Bankruptcy Count Lowest Ever. Uptick Anticipated - Health Care Filings Lead Count

Summary

• Fewest Public Company Bankruptcies Ever in 2014; 3rd Year of Decline.
• Energy Future Holdings Largest Chapter 11 of 2014--by Far.
• Health Care/Medical Bankruptcies Represent 15% of Total.
• Uptick Anticipated as Oil Prices Drop and Maturities Come Due.

2014's corporate bankruptcy count represents the fewest number of public* companies seeking U.S. Bankruptcy Court protection since at least 1980-and perhaps ever. Only 54 publicly traded companies filed for Chapter 7/Chapter 11 protection last year with a total of $71.9 billion in combined pre-petition assets**. While that figure is down from 2013's 71 bankruptcies, the asset count is a 69% increase over last year's $42.6 billion because of the $41 billion in pre-petition assets for the largest filing of 2014: Energy Future Holdings. NII Holdings (NIHD) ($9 billion) is the second largest Chapter 11 filing for the year, followed by Genco Shipping & Trading (GSKN) ($3 billion).

Last year's activity was unusual in several ways: The year began with one of the slowest periods for public filings, up-ending historical corporate bankruptcy benchmarks and pundit expectations with zero activity from early December 2013 until early February 2014. 2006 was the second-closest in terms of that type of slowdown. The late 2013/early 2014 decline was followed shortly thereafter by one of the busiest periods for large Chapter 11's when eleven public companies, each with pre-petition assets in excess of $300 million, sought U.S. Bankruptcy Court protection in March and April 2014. The roller coaster continued with activity again slowing dramatically and only sporadic large filings occurring since May 2014. The chart below reflects the ten largest Chapter 11 proceedings in 2014.

Largest Public Bankruptcies of 2014:

Company	Bankruptcy Date	Business Description	Assets** ($mils)
Energy Future Holdings Corp.	04/29/14	Electric Utility Company	$40,970
NII Holdings, Inc.	09/15/14	Wireless Comm. Provider	8,680
Genco Shipping & Trading Ltd.	04/21/14	Ocean Transport Vehicles	2,957
Momentive Perform. Materials	04/13/14	Silicone & Materials	2,694
USEC Inc.	03/05/14	Energy Company	2,266
Eagle Bulk Shipping Inc.	08/06/14	Ocean Transport Provider	1,723
Endeavour International Corp.	10/10/14	Oil & Gas Company	1,525
First Mariner Bancorp	02/10/14	Bank Holding Company	1,378
James River Coal Company	04/07/14	Coal Producer & Seller	1,204
GT Advanced Technologies Inc.	10/06/14	Electronics Equipment	1,187

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2014's average pre-petition asset figure rose to its highest total since 2009, once again largely as a result of Energy Future's tremendous size. 2014's average asset count was $1.3 billion, compared to last year's $600 million. In addition to being the largest bankruptcy of 2014, Energy Future is also the fourth largest (excluding purely financial companies) of all time. The three largest historic Chapter 11's (again, excluding purely financial companies) are WorldCom in 2002, General Motors (GM) in 2009 and Enron in 2001, respectively.

Largest All Time Public Bankruptcies (Excluding Financial Companies):

Company	Bankruptcy Date	Business Description	Assets** ($mils)
WorldCom, Inc.	07/21/02	Telecommunications Provider	$103,914
General Motors Corporation	06/01/09	Auto Manufacturer & Seller	91,047
Enron Corp.	12/02/01	Energy & Natural Gas Trading	65,503
Energy Future Holdings	04/29/14	Electric Utility Company	40,970
Chrysler LLC	04/30/09	Auto Manufacturer & Seller	39,300
Pacific Gas and Electric Co.	04/06/01	Electric Utility Company	36,152
Texaco, Inc.	04/12/87	Petroleum & Petrochemical	34,940
Global Crossing, Ltd.	01/28/02	Telecommunications Provider	30,185
General Growth Prop., Inc.	04/16/09	Real Estate Investment	29,557
Lyondell Chemical Company	01/06/09	Chemical Manufacturer	27,392

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The decline in the number of public company filings is also consistent with recent activity seen in the business bankruptcy sector, in general. BankruptcyData.com reports that all categories of business bankruptcies (both public and private companies) have dropped steadily since 2007, and this past year proved to be no exception: 2014 saw a 19% reduction in filings since 2013-with a dramatic 44% drop since 2012.

Once again examining public company statistics, 2014's activity continued a trend seen over the past few years with filings heralding from a wide range of industries. This represents a marked departure from the bankruptcy cycles of (1) 2000-03 and (2) 2008-09, which were clearly dominated by certain sectors (telecom/technology and financial services, respectively). As was the case in both 2013 and 2012, health care & medical industry bankruptcies once again led this year's filing count with eight of the year's bankruptcies (roughly 15% of total filings) coming from this sector, followed closely by six filings each from both the oil & gas and retail industries. Telecommunications and banking & finance reported five filings each.

While activity has continued to slow over the past several years, I anticipate an uptick-particularly from the energy sector. Looking ahead, I expect bankruptcy activity to begin to pick up again. The downturn in oil prices is likely to cause some bankruptcy filings among the more leveraged exploration and production companies, drillers and oilfield service companies. Just how many will fail will depend on how long the price of oil stays at its current low level.

In addition, there are likely to be more restructurings outside of the oil patch. A variety of companies with heavy debt loads face significant debt maturities in 2015 and early 2016. If volatility continues in the credit markets, these companies may not be able to refinance the debt when it comes due, and they will be forced to file for bankruptcy.

Public Companies/Assets Filing for Bankruptcy:

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		42,641		600
2014		54		71,918		1,332

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* BankruptcyData.com 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.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.