Q4 Flash Report: Bankruptcy Spreads Across Sectors

Bankruptcy filings during the last three years have been dominated by one of two industries. In 2017 it was retail, while the prior two years saw a slew of oil and gas companies march into Chapter 11. Now with 2018 upon us, it looks like the trend of a single dominate bankrupt industry may dwindle as distress disperses into a number of places.

Healthcare has come roaring on the radar of bankruptcy professionals, as regulatory changes will likely usher in the bankruptcy filings of hospitals, skilled nursing facilities and standalone emergency rooms. It looks as though power generators could also have an active year in restructuring, as well as telecommunications and transportation companies.

Oil and gas will continue to feel distress as the industry continues to work at a shaky recovery. And of course, the pace or retail filings could move beyond what was seen this year as store closures are expected to hit a peak.

With the expectation that interest rates will be rising, albeit slowly, indicators point to another active year ahead in restructuring. There are currently 200 companies on S&P Global's weakest links list, which tracks its most vulnerable companies. That number is down from a peak of 254 in October 2016 but continues to be elevated compared to the five-year average of 181.

Filings in the fourth quarter already picked up, compared to the third, with a number of significant Chapter 11 filings including radio station operator Cumulus Media Inc., financial services company Walter Investment Management Corp., retailer Charming Charlie Holdings Inc. and offshore oil and gas driller Pacific Drilling SA. Practitioners should expect more of the same in 2018: a number of significant filings peppered by a wide array of industries.

This article was produced by the staff of The Deal, a financial intelligence service that provides actionable information on deals and dealmakers, offering over 100,000 users the unique opportunity to find potential deals and target dealmakers.