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Free Business Bankruptcy Filings Report: YTD Bankruptcy Filings Up 23%

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BankruptcyData released its Q2 2016 Business Bankruptcy Filing Report, which is available for browser download in this free e-report. According to New Generation Research, the upward swing in corporate bankruptcies continued in Q2 2016 as the number businesses filing for bankruptcy increased 9% compared to Q1 and was up 25% compared to Q2 2015 and up 7% compared to Q2 2014. YTD through June 2016 the number of filings was up 23% compared to the same period last year and up 4% compared to the first six months of 2014. The 2016 average number of filings per day figure is the highest since 2013. The number of business bankruptcies had seriously declined for several consecutive years following the recession in 2008. In 2014 and 2015 those numbers began to flatten out at levels that were 67% lower than they were in 2010. We have seen increased corporate bankruptcy activity in 2016 as our YTD numbers are the highest since the same period in 2013.

As in the past, small businesses made up the largest percentage of overall bankruptcies with 59% of bankruptcies being generated by companies with less than $2.5 million in sales in Q2 2016. The 2016 YTD the figure through June was 71%. But these figures are down significantly from the comparable 2015 and 2014 figures of 76% and 88% respectively. Conversely, in the first half of 2016 companies with $20 million+ in sales revenue generated 18% of all bankruptcies. This compares to 12% in the first half of 2015 and 4% in the first half of 2014. Additionally, 70% of all the bankruptcy filings in the first half of 2016 were from companies with less than 20 employees. Again, this figure compares to 80% in the first half of 2015 and 89% in the first half of 2014. The significant increase in large public and private company filings over the last couple of years has resulted in a decreasing number of overall filings being generated by smaller companies.

The service industry, our economy’s largest employer, also generated the largest percentage of overall bankruptcies with 26% coming from this sector in Q2 2016. This figure is down however from the Q2 2015 and Q2 2014 figures of 31% and 37%. This decrease, in part, can be attributed to the increase in bankruptcies in the energy sector over the last couple of years. In the first 6 months of 2015, Mining generated 4% of overall bankruptcies, in 2014 Mining generated 1.7% of all bankruptcies and years previous to that Mining generated less than 1%. In the first six months of 2016 the Mining industry generated just over 10% of overall bankruptcies. Specific service and manufacturing sectors that support the energy industry saw significant bankruptcy increases as well.

Texas surpassed California as the state that generated the highest percentage of overall bankruptcies in Q2 and YTD 2016. The 12.62% of overall filings generated by the state of Texas in the first half of 2016 is 2.73 percentage points higher than the same period in 2015 and 4.48 percentage points higher than in 2014. The Oil & Gas filings have largely contributed to this increase. The state of Missouri saw the largest increase in percentage of overall bankruptcies compared to the first half of 2015 due largely to the filings of Arch Coal, Peabody Energy Corporation, Abengoa Bioenergy US Holdings and Noranda Aluminum Holding Corporation…all companies adversely affected by the downturn in the energy sector. Puerto Rico’s sagging economy and burgeoning debt load has resulted in it landing in the group of top 10 states contributing the highest percentage of overall bankruptcy percentage. Puerto Rico’s business bankruptcy filings per capita is the highest in the country.

Bankruptcy filings by publicly-traded companies have surged so far this year, with 61 filings and a total of over $86 billion in assets entering Chapter 11 or Chapter 7 as of June 30. For perspective, this is more than twice the $33 billion in assets at last year’s halfway point. If bankruptcy filings continue at the same pace during the second half of the year, the total assets going into bankruptcy in 2016 would be the fourth highest of all time, surpassed only by 2008 and 2001-02.

Energy-related companies dominated the public filings, with 10 of the 15 largest bankruptcies coming from this capital-intensive industry. Similarly, over 80% of all $86 billion in assets entering bankruptcy were from energy-related companies. In addition to a number of oil & gas companies going into Chapter 11, every large publicly-traded pure-play coal company has now filed for bankruptcy. Consol Energy, thanks to its substantial natural gas assets in addition to its coal assets, is the only significant publicly-traded coal miner that remains afloat. The balance of 2016’s public company filings have come from a diverse mix of technology, airline, printing, metals and other industries.

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Will the number of corporate bankruptcies continue to increase moving forward? We think that it will. We expect this heavy public company bankruptcy volume from energy companies to continue, but it could be reaching its peak. Oil prices have recovered somewhat, and many of the weakest companies have already filed. However, we expect to see public company bankruptcy activity increase away from the energy sector. The amount of high-yield debt raised during the 2009-2015 credit cycle has been huge—almost double the previous credit boom— and much of that debt matures over the next several years. While most companies should be able to refinance their debt, some of the weaker performers will not. Only a relatively small uptick in the default rate will create a significant number of new bankruptcies. Economic weakness, rising interest rates or soft financial markets could boost the number of coming bankruptcies even higher.

The broadening scope of this wave of bankruptcies is a strong indicator that the credit cycle has ended, that the credit bubble created by the Fed to reflate the collapsed markets prior credit bubble is now also deflating. This will most certainly trickle down to the smaller private companies as the economy remains flat driving up their bankruptcy numbers throughout the rest of the year.

 

 

 

 

 

The post Free Business Bankruptcy Filings Report: YTD Bankruptcy Filings Up 23% appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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