BY Fraser Tennant
The US business bankruptcy landscape saw bankruptcy filings increase by 46 percent in 2015 — due primarily to a challenging energy sector environment — according to a report released this week by BankruptcyData.com, a leading provider of information on companies in bankruptcy.
In the ‘Q4 2015 Business Bankruptcy Filings Report’, which breaks down business bankruptcy filings into factors such as industry, sales volume, company size, liability and asset ranges and public and private filings, a total of 79 publicly traded companies (with $81bn in combined pre-petition assets) are revealed to have filed for Chapter 7 or Chapter 11 protection in 2015.
Furthermore, eight of the 10 largest Chapter 11 filings were initiated by companies operating in the oil and gas, mining and related sectors — a substantial 51 percent of the total public bankruptcies seen in 2015. Overall, 40 of the 79 filings involved oil and gas and mining companies.
However, despite this significant uptick, the total assets entering Chapter 11 in 2015 increased only marginally in comparison with 2014; due, in the main, to the $40bn bankruptcy of Energy Future Holdings.
The analysis also shows that six of the publicly traded filings have assets above $3bn (compared to two filings the previous year) while there were 19 bankruptcies with assets over $1bn (compared to 11 the year before).
Looking forward to what 2016 has in store for the business bankruptcy landscape, many analysts, including distressed securities investor George Putnam, expect to see a further increase in activity in US bankruptcy courts.
"There could be a number of additional companies getting ready to file in 2016," said Mr Putnam. “The face amount of bonds that have not yet defaulted but are trading below 50 cents on the dollar jumped to about $80bn in December, a more than five-fold increase during 2015 and the highest level since the 2008-09 financial crisis."
In terms of overall US Bankruptcy Court trends, the BankruptcyData.com report notes that the 2015 figures represent approximately 33 percent of the business bankruptcy activity seen in 2009.
BankruptcyData.com said: “Low interest rates, a robust capital market with easy access to financing, out-of-court settlement alternatives, a slightly improving economy, the perceived cost of filing for bankruptcy and tighter bank lending decisions have driven the number of bankruptcy filings down over the last six years.
“Additionally, the recession eliminated many of the troubled companies, so the remaining relatively healthy businesses are able to borrow with little fear of raising rates keeping the filing rates down.”