Commercial Chapter 11 filings increased 23% in May when compared to the 405 filings registered the previous month, according to Epiq Systems, Inc. And the increase over May 2014's pace marks only the seventh year-on-year uptick since 2011, though this is the second since January.
Deborah Thorne, Esq., of Barnes & Thornburg LLP, is among a growing list of bankruptcy experts wondering how many of the Chapter 11s are connected with oil and gas. “There is particular stress in that industry,” Thorne said. On Tuesday, yet another product producer tied to the industry (Boomerang Tube LLC), filed for bankruptcy protection as part of the ongoing fallout from the significant price declines in the price per barrel.
Lynnette Warman, Esq., a partner with Culhane Meadows PLLC, notes that her firm is experiencing “a material increase in calls from clients who are reporting increased late payments in commodity industries as well as in oil- and gas-related companies.” In addition, pressure seems to be building in the economy’s lower-middle market segment, where volatile prices and markets are affecting businesses’ liquidity, according to Warman.
“Many lenders are becoming more conservative again and reining in availability under their lines,” she said. “Many commentators in the restructuring field are predicting that Chapter 11 filings will continue to increase over the next year, until the various commodity markets stabilize again. My own experience is consistent with that prediction: this looks to be the busiest year for me in some time.”
- Diana Mota, NACM associate editor
For more detailed information on the latest bankruptcy numbers, released monthly by Epiq Systems, check out the extended version of this story in the latest edition of NACM eNews, available late Thursday afternoon.