Twelve midsize to large corporations — all with more than $10 million in debt — filed for chapter 11 protection during the third week of June, another consequence of the coronavirus pandemic and continued trouble in America’s oil industry. The filings represent the highest weekly total of the year, and experts believe this is just the beginning of a bankruptcy tsunami that will wash over the country’s largest companies this summer and then drench both smaller businesses and individuals if government stimulus money dries up, USA Today reported. “I very much expect to see the numbers continue to rise” said Ed Flynn, a consultant for the American Bankruptcy Institute, a nonpartisan research organization. The types of companies affected are unsurprising. Since the start of the pandemic, they have included businesses that consumers have studiously avoided, from rental car companies, restaurants and department stores to gyms and health care companies offering elective surgeries and procedures. At least 24 oil and gas companies filed from April through June — nearly twice as many as during the first three months of the year, according to Haynes and Boone LLP, an international law firm based in Texas. Four of those companies — Texas-based NorthEast Gas Generation, Colorado-based Extraction Oil & Gas, and Chisolm Oil and Gas and Chesapeake Energy, which are both from Oklahoma — filed in the last two weeks of June. “This trend should continue through the remainder of 2020 and into 2021,” said Charles Beckham, a partner in Haynes and Boone's restructuring practice. “Unless commodity prices have a majestic increase, many producers will seek relief in bankruptcy court with the hope that will bring them back to a rational place where they can continue to produce and service their debt.” Melissa Kibler, senior managing director in the Chicago office of Mackinac Partners — a turnaround and restructuring firm — also believes the U.S. economy is at a turning point and bankruptcy courts will play a major role in determining the way forward. “Any time you have a significant disruption like this it’s going to create winners and losers and systemic change,” Kibler said. “We have industries that are evolving, and on top of that we have overlaid the COVID pandemic and that has forced a lot of changes.” Read more.
For weekly bankruptcy filings and analysis from ABI's Ed Flynn, be sure to visit ABI's Coronavirus Resources page.
