U.S. Bankruptcy Tracker: Real Estate Dominates Filings Flurry

The busiest week for bankruptcies in a month was dominated by real estate companies, which have sought protection from creditors this year at the fastest pace since 2011.

Two real estate companies with assets over $50 million filed for Chapter 11 in the week ended Dec. 12, when there were a total of five bankruptcies. Twenty large real estate companies have filed for Chapter 11 protection so far this year, data compiled by Bloomberg show.

From all sectors, there have been 236 bankruptcy filings in 2020 from companies with more than $50 million in liabilities. That’s the most since 2009, when there were 281 in the comparable period.

Read more: The Covid Bankruptcies: Guitar Center to Helicopter Charters

Stress Lag

Commercial real estate and associated industries are dogged by curtailed cash flow and having a lot of debt pledged against assets, according to Jeff Robinson, who runs the distressed and special situations group at Bain Capital Credit. In an interview, he noted “a lag in stress” compared with other industries, some of which have already started to recover from the initial shock of the pandemic; the sector’s worst days may still be ahead.

U.S. Bankruptcy Tracker: Real Estate Dominates Filings Flurry

Mall-based real estate is a “tough place to be” with market participants acting more defensive than offensive, Bill Derrough, co-head of restructuring at Moelis & Co, said in an interview.

An estimated $126 billion in commercial real estate will be forced to sell at distressed prices through 2022, more than in the first two years after the global financial crisis, according to CoStar Group Inc.

The amount of distressed debt in the real estate sector has risen 4% since the March peak, in contrast to the easing in most other sectors. During the same period, the volume of troubled debt in the oil and gas, telecommunications and retail sectors fell by more than 30%, according to data compiled by Bloomberg.

Disappearing Distress

In the latest week, the total amount of traded distressed bonds and loans shrank by 5.7% to about $174 billion as of Dec. 11. Troubled bonds and loans declined 2.7% and 13%, respectively, in the latest week. ​

Click here for a worksheet of distressed bonds and loans

There were 412 distressed bonds from 204 issuers trading as of Monday, down from 435 and 224 the previous week. That’s significantly less than the 1,896 deals from 892 companies at the March 23 peak.

U.S. Bankruptcy Tracker: Real Estate Dominates Filings Flurry

The distressed market has quieted, but it “won’t stay that way,” Josh Brody, bankruptcy and restructuring attorney at Gibson Dunn, said in an interview. Next year “could get active quickly with many companies failing to meet expectations,” Brody said.

Consumer focused companies will continue to see stress and potential new bankruptcies in 2021, according to Brody. The energy sector also remains vulnerable because of weak demand, he said.

Transocean Inc. had the most distressed debt of issuers that hadn’t filed for bankruptcy as of Dec. 11, data compiled by Bloomberg show.

Top 5 Distressed IssuersDebt ($B)
Transocean Inc5.0
AMC Entertainment Holdings Inc4.4
Ligado Networks LLC3.9
Crown Finance US Inc3.3
JC Penney Corp Inc3.1

Several distressed companies have significant dates approaching. Transocean and Ferrellgas have bond payments due Tuesday, and the latter has said it plans to place some units in bankruptcy to restructure debt. GTT’s extended lender forbearance ends on Dec. 28.

Read more: AMERICAS DISTRESSED WATCH: Transocean, Ferrellgas, GTT

©2020 Bloomberg L.P.

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