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Mixed Bankruptcy Picture for Retail, Improvement for Energy

By Stephanie Gleason | Published on September 28, 2018

Retailers continued, slow and steady, to file for bankruptcy during the third quarter, but filings from big-box retailers and department stores have still been notably missing from the year’s filers—so far.

Specialty retailers Brookstone Holdings Corp., National Stores Inc., Sarar USA Inc., Gump’s Holdings LLC and Samuels Jewelers Inc. all filed for Chapter 11 bankruptcy since July 1. But department stores, like Sears Holdings Corp. (SHLD) and J.C. Penney Co. (JCP), that have long been ripe for restructuring continued to hang on.

For retailers, the fourth quarter is a make-or-break time, and there’s reason to think that more pain could befall the industry at that time.

“In the last quarter, you haven’t seen big names collapsing, where a few quarters before we were seeing Toys ‘R’ Us file bankruptcy,” said retail expert Alan Treadgold of PA Consulting Group.

He noted that a lot of the pain in retail so far this year has hit specialty retailers, like Claire’s Stores Inc. and Nine West Holdings Inc., while things for many of the big-box retailers haven’t become that dire yet.

However, he said, “the general upturn in the U.S. economy hasn’t come through in stronger retail sales for a number of retailers.” As a result, “I think there is a lot of pain still to come in the sector,” he said.

In the third quarter, restaurants, including the owner of El Torito and Chevy’s, celebrity chef Mike Isabella’s restaurant group and Southern California diner Ruby’s, also logged bankruptcy filings.

Many in these sectors are likely to continue to restructure in the coming years. According to S&P Global Ratings, $50 billion in speculative-grade debt held by restaurants or retailers will mature in the next three years.

On the other hand, bankruptcies among oil and gas companies are leveling off.

Since the downturn in oil and gas prices beginning in 2015, 160 oil and gas producers holding $92.9 billion in debt have filed for bankruptcy, according to Haynes and Boone LLP‘s  most recent report, which tracked filings through August 2018.

Of those 160 filers, just 22 producers holding $9 billion in debt have filed in 2018.

The Texas law firm expects this trend will continue.

“This optimism manifests itself in the results of our Fall 2018 Borrowing Base Redeterminations Survey, which predicts increases in credit availability to producers,” Haynes and Boone said in the Wednesday, Sept. 26, report. Redeterminations are periodic reviews by industry lenders of the value of the assets they lend against. Haynes and Boone added that the survey, plus the findings of its bankruptcy monitor reports “show the sun setting on a three-year era of oil and gas bankruptcies.”

 

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