Credit Resilience Amid Corporate Failures: Unlocking Opportunities in Undervalued Credits

The 2024–2025 corporate bankruptcy wave has exposed a paradox: while economic pressures like inflation, high interest rates, and shifting consumer behavior have driven over 371 U.S. companies into insolvency in the first half of 2025 aloneUS corporate bankruptcies soar to 14-year high in 2024^[1], these failures also reveal a trove of undervalued credits. For investors with a long-term horizon, the collapse of once-dominant brands like Red Lobster, Del Monte, and 99 Cents Only Stores offers a unique opportunity to capitalize on fundamentally strong businesses restructured for resilience.

Red Lobster: From Private Equity Overleveraging to Strategic Turnaround

Red Lobster's Chapter 11 filing in 2024 was emblematic of the perils of private equity-driven overleveraging. Golden Gate Capital's 2014 buyout saddled the chain with debt, while predatory leaseback agreements and a failed "Endless Shrimp" promotion eroded profitabilityThe Downfall of Red Lobster. Private Equity and the Complexities^[2]. However, its 2024 restructuring under RL Investor Holdings LLC-a consortium including Fortress Investment Group-has transformed the brand. The company secured $60 million in new funding, closed 100 underperforming locations, and appointed CEO Damola Adamolekun to drive innovationRed Lobster Emerges Stronger After Exiting Chapter 11 Bankruptcy^[3]. Financial projections now show a path to $2.1 million in net income by 2026, a stark reversal from a $52 million loss in 2025Red Lobster expects positive net income by fiscal 2026^[4]. Investors who recognize the value of its iconic brand and streamlined operations may find this a compelling case of credit resilience.

Del Monte: Restructuring for a Health-Conscious Future

Del Monte's July 2025 Chapter 11 filing stemmed from $1.2 billion in liabilities and declining demand for canned goods. Yet, its pre-bankruptcy debt restructuring in 2024-raising its credit rating from "SD" to "CCC"-demonstrated strategic foresightResearch Update: Del Monte Foods Inc. Issuer Credit Rating^[5]. The company's $912.5 million debtor-in-possession (DIP) financing package, led by JPMorgan Chase and Wilmington Savings Fund Society, ensures operational continuity while it pursues a court-supervised saleDel Monte Foods Chapter 11: Massive $1B Bankruptcy^[6]. Del Monte's pivot to low-sodium canned products and fresh-forward lines aligns with modern consumer preferences, and its international subsidiaries (e.g., Philippine operations) remain credit-stableDel Monte Foods files for Chapter 11 - Financier Worldwide^[7]. For investors, the key lies in identifying a strategic buyer who can leverage its distribution network and brand equity.

99 Cents Only: Distressed Assets as a Catalyst for Value Retail Innovation

The 99 Cents Only bankruptcy in April 2024 highlighted the fragility of the value retail sector. With $456.9 million in debt and declining sales, the chain liquidated 371 stores, generating $413 million in proceeds99 Cents Only Stores - Hilco Global^[8]. However, Dollar Tree's acquisition of half its leases and subsequent rebranding as Dollar Tree stores exemplifies how distressed assets can be revitalized. The broader sector's shift toward hybrid formats (e.g., fresh food integration) suggests that 99 Cents' failure is not the end of the value retail story but a signal for investors to target operators with agile business modelsThe Decline and Fall of 99 Cents Only Stores^[9].

The Broader Implications for Credit Investors

The 2024–2025 bankruptcy surge underscores a critical lesson: macroeconomic stress often separates resilient businesses from those with structural weaknesses. Companies like Red Lobster and Del Monte, despite their challenges, possess durable brand equity, operational flexibility, and strategic partnerships that position them for recovery. For credit investors, the key is to differentiate between temporary distress and permanent decline.

As S&P Global notes, 60% of 2025 bankruptcies have opted for Chapter 11 reorganization over liquidation, signaling confidence in long-term viabilityUS corporate bankruptcy filings lean toward reorganization^[10]. This trend favors investors who can identify undervalued credits with strong fundamentals and a clear path to profitability.

Conclusion

Corporate failures are not the end of the story-they are often the beginning of a new chapter. By analyzing the restructuring strategies of Red Lobster, Del Monte, and 99 Cents Only, investors can uncover opportunities in credits that have been unfairly devalued by short-term volatility. The key lies in rigorous due diligence, a focus on operational and financial discipline, and a willingness to bet on brands with the potential to adapt. In a high-interest-rate environment, the most rewarding investments may lie not in avoiding risk but in managing it with precision.