptcy trends, challenges, and opportunities within this dynamic landscape. Explore the strategic insights to capitalize on restructuring opportunities in 2025 and beyond.
How 2024 shaped the future of US restructuring?
In 2024, many sectors experienced significant transformations driven by macroeconomic factors such as rising interest rates, inflation, and geopolitical uncertainties. Bankruptcy trends revealed a notable 20% increase in Chapter 11 filings across businesses of all sizes compared to 2023, indicating broad financial strain in the market.
However, larger companies with at least $2 million in assets or liabilities saw a smaller increase in filings, ranging from 3% to 5%. Sector-specific insights showed that the consumer discretionary sector led with 89 bankruptcy filings in 2024, up from 81 in 2023, coinciding with a record-high consumer debt of $17.7 trillion. Continuing the trend from 2023, industrials and health care were also near the top of the list with 77 and 63 filings in 2024, respectively.
2025 investment opportunities amid economic slowdown
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Distressed debt and equity investors should anticipate a wealth of opportunities in 2025, driven by an economic slowdown and more restrictive financial conditions. Sectors significantly impacted by tariffs and supply chain complexities are expected to offer compelling investment prospects. Investors are likely to adopt a discerning approach, prioritizing assets with strong recovery potential and restructuring opportunities.
In addition to conventional watchlist indicators, attention should also be given to broader market dynamics, including potential regulatory shifts, tariffs, and tax adjustments that may emerge under the new administration.
Several key factors are poised to shape the restructuring landscape in 2025, including:
- US GDP growth projected to slow from 2.8% in 2024 to 2.4% in 2025
- Inflation expected to stay above the Federal Reserve’s 2% target due to trade policies and tariffs
- These factors may increase the need for restructurings in 2025
- The Supreme Court’s recent decision in the Purdue Pharma case will likely have significant implications for bankruptcy proceedings
- Creditors are likely to gain increased leverage in plan negotiations, potentially leading to more complex and protracted bankruptcy proceedings
- Capital markets are expected to remain cautious due to ongoing inflation concerns and elevated interest rates
- Companies may turn to private credit as traditional financing becomes restrictive
- The cost of capital is likely to remain high and there may be a tightening of credit agreement terms
- Legal changes and high chapter 11 costs may drive use of amend-and-extend transactions and out-of-court restructurings
- These strategies could offer flexibility but may face scrutiny and litigation from non-participating creditors
Key drivers shaping sectors in 2025
Three primary enterprise service delivery goals
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Consumer – General
With expected rate cuts in the coming quarters, cheaper borrowing will likely allow households to take on more debt and continue spending in 2025. With the added dynamic of new tariffs potentially on the horizon, there may also be an acceleration on consumer spend in 2025 ahead of tariffs coming into full effect in 2026. On the contrary, consumer spending might be negatively affected by the broader economic slowdown caused by the tariffs, government spending cuts, and continued inflation, with discretionary spend being the first area to potentially take a hit.
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Consumer – Auto
The combination of steadily increasing US labor costs (especially when considered against overseas manufacturing facilities) coupled with potential tariffs and new approaches on tax credits for EVs, presents a set of challenges for US-based auto companies and parts manufacturers. Consolidation in EV startups, battery manufacturing, and broader EV technology space is expected—presenting opportunity for an original equipment manufacturer and a tier one supplier.
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Health care
Health care executives cautiously express a more favorable outlook for 2025 with nearly 60% of industry leaders holding a favorable industry view versus just 52% a year earlier, but that still leaves a significant portion of executives indicating concern about the year ahead.
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What’s ahead?
2024 was a transformative year for many sectors, driven by macroeconomic factors such as rising interest rates, inflation, and geopolitical uncertainties. As we transition into 2025, these macroeconomic pressures, along with updates in bankruptcy case law and evolving lender dynamics, continue to shape the restructuring landscape, offering both challenges and opportunities for businesses and investors.
To gain deeper insights, get your copy of the US Restructuring Outlook 2025.
Contacts
Advisory Senior Manager
Deloitte Transactions and Business Analytics
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