Report: Nearly 50 Percent of Public Company Bankruptcies During 2014-2016 Were from Energy Industry

With the energy industry in its worst downturn in decades, E&P companies dominated the bankruptcy landscape, according to the “Energy Sector Bankruptcies: A Review of Bankruptcy Activity in the Energy Sector: 2015-2016” report released today by BankruptcyData. The report found that over 60 percent of the assets that filed for bankruptcy during 2014-2016 and nearly 50 percent of the total number of public company bankruptcies were from the energy industry (historically, the energy industry accounts for just 2-15 percent of public company bankruptcies). Also, these companies were often very large: 15 of the top 20 bankruptcies in this period came from the energy industry. Private companies in the energy industry were also not immune, according to the report. The percent of total business bankruptcies generated from the energy industry increased from 2.8 percent in 2014 to 8.5 percent in 2016. The effect of the downturn was far-reaching and cut across all industries that had ties to energy, from manufacturing to transportation.

 

The featured keynote at ABI's 2017 Annual Spring Meeting will be Spencer Abraham, former U.S. Senator and former U.S. Secretary of Energy. Additionally, a panel at the Annual Spring Meeting will be discussing legal and business developments in E&P cases. Click here to register!

Need a better understanding of what happens when an oil, gas or other natural resources company goes bankrupt? Order your copy of ABI’s revised and expanded When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy, Second Edition.

Commentary: Retail Zombies Haunt Industry

Investors are normally a ruthless bunch, but some are keeping alive a range of battered retailers, which is making things worse for the already struggling industry, according to a commentary today in the Wall Street Journal. More retailers are teetering on the edge of bankruptcy than at any point since the recession. Moody’s rates the debt of 19 retailers, or 13.5 percent of the retailers it covers, as “speculative, of poor standing and subject to very high credit risk” or worse. That is up from only 5.6 percent of the ratings agency’s retail portfolio at the end of 2011 and compares with 16 percent in 2009 in the middle of the financial crisis. As dismal as things are among stores fighting e-commerce competition and endless price pressure, not that many have actually gone bankrupt. American Apparel, Limited Stores, Wet Seal and Sports Authority so far have been more the exception rather than the rule. The roster of the living dead is mostly made up of household names, including publicly held companies such as Sears Holdings, Fairway Group Holdings and Bon-Ton Stores and private-equity-owned David’s Bridal, TOMS Shoes, True Religion Apparel, Nine West Holdings, Payless ShoeSource, Gymboree, Claire’s Stores and J. Crew parent Chinos Intermediate Holdings.

Analysis: Investors Hone Student Loan Debt-Investment Strategies

FlowPoint Capital has generated fivefold returns in recent years through so-called short bets, or wagers in the stock and options market that shares of certain student loan-related companies will fall, according to company documents, the New York Times reported last week. It is part of a broader investment theory that inflated stock prices in for-profit college companies, textbook-makers, lenders and loan collectors — all of whom have roles in what FlowPoint’s Charles Trafton calls “the college bubble” of the last seven or eight years — have a long way to fall. Trafton isn’t the only market participant who is skeptical of the $1.4 trillion student loan market. Outspoken hedge-fund manager William A. Ackman has called student debt a big threat to the U.S. credit markets, saying, “I think that the government’s going to lose hundreds of millions of dollars.” JPMorgan Chase’s chief executive, Jamie Dimon, warned last year that student-debt defaults were a looming problem. More recently, some hedge funds — concerned about default rates and state and federal lawsuits accusing a major student loan collector of abuses — have considered shorting shares of the company or its competitors in various ways.


Now available in the ABI Bookstore: Pick up your copy of the updated and revised Graduating with Debt: Student Loans under the Bankruptcy Code, Second Edition!
 

Credit Caught in the Crosshairs of Politics and Rates

The Bloomberg Barclays Global Aggregate Credit index tightened four basis points in January, even as issuers in the U.S. and Europe placed a record $445 billion equivalent in new supply, Bloomberg Brief reported on Tuesday. Corporate bond demand is buoyed by hopes that President Trump’s fiscal stimuli will boost credit fundamentals, as well as implicit backstops from Fed, ECB and Bank of England quantitative easing. Any hint of U.S. growth fading, or central banks tapering, could trigger a swift reversal in coming months. In the U.S., investors may soon start to question the sustainability of the post-election risk rally, especially after legal challenges to some of the administration's proposals. In the U.K., intensifying Brexit polemic may weigh on European risk appetite as the end of a March deadline for triggering Article 50 nears.

 

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