The Halftime Report: A Dull, Low-Scoring First Half
Like a highly anticipated football game that only produces a few first-half field goals, restructuring activity to date in 2021 has been underwhelming relative to expectations.
Though it was clear by the end of 2020 that the default cycle attendant with the COVID-19 pandemic was not going to be the barnburner that many had expected just months earlier, few anticipated the steep falloff in restructuring activity we have seen to date, which is mostly attributable to high vaccination rates, a reopening of the national economy and roaring leveraged credit markets. Commentary on the state of the restructuring market in 2021 has been distinctly downbeat but the numbers need more context than a comparison to 2020.
Indeed, any comparison of filing activity to 2020 is sure to disappoint, given the economic effects of the pandemic last year and the better-than-expected vaccine rollout and reopening scenario that is underway. There were 75 large Chapter 11 filings to date through June, a 35% decline from YTD 2020 when the pandemic was taking its toll on the economy.1 Such comparisons will worsen during the third quarter, when filings peaked in 2020, and YOY comparisons will likely show a 50% decrease by the end of summer. However, these numbers put 2021 squarely in line with filing activity in 2017-2019.
1: The Deal Pipeline. Note that we consider large filings as those with liabilities at filing of greater than $50 million. https://pipeline.thedeal.com/login-page