Bankruptcy News

We've summarized the latest docket activity and news for publicly traded companies currently operating under U.S. Bankruptcy Court protection.

Bankruptcy/Chapter 11 / Bonds / Post-Bankruptcy Stocks

2017 Bankruptcy Review

The growth in bankruptcy activity that we’ve seen over the last few years paused somewhat in 2017. As shown in the table below, the number of publicly traded companies filing for bankruptcy this past year dipped to 70 from 99 in 2016. However, the total assets of public companies going into Chapters 7 and 11 during 2017 actually rose slightly to almost $107 billion from $104 billion the year before. This may have been skewed somewhat by the fact that some of the largest 2017 filers arguably were financial services companies (which we typically exclude from our totals because they show huge assets on their balance sheets), but the numbers nonetheless reflect a continued high level of filings by large companies.

While Chapter 11 activity in the energy and mining sectors remained significant in 2017, it no longer dominated the bankruptcy world the way it did in 2016. This past year there were only four energy or mining companies among the ten largest Chapter 11 filings, compared to eight of the top ten in 2016 (or nine of the top ten if you include a solar energy company).

Interestingly, the largest bankruptcy of 2017 wasn’t by a company, and technically might not even be a “bankruptcy.” When the Commonwealth of Puerto Rico defaulted with a total estimated $73 billion of debt earlier this year, it wasn’t eligible to seek protection under the U.S. Bankruptcy Code because that law doesn’t cover unincorporated territories. Instead, Congress passed a special statute called the Puerto Rico Oversight, Management, and Economic Stability Act (sometimes known as “PROMESA”) to provide judicial oversight for the restructuring of the island’s debt.

Looking ahead, we expect corporate bankruptcy activity to remain at a high level for at least the next few years. Much of the unprecedented amount of debt that has been raised during the exuberant markets since 2009 comes due soon. Roughly $1.5 trillion dollars of lower quality corporate debt (a combination of high yield bonds and so-called “leveraged” bank loans) comes due over the next five years. Even if the debt markets stay strong, some small percentage of that debt will need to be restructured, much of that through Chapter 11. If the debt markets get more selective, a larger percentage of the maturing debt will not be able to be refinanced, leading to even more bankruptcies.

If we are correct and the pace of defaults pick up, this will create a wealth of opportunities for distressed debt investors. Also, the large number of companies, particularly energy companies, emerging from Chapter 11 has created interesting opportunities in post-reorganization stocks.

Finally, Puerto Rico’s debt is beginning to look attractive, as some issues have fallen to 20 or 30 cents on the dollar or below. It is a complicated and risky situation for at least three reasons: 1) there are quite a few different types of Puerto Rican bonds outstanding, many of which have competing claims on the same limited pool of assets; 2) the restructuring is governed by a new and untested law and 3) the island’s economy remains in shambles after being battered by two hurricanes last fall. All that said, our best guess is that at least some of the Puerto Rican debt could provide substantial rewards to investors willing to take on those risks.

Disclosure Note: Accounts managed by an affiliate of the Publisher own certain Puerto Rican bonds.

Read more Bankruptcy News

Identify & Profit from Distressed Investing

Free Report: Turnaround Investing Mistakes

Turnaround Investing Blog

Turnaround Investing Blog

Lessons from the 1st Turnaround Letter of 32 Years ago

In July, 1986, exactly 32 years ago, George Putnam sent the first Turnaround Letter to subscribers. Technology back then seems like the Stone Age, with hard copy research and primitive CompuServe dial-up service. Wall Street ignored turnaround stocks back then and continues to ignore them today. While technology has changed immensely in 32 years, The Turnaround Letter’s philosophy of selecting out-of-favor companies on the verge of turning around hasn’t changed. Our timeless process helped driven The Turnaround Letter’s independently-verified market-beating returns. Read More.

Comparing Stocks Vs. Bonds

While the common stock of a turnaround candidate usually has the greatest upside potential, other classes of securities, such as bonds or preferred stock, may offer attractive profit possibilities with less risk. Many turnaround companies have only one class of securities available to investors but where there are different classes to choose from, it can pay to do a little extra analysis of the various options.

Read More.

Turnaround Letter Stock Pick Named Top Performer of 2017

 

stock market advicex

 

What Last Year's Top Stock Pickers Are Buying in 2018

 

This Forbes write-up follows up on the recent Top Stock Tips report--naming The Turnaround Letter's Crocs recommendation the top performer of 2017: With 90% gains, CROX beat out 100 other investment ideas included in the report; and the stock continues to have value investing appeal, according to Putnam.

 

George notes, "We see additional upside for the stock in 2018 as management's efforts continue to bear fruit, though the gains will likely be more muted than we saw in 2017."