Turnaround Investing Blog

George Putnam, one of the country's leading turnaround and distressed investing professionals, shares his timely insight on the economy and turnaround investing opportunities.

Bankruptcy/Chapter 11 / Bonds / Post-Bankruptcy Stocks

Recent Chapter 11 Bankruptcy Activity: A Blip or a Trend?

After a number of slow months in the bankruptcy world, we’ve seen a flurry of new activity over the last two months. During the months of March and April alone, we saw 11 public companies with assets in excess of $300 million file for Chapter 11 protection, as detailed below:

Public Chapter 11 Bankruptcies Initiated in March & April 2014

Company Name Description Pre-Petition Assets* 
Energy Future Holdings Corp. Energy $40,970
Genco Shipping & Trading Ltd. Ocean Trans. $2,957
Momentive Perf. Materials, Inc. Silicone $2,694
USEC Inc. Energy $2,266
James River Coal Company Coal $1,204
Sorenson Communications, Inc. Telecom $645
MModal Holdings, Inc. Health Data $627
Global Geophysical Services, Inc. Seismic Data $553
Dolan Company, The Prof Svcs. $450
Brookstone, Inc. Retailer $406
Coldwater Creek, Inc. Retailer $346

* Assets in $mil

The month ended with a bang, with the long-anticipated Energy Future Holdings filing, which is the largest of 2014 (thus far) by a tremendous margin. With $41 billion in total assets, this pre-arranged Chapter 11 bankruptcy also ranks among the top-10 historic bankruptcies (see chart below). The last company to make it on this list of mega-Chapter 11 petitioners was MF Global Holdings back in 2011.

20-Largest Public Chapter 11 Bankruptcies of All Time

Company Bankruptcy Date   Pre-Petition Assets*
Lehman Brothers Holdings Inc. 09/15/08   $691,063
Washington Mutual, Inc. 09/26/08   $327,913
WorldCom, Inc. 07/21/02   $103,914
General Motors Corporation 06/01/09   $91,047
CIT Group Inc. 11/01/09   $80,449
Enron Corp. 12/02/01   $65,503
Conseco, Inc. 12/18/02   $61,392
Energy Future Holdings Corp. 04/29/14   $40,970
MF Global Holdings Ltd. 10/31/11   $40,542
Chrysler LLC 04/30/09   $39,300
Thornburg Mortgage, Inc. 05/01/09   $36,521
Pacific Gas and Electric Co. 04/06/01   $36,152
Texaco, Inc. 04/12/87   $34,940
Financial Corp. of America 09/09/88   $33,864
Refco Inc. 10/17/05   $33,333
IndyMac Bancorp, Inc. 07/31/08   $32,735
Global Crossing, Ltd. 01/28/02   $30,185
Bank of New England Corp. 01/07/91   $29,773
General Growth Propert., Inc. 04/16/09   $29,557
Lyondell Chemical Company 01/06/09   $27,392

* Assets in $mil

As a result of this recent uptick, we’ve gone from one of the slowest periods for major bankruptcy filings in recent memory to one of the most active. This raises the question: Is this the beginning of a significant new bankruptcy wave, or is just a coincidence that all these companies filed in the same two-month period? 

We’ve seen a few short periods in the past when there has been a burst of Chapter 11 filings but no sustained trend followed. On the other hand, as we’ve been saying for some time, a large number of highly leveraged companies will have to restructure their balance sheets in the not-too-distant future, and so this could be the beginning of a trend.

At any rate, distressed securities investors suddenly have a nice batch of new opportunities to consider. Energy Future Holdings alone has something like 66 different debt issues spread out over its complicated capital structure. That company alone will keep distressed securities investors--not to mention lawyers and other bankruptcy professionals--busy for some time to come.

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