Two formerly strong companies appear destined for bankruptcy and, barring some unexpected changes soon, those could come within the month.
Samson Resources Corp. is widely expected to file and is one current case study in how drastically lower oil prices caused in part by the United States’ emergence in energy markets are affecting connected businesses, according to analysts including Fitch Ratings. “The recent oil price drop has compounded the effects of the offshore rig oversupply cycle, resulting in limited tenders, weak day rates and legacy fleet rationalization,” Fitch said. “Backlog protections for offshore drillers are falling away at a fast clip—a significant portion roll-off within the next year—which will likely begin to pressure cash flows.”
Meanwhile, American Apparel this week unveiled disappointing second-quarter financial results, which included a net sales drop of more than 17.2% and additional problems stemming from foreign exchange losses. Company officials admitted they have “substantial doubt” that the business can rebound given its current liquidity. Amid whispers of dropping sales and liquidity problems, it entered Kamakura Corp’s list of 10 riskiest companies globally earlier this month based on its default probability, which surged from 5% to 41.54% in just three months, according the Kamakura assessments. The risk profile represents the worst of any U.S.-based company not operating in the energy sector.
- Brian Shappell, CBA, CICP, NACM managing editor