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Q1 League Table: Ch. 11 Filings Seen Spiking on Covid

By Kirk O'Neil | Published on April 30, 2020

Bankruptcy attorneys and advisers expect a significant increase in Chapter 11 filings over the next several months as the coronavirus wreaks havoc on almost every business sector.

The Covid-19 pandemic has already been directly blamed for the March 24 Chapter 11 filing of charter air carrier Miami Air International Inc. The virus outbreak also has been credited for pushing medical services provider Alaska Urological Institute PC over the edge and into bankruptcy on March 23.

Business closings and stay-at-home-orders as a result of the Covid-19 outbreak have immediately impacted revenues in the travel, hospitality, restaurant, retail and energy sectors and could push some companies in these industries into Chapter 11 in the weeks and months ahead.

Many businesses in these sectors, however, weren’t immune to bankruptcy in the first quarter before effects from the coronavirus took hold.

Retail chains that filed Chapter 11 in the first half of March included ice cream retailer Ample Hills Holdings Inc.Modell’s Sporting Goods Inc.Art Van Furniture LLC, e-commerce retailer Bluestem Brands Inc. and restaurant chain operator CraftWorks Holdings LLC.

In February, home décor retailer Pier 1 Imports Inc., supermarket chain Earth Fare Inc., hemp products maker GenCanna Global Inc., restaurant chain operator Cosi Inc. and fast-food franchisee SD-Charlotte LLC filed petitions.

In January, supermarket chains Lucky’s Market Parent Co. LLC and Fairway Group Holdings Corp. filed Chapter 11 to seek sales of their assets. Restaurant operators BL Restaurants Holding LLC, which operates Bar Louie, and fast-food operator Krystal Co. filed petitions. Papyrus stationery store operator SFP Franchise Corp. filed to liquidate.

The coronavirus is expected to impact the energy sector as a result of reduced air travel and automobile use. However, the industry also is feeling the effects from the oil price war between Saudi Arabia and Russia.

Oil and gas producer Sheridan Holding Co. I LLC in March filed a prepackaged Chapter 11 seeking confirmation just one day after filing its petition.

Oilfield services companies Tri-Point Oil & Gas Production Systems LLC and Pioneer Energy Services Corp. also sought Chapter 11 protection in March. In January, Southland Royalty Co. LLC oil and gas technology company McDermott International Inc. filed petitions.

Coal companies are still having financial distress, too, as Foresight Energy LP in March filed Chapter 11 seeking a debt-for-equity swap. Thermal coal producer Hartshorne Holdings LLC and metallurgical coal miner Murray Metallurgical Coal Holdings LLC filed petitions in February.

The healthcare sector was facing financial distress even before coronavirus patients began arriving at medical facilities. Nonprofit healthcare system Randolph Hospital Inc. in March filed Chapter 11, blaming a decline in patient volume and reimbursement rates. In January, hospital operator Thomas Health System Inc. filed Chapter 11 to reorganize.

Pharmaceutical companies Rochester Drug Co-Operative Inc. in March and Mallinckrodt plc in February filed for Chapter 11 protection to address opioid litigation. Medical device makers Valeritas Holdings Inc. in February and Reva Medical Inc. in January filed Chapter 11 to sell assets and complete a debt-for-equity swap, respectively.

Finally, several nonprofit organizations in February filed for Chapter 11 protection to settle child sexual abuse claims, including Diocese of Buffalo, N.Y., Diocese of Harrisburg, Pa., and Boy Scouts of America.

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