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Illustration: Sarah Grillo/Axios

Even with trillions of dollars in loans, grants and government support — with markets having absorbed a record $1.22 trillion of corporate debt in just five months — a slew of companies are defaulting on their loans and filing for bankruptcy in what is expected to be a record wave of insolvencies and defaults.

Why it matters: While equity and debt markets have rallied thanks to massive interventions from the Federal Reserve and Congress and excitement about the removal of lockdown orders, the real economy is quietly buckling, with many companies threatened by issues that predate the coronavirus pandemic.

What's happening: So far this month, 27 firms that report at least $50 million in liabilities have sought bankruptcy protection, Bloomberg reports.

  • That's the highest monthly total since May 2009.

Stay woke: "As we have seen in previous times of economic stress, companies facing unforeseen financial burdens do not immediately resort to bankruptcy," Sudeep Kesh, head of S&P Global credit market research, says in a new report.

  • "The majority of bankruptcy defaults we have seen so far in the second quarter of 2020 were at companies that were facing idiosyncratic challenges before the COVID-19 and oil price shock."

What to watch: Already this year, 88 companies globally have defaulted on their debt, according to S&P Global. That's nearly double the number of corporate defaults to this point in 2019 (49) and more than double 2018's total (43).

  • Of the 88 defaults, 59 have been the result of missed interest and principal payments or bankruptcy.

What's next: Distressed debt investors and law firms are gearing up for the onslaught of bankruptcies, insolvencies and liquidations expected this year, with legal scholars warning congressional leaders in a recent letter that federal bankruptcy courts are likely to "be overwhelmed by this flood of cases."

  • Centerbridge Partners recently activated a roughly $3 billion capital pool that had been on standby for four years to direct at distressed assets, the firm's co-managing partner Jeffrey Aronson told the Wall Street Journal.

The last word: “You have to recognize that this recession, as tough as it is, has just started,” Aronson said.

Go deeper

U.S. debt to reach 100% of GDP in 2021

Photo: Stefani Reynolds/Getty Images

The federal budget deficit will reach $3.3 trillion in the fiscal year ending this month — more than triple the 2019 shortfall, the nonpartisan Congressional Budget Office (CBO) projected on Wednesday.

Why it matters: That would be 16% of GDP, the largest amount since the end of World War II in 1945. The national debt is projected to exceed 100% of GDP in 2021 and rise to 107% in 2023 — "the highest in the nation's history," the CBO notes.

2 hours ago - World

Special report: Trump's U.S.-China transformation

Illustration: Aïda Amer/Axios

President Trump began his term by launching the trade war with China he had promised on the campaign trail. By mid-2020, however, Trump was no longer the public face of China policy-making as he became increasingly consumed with domestic troubles, giving his top aides carte blanche to pursue a cascade of tough-on-China policies.

Why it matters: Trump alone did not reshape the China relationship. But his trade war shattered global norms, paving the way for administration officials to pursue policies that just a few years earlier would have been unthinkable.

McConnell: Trump "provoked" Capitol mob

Senate Majority Leader Mitch McConnell (R-Ky.) said on Tuesday that the pro-Trump mob that stormed the U.S. Capitol on Jan. 6 was "provoked by the president and other powerful people."

Why it matters: Trump was impeached by the House last week for "incitement of insurrection." McConnell has not said how he will vote in Trump's coming Senate impeachment trial, but sources told Axios' Mike Allen that the chances of him voting to convict are higher than 50%.