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Corporate Bankruptcy Recap & Forecast: Downward Trend Continues while Prepackaged Filings Rise in 2013

January 10, 2014
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BankruptcyData.com’s research reveals that 71 publicly traded* companies filed for bankruptcy protection in 2013 with a total of $42.6 billion in combined pre-petition assets**. This filing count is down from 2012’s 87 filings and $70.8 billion in assets. The largest filing of 2013 was Cengage Learning’s$7.5 billion bankruptcy, followed by Penson Worldwide with $6.2 billion in assets then a sharp drop to Dex One’s $2.8 billion filing. The chart below reflects the ten largest Chapter 7 and Chapter 11 proceedings for 2013. Coincidentally, these are the only bankruptcies for the year that listed $1 billion or more in total pre-petition assets.

10 Largest Bankruptcies of 2013:

Company

Bankruptcy Date

Assets** ($mil)

Cengage Learning, Inc.

07/02/13

$7,505

Penson Worldwide, Inc.

01/11/13

6,197

Dex One Corporation***

03/17/13

2,835

Excel Maritime Carriers Ltd.

07/01/13

2,722

Anchor BanCorp Wisconsin Inc.

08/12/13

2,368

Exide Technologies***

06/10/13

2,195

Central European Distribution Corporation

04/07/13

2,073

RDA Holding Co. (Reader’s Digest)***

02/17/13

1,564

SuperMedia, Inc.***

03/18/13

1,410

Revel AC, Inc.

03/25/13

1,170

 

The average pre-petition asset figure also continued its downward trend, dropping to $600 million—compared to $814 million in 2012. In fact, the total asset figure for the two largest bankruptcies combined still does not equal that of the largest filing of 2012—Residential Capital, which had more than $15 billion in assets—and none of this year’s bankruptcies come close to ranking on BankruptcyData.com’s list of largest all-time bankruptcy filings:

10 Largest All Time Chapter 7 and Chapter 11 Bankruptcies (1980-2013):

Company

Bankruptcy Date

Business Description

Assets** ($mil)

Lehman Brothers Holdings Inc.

09/15/08

Investment Bank

$691,063

Washington Mutual, Inc.

09/26/08

Savings & Loan Holding

327,913

WorldCom, Inc.

07/21/02

Telecommunications

103,914

General Motors Corporation

06/01/09

Automotive Mfg. & Sales

91,047

CIT Group Inc.

11/01/09

Bank Holding Company

80,449

Enron Corp.

12/02/01

Energy Trading & Natural Gas

65,503

Conseco, Inc.

12/18/02

Financial Services Holding Co.

61,392

MF Global Holdings Ltd.

10/31/11

Commodities & Derivatives Broker

40,542

Chrysler LLC

04/30/09

Automotive Mfg. & Sales

39,300

Thornburg Mortgage, Inc.

05/01/09

Residential Mortgage Lending

36,521

Continuing a trend we’ve seen over the past few years—and unlike the bankruptcy cycles of (1) 2000-03 and (2) 2008-09, which were clearly dominated by certain industry groups (telecom/technology and financial services, respectively), 2013’s Chapter 11 activity covered a wide range of industries. As was the case in 2012, health care & medical industry bankruptcies once again led this year’s filing count with ten bankruptcies (or approximately 15% of the total filings) coming from this sector (with total combined assets of $1.2 billion).

In terms of asset size, filings from the health care & medical industry do not measure up to those from the banking & finance, education and publishing sectors, which reported combined total assets of $9.5 billion, $8.2 billion and $6.3 billion, respectively despite their respective bankruptcy counts of just four, three and four. It should be noted that many filings within the financial sector, which typically report a higher pre-petition asset figure than other industries, reflect a tremendous asset discrepancy between the date on which a company files its most recent pre-petition Annual Report and its bankruptcy date. This variance often can be explained by Federal Deposit Insurance Corporation (FDIC) closures and subsequent third party bank asset acquisitions.

Other significant industry representations in 2013 include the following: telecommunications: seven bankruptcy filings/$1.5 billion in assets; manufacturing; seven bankruptcy filings/$3.0 billion in assets; oil & gas: five bankruptcy filings/$1.7 billion in assets and computers & software: five bankruptcy filings/$575 million in assets. The graphic below provides an overview of 2013’s bankruptcy activity by industry.

2013 Chapter 7 and Chapter 11 Bankruptcies by Industry:

(Note: Only those industries with three or more filings are included in this sampling.)

post bankruptcy stock

While statistical analysis reveals that bankruptcy activity has generally slowed over the past several years, many wonder if this trend will continue in 2014. George Putnam, III, Publisher of The Turnaround Letter and Founder of New Generation Research, recently wrote that he anticipates a change. Putnam explains, “Even with the strength in the markets, there are a number of companies that raised large amounts of debt prior to 2008 that have not yet refinanced or restructured that debt. Many of those debt issues come due over the next few years, and we think a significant number of those issuers will have trouble refinancing.”

Putnam continues, “In addition, there has been a huge amount of new high yield debt issued since 2009. History shows us that a meaningful percentage of high yield debt usually defaults within four years of issuance. Even if only a small percentage of the debt issued over the last four years goes into default, that is likely to generate a significant surge in bankruptcy filings. It is difficult to predict exactly when defaults and bankruptcies will pick up again, but we are confident it will happen in the not-too-distant future.”

Despite the decrease in the actual number of filings, there has been an increase in the number of prepackaged bankruptcy filings (Plan of Reorganization submitted concurrently with the Petition) or pre-negotiated proceedings (company has initiated pre-petition creditor negotiations) over the past few years, and many companies are now opting for this streamlined approach or simply restructuring outside the parameters of a U.S. Bankruptcy Court proceeding. In fact, BankruptcyData.com’s research reveals that there were a total of 17 prepackaged Chapter 11 proceedings in 2013, versus eleven in 2012 and just four in 2011—with respective combined total asset figures of $14 billion, $8 billion and $3 billion. The chart below offers historical context on both the number and size of public Chapter 7 and Chapter 11 bankruptcy filing activity dating back to 1980.

Public Companies/Assets Filing for Bankruptcy (1980-2013):

Year

 

Filings

 

Assets**

($mil)

 

Average Assets** ($mil)

1980

 

62

 

$1,671

 

$27

1981

 

74

 

4,703

 

64

1982

 

84

 

9,103

 

108

1983

 

89

 

12,523

 

141

1984

 

121

 

6,530

 

54

             

1985

 

149

 

5,831

 

39

1986

 

149

 

13,033

 

87

1987

 

112

 

41,503

 

371

1988

 

122

 

43,488

 

356

1989

 

135

 

71,371

 

529

             

1990

 

115

 

82,781

 

720

1991

 

123

 

93,624

 

761

1992

 

91

 

64,226

 

706

1993

 

86

 

18,745

 

218

1994

 

70

 

8,337

 

119

             

1995

 

85

 

23,107

 

272

1996

 

86

 

14,201

 

165

1997

 

83

 

17,247

 

208

1998

 

122

 

29,195

 

239

1999

 

145

 

58,760

 

405

             

2000

 

187

 

100,882

 

539

2001

 

265

 

267,203

 

1,008

2002

 

229

 

401,063

 

1,751

2003

 

176

 

100,214

 

569

2004

 

93

 

47,802

 

514

             

2005

 

86

 

133,843

 

1,556

2006

 

66

 

22,257

 

337

2007

 

78

 

70,525

 

904

2008

 

138

 

1,159,351

 

8,401

2009

 

211

 

593,733

 

2,813

 

 

 

 

 

 

 

2010

 

106

 

89,109

 

840

2011

 

86

 

103,990

 

1,209

2012

 

87

 

70,843

 

824

2013

 

71

 

42,626

 

600

 

 

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

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

*** Indicates that the company has made more than one bankruptcy filing.

Disclaimer: BankruptcyData.com collects its information from the U.S. Bankruptcy Court, SEC and FDIC. Although all sources are believed to be reliable, accuracy cannot be guaranteed. New Generation Research thoroughly analyzed and audited all bankruptcy figures and statistics; however, certain details may require adjustment pending untimely SEC reporting and/or delayed U.S. Bankruptcy Court docketing.

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