AlixPartners, the global advisory firm, released the results of its 11th Annual North American Restructuring Experts Survey. This year’s survey, which represents the opinions of 207 senior-level restructuring experts, indicates there will likely be more restructuring activity in 2017 than last year with 78% of respondents saying the number of bankruptcies will increase or remain the same as 2016. This comes after 2016 saw a rebound in the number of business bankruptcies after many years of decline.
“In addition to retail and oil and gas, we are seeing increased restructuring activity in shipping and energy/utilities,” said Lisa Donahue, Managing Director at AlixPartners and global leader of the firm’s Turnaround & Restructuring Services practice. “As the year came to a close, 2016 will be remembered for some of the most impactful global events on record that not even the most well informed experts could have predicted. But the changes brought upheaval and opportunities for the restructuring community to contribute its skills. We expect this to continue in 2017.”
Industries to Watch in 2017
In the U.S., the top industries predicted to face distress in 2017 are retail (67%), oil and gas (57%), and healthcare (31%). Outside of the U.S., oil and gas (55%), maritime and shipping (40%), and retail (35%) are the three most-cited sectors.
The retail industry began 2017 under the spotlight after an uptick in bankruptcies in the sector in 2016. Several high-profile apparel retailers filed for bankruptcy last year and as consumers continue to migrate online for purchases, retailers are under continued stress to adapt their operations to the changing environment.
The oil and gas industry saw a large number of bankruptcies and restructurings in 2016 and 55% of respondents feel the industry will not stabilize until 2018. 48% of respondents predict companies in the industry will resolve their financial problems through chapter 11 proceedings while 37% percent say companies in the sector will conduct out-of-court restructurings. Oilfield services is the sub-sector predicted to have the most restructurings, followed by offshore drilling.
“Our survey respondents are saying that the challenges that oil and gas companies have faced for the past several years are not expected to subside this year,” said Jim Mesterharm, Managing Director at AlixPartners and co-head of the firm’s Turnaround & Restructuring Services practice for the Americas. “Oil and gas was the industry with the most corporate bankruptcies in 2016 and this could continue into 2017. It does not appear that there will be significant increases in oil prices in 2017. Given the high fixed costs and debt load of many oil and gas companies, this may push more firms to pursue restructurings.”
Global Outlook
According to the experts surveyed, restructuring activity is expected to increase outside of the U.S. as well, with 57% of survey respondents believing 2017 will see an increase in activity over 2016 and 40% believing the level of activity will remain at the same level. Survey respondents expect the U.K. to see the most restructuring activity in 2017, followed by Italy. Most experts think the Brexit vote will lead to more restructurings in the U.K. (68%), while 28% think Brexit will have no impact.
The North American Restructuring Experts Survey reflects the opinions of 207 senior-level North American-based corporate restructuring experts. The survey, which was conducted online from November 22 through December 9, 2016, highlights the evolving state of the restructuring industry and forecasts developments over the next 12 months. The survey polled senior attorneys, investment bankers, lenders, hedge fund managers and other restructuring professionals across the United States.