BankruptcyData, a service provided by New Generation Research, Inc. (NGR) released its annual bankruptcy report. The yearly report analyzes trends associated with U.S. Bankruptcy Court activity. In 2016, declining bankruptcy trends reversed dramatically, with overall bankruptcies in both the public and private sector rising by 26%. Nearly a hundred public companies filed for Chapter 7 and Chapter 11 protection, with just under $105 billion in combined pre-petition assets. Additionally, an impressive 25 petitioners had assets greater than $1 billion, compared to 19 in the previous year.
George Putnam, Founder and Publisher of New Generation Research, Inc.'s The Turnaround Letter and BankruptcyData, anticipates a further rise in bankruptcy filings during 2017 and beyond. He notes, "While we believe that overall bankruptcy activity will remain at a high level for the foreseeable future, we think that filings in the energy sector may have peaked. They won't dry up overnight however, and we anticipate that energy bankruptcies will gradually decline over the next 12 to 18 months."
68% of the largest Chapter 11 bankruptcies were initiated within the Oil & Gas, Mining and Energy sectors. Continuing trends seen in previous years, over 80 public companies operating within these sectors filed for U.S. Bankruptcy Court protection with 30 of those petitioners listing more than $1 billion in pre-petition assets. It is also of interest to note that these statistics do not include SunEdison, which filed the largest bankruptcy last year. With nearly $12 billion in assets, SunEdison categorizes itself within the Electronics industry in SEC filings; however, this renewable power plant operator could certainly be considered an additional Energy sector bankruptcy. Including SunEdison, the five largest public Chapter 11 filings of 2016 are all energy related:
- SunEdison, Inc. - $11.5 billion
- Peabody Energy Corporation - $11.0 billion
- LINN Energy, LLC - $10.0 billion
- Arch Coal, Inc. - $8.4 billion
- Breitburn Energy Partners LP - $4.9 billion
Delaware continued to house the largest percentage of public Chapter 11's, with Wilmington presiding over 42% of all public proceedings. Notably, as a result of the high percentage of Oil & Gas sector bankruptcies, Texas continued to see more than its typical share of activity with 22% of public filings, a slight rise from 19% in 2015.
Although many analysts believe the Oil & Gas, Mining and Energy sector has seen its restructuring peak, The Turnaround Letter notes that approximately $1.5 trillion worth of lower quality corporate debt (a combination of high yield bonds and "leveraged" bank loans) will be due over the next five years. Putnam cautions, "Some meaningful percentage of those issuers will not be able to refinance their debt and be forced to restructure when their debt matures, even if the high yield debt market strengthens again. If the junk bond market is weak for a while, the number of defaults and restructurings is likely to be even larger."