Sleepy Season is Upon Us
The calendar says we’ve reached the halfway point in the year, but the recent history of large Chapter 11 filings says we’re well more than halfway done. That’s not encouraging news for those who thought the first half of 2018 was a dud for restructuring activity. (Early signs indicate that large Chapter 11 filings were down about 17% from 1H17 and 12% from the pace of 2H17—mostly due to a sharp falloff in June filings. We’ll have more on that next month.) We don’t necessarily think of bankruptcy filings as being seasonally influenced, but there is persuasive evidence of such influence in the filings.
We looked at all large (>$250 million in liabilities at filing) Chapter 11 filings from 2010 through 2017 — some 365 filings over eight years — and broke down these filings by month and, in some instances, by industry sector. These filings were evaluated and are shown on a monthly basis (Exhibit 1) and a cumulative basis (Exhibit 2). There were some noteworthy takeaways:
- The energy sector accounted for 90 Chapter 11 filings, or 25% of all filings, over this eight-year period, the most of any industry sector, followed distantly by retail (9.1%) and manufacturing (9.1%). Collectively, these three sectors accounted for 43% of total filings.
- Nearly 58% of large Chapter 11 filings across all industries occurred in the first half of the year, with a disproportionately large share coming in March (13.5%) and April (10.0%).
- Chapter 11 filings by energy companies have tended to run strong in March, April and December. These three months have accounted for 37% of energy-related filings.
Global Co-Leader of Corporate Finance & Restructuring