U.S. Bankruptcy Tracker: New Filings Muted as Borrowers Dig In

Four large firms have filed for bankruptcy so far in 2021, a relative slowdown after the busiest year for Chapter 11 filings since the financial crisis.

“The slowness going into early January is just a function of the shock effect of Covid and the related lockdown orders working their way through the system,” said Vladimir Jelisavcic of Cherokee Acquisition, an investment banking firm focused on bankruptcy claims and receivables. “Whenever you have a one-time shock event, you have a spike and a sort of lag.”

Stock+Field -- a farm, home and outdoor goods chain with about 25 stores in the Midwest -- joined the heap of retailers in Chapter 11 when it filed for bankruptcy on Sunday. Five days earlier, a private equity-backed mental health services provider sought protection from creditors following the “shock” of Covid-19, court papers show.

This week, Ferrellgas Partners LP, whose Blue Rhino propane tank exchange network serves backyard barbecuers across the U.S., filed for bankruptcy to unload debts left over from a failed expansion.

U.S. Bankruptcy Tracker: New Filings Muted as Borrowers Dig In

The owner of the historic Marriott Wardman Park in Washington also filed for bankruptcy, becoming the latest hotel to collapse amid the coronavirus outbreak.

“We will see a number of hotels” and related companies file in the second half of the year, including catering and conference-related businesses, especially companies that took on more debt in recent months, said Deborah Friedland, managing director in EisnerAmper’s financial advisory services and real estate groups.

Borrowers Dig in Heels

January has so far been slower than the corresponding period of 2020, which saw six filings from companies with at least $50 million of liabilities, according to data compiled by Bloomberg. At that time, the spread of Covid-19 was in its very early stages.

“Until you have a little more clarity and better understanding of what is temporary versus the new normal, you will have the continued level of relative inaction,” said Chris Donoho, a partner at law firm Hogan Lovells. During periods of trouble, he said, “companies dig in their heels to play out the option value.”

Bankruptcy filings could remain quiet in the first half of 2021 because companies have amassed enough liquidity for the immediate future, Donoho said. Still, some will eventually have to reconcile debt costs and lower revenue, said David Simonds, also a partner at Hogan Lovells.

U.S. Bankruptcy Tracker: New Filings Muted as Borrowers Dig In

Some Wall Street strategists have waxed bullish on the possibility of sweeping stimulus after the Democrats take control of the Senate. But such a deal probably won’t make more than a marginal difference to ailing corporate borrowers, according to Phil Brendel of Bloomberg Intelligence.

“You could argue larger fiscal stimulus could provide corporates more liquidity, and thus more time,” Brendel said. But that may be just noise compared with the impact of an effective Covid-19 vaccine and its rollout, he said.

Troubled Debt Shrinks

The total amount of traded distressed bonds and loans shrank to about $146 billion as of Jan. 8, down 2.5% week-on-week and a small fraction of the $935 billion peak in March. Troubled bonds and loans declined 0.8% and 7.9%, respectively, according to data compiled by Bloomberg.

There were 344 distressed bonds from 166 issuers trading as of Monday, according to Trace data. That’s up from 290 and 154, respectively, one week earlier but significantly less than the 1,896 credits from 892 companies at the March 23 high.

Transocean Inc. had the most distressed debt of issuers that hadn’t filed for bankruptcy as of Jan. 8, Bloomberg data show.

Top 5 Distressed IssuersDebt ($B)
Transocean Inc4.6
AMC Entertainment Holdings Inc4.5
Crown Finance US Inc3.3
GTT Communications2.3
American Airlines Inc2.2

Several distressed companies have potentially significant dates approaching. Community Health Systems has an investor presentation. The parent of Diamond Sports also makes a presentation, and Exela Technologies has an interest payment due Jan. 15.

Read more: AMERICAS DISTRESSED WATCH: Community Health, Diamond and Exela

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