2016 Recap: Bankruptcies Up 25%; 41% of Filings from Oil & Gas/Energy Sector

BankruptcyData’s analysis indicates that public* company bankruptcy filings increased by more than 25% in 2016 on top of the 46% rise seen in 2015. A
total of 99 publicly traded companies filed for Chapter 7/Chapter 11 protection last year with $105 billion in combined pre-petition assets**, and 2016’s crop of publicly traded filings includes an impressive 25 with assets greater than $1 billion—compared to 19 in the previous year.

Continuing the trend we saw in 2015, 17 of 2016’s 25 largest Chapter 11’s were initiated by companies within the Oil & Gas, Mining and Energy sectors—and 41% of 2016’s total public bankruptcies came from those industries. In fact, during the past two years alone, more than 80 public companies operating within these categories filed for U.S. Bankruptcy Court protection, with 30 of those petitioners listing more than $1 billion in pre-petition assets.

Largest Public Energy, Oil & Gas & Mining Sector Bankruptcies (2015 & 2016)

It is also of interest to note that these statistics do not include SunEdison, the largest bankruptcy of 2016. With nearly $12 billion in assets, SunEdison categorizes itself within the Electronics industry in SEC filings; however, the renewable power plant operator could certainly be considered an additional Energy sector bankruptcy.

25 Largest Public Bankruptcies of 2016 

Delaware continued to house the largest percentage of public Chapter 11’s, with Delaware seeing 42% of all public filings in both 2016 and 2015. Notably, as a result of the high percentage of Oil & Gas sector restructurings, Texas continued to see more than its typical share of public company bankruptcy activity: The four Texas Districts housed 22% of all of 2016’s public filings, a slight rise from 2015’s already impressive 19%.

Another corporate bankruptcy uptick was seen in 2016’s rise of prepackaged or pre-negotiated Chapter 11 filings. This expedited approach is utilized when a company and its creditors can agree on the key terms of a plan of reorganization before the company files its bankruptcy petition. The advantage to this approach is an expedited, less contentious proceeding, which can benefit both the debtor and its creditors with reduced legal expenses and consumer distress. With a prepackaged filing, the plan of reorganization is drafted, circulated and approved pre-petition then filed with the U.S. Bankruptcy Court concurrently with the Chapter 11 petition.

In a pre-negotiated scenario, negotiations on the key terms of a plan are commenced pre-petition; however, a plan is not finalized before the bankruptcy filing is initiated. During 2016, 18% of the year’s public filings were either prepackaged or pre-negotiated, versus just 13% in 2015. The efficiency of this approach is demonstrated by the fact that during 2016, 16 public companies confirmed Plans in three months or less. The average time between Chapter 11 filing date and a U.S. Bankruptcy Court confirmation order declined nearly 25% from 2015 to 2016. In terms of asset totals, 2016’s average pre-petition figure of $1.1 billion climbed just slightly from 2015’s $976 million, Like last year—none of 2016’s bankruptcies were large enough to rank among the largest historic filings.

25 Largest All Time Public Bankruptcies 

George Putnam, Publisher of New Generation Research, Inc.’s The Turnaround Letter and BankruptcyData, anticipates a further increase in U.S. Bankruptcy Court activity in 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.” Just a few days into 2017, the Oil & Gas industry has continued to make headlines with Bonanza Creek Energy’s much-anticipated $1.3 billion Chapter 11 bankruptcy.

Although many analysts believe the Oil & Gas/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.”

Public Companies/Assets Filing for Bankruptcy 

* BankruptcyData defines publicly traded as those companies with common stock and/or bonds that are publicly traded on U.S. markets.

** Total asset figures are pre-petition and taken from each debtor’s most recent Annual Report filed with the Securities and Exchange Commission (SEC).

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