Download the full report.

2023 had a brisk start to the year for chapter 11 filings, in particular for middle-market-and-up size filings. 

In the First Day by Reorg 2023 Year in Review, our team provides a comprehensive overview of filings, including a timeline of annual aggregate chapter 11 filings spanning from 2016 to 2023. Notably, 2023 stands out with a thicker purple line, leading all years except 2020.

Major industry developments and highlights:

• The consumer discretionary and healthcare sectors were the busiest of the year for cases with more than $100 million in liabilities, making up 21% and 20%, respectively, of the total.
   
• For the $10 million-and-up range, real estate led with 23%, followed by consumer discretionary with 17% and healthcare with 16%.
   
• The rate of freefall bankruptcy filings was stable with prior years, but there was a pronounced increase in debtors seeking to sell their assets.
   
• Delaware and the Southern District of Texas led all other districts this year, but there was a new trend of mega filings in the District of New Jersey.
   
• Macroeconomic issues affected companies in varied industries, with inflation and rising interest rates affecting consumer behavior and financing terms.
   
• The year was devoid of billion-dollar energy filings, bucking trends from prior years.
   
• More than half of 2023’s filers requesting DIP financing included rollup provisions in their DIP proposals.

Dive deeper into chapter 11 filings by sector and filing district, as well as DIP financing trends, sale trends, chapter 22 filings and more by downloading the full report.

For more reports and guides by Reorg, please click here.

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Register now – Reorg webinar: Fallout From Liability Management Exercises: Double Dip and Pari Plus Fights In and Out of Bankruptcy, Hosted by Schulte Roth & Zabel and Reorg on Nov. 15

Join Reorg and Schulte Roth & Zabel on Nov. 15 at 12 p.m. ET for a discussion on potential state law and bankruptcy challenges to “double-dip” and “pari plus” financing transactions, including fraudulent transfer, substantive consolidation/alter ego, recharacterization and equitable subordination issues. Reorg held a webinar on Oct. 4 discussing the nuts and bolts of recent double-dip transaction structures; this panel presentation will consider possible litigation by nonparticipating creditors and creditors’ committees to eliminate the benefits of these structures for participating creditors and the implications for plan treatment and value allocation.

Other liability management/non-pro rata transactions, including uptier exchanges and drop-downs, have drawn challenges from nonparticipating creditors both inside and outside bankruptcy. Some of these challenges have proceeded in state court (TriMark, Boardriders and Mitel) while others became the central issue in chapter 11 cases (Revlon, Serta Simmons, Envision and Wesco/Incora). The panel will consider whether double-dip transactions face similar challenges, the arguments on both sides and the effect of these claims on an eventual bankruptcy filing by the borrowers.

Kevin Eckhardt, Deputy Managing Editor-Legal at Reorg, will moderate the webinar, and presenters include:

• Douglas Mintz, Partner, Schulte Roth & Zabel
• Jared Muroff, Distressed Debt Research Manager, Reorg
• Julia Beskin, Partner, Schulte Roth & Zabel
• Ned Schodek, Partner, Schulte Roth & Zabel

Attendees will be invited to submit questions during the webinar.

Webinar details:

• When: Nov. 15 at 12 p.m. ET
• Registration: To register for the webinar, please click here. Please register using your business email address.

If you would like to be panelist on any upcoming webinars, please contact marketing@reorg.com, and if you would like to be notified for the upcoming webinars, sign up for Reorg on the Record.

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Reorg’s editorial leadership has selected the following list of the most compelling and topical situations across our global coverage universe.

As part of Reorg’s global data and analytics product expansion, Fundamentals by Reorg now offers earnings transcripts of both public and private debt issuers. For further inquiries, please email questions@reorg.com.

Twenty-four debtors filed for chapter 11 over the past two weeks, a list dominated by real estate names with liabilities of less than $10 million. The sector has been hard hit by rising interest rates and a sluggish recovery in occupancy as the pandemic’s “work from home” model becomes a permanent feature of the American landscape. Those hoping for relief in the form of interest rate cuts by the Federal Reserve have been heartened by economic data showing that pricing pressures are abating, but the ongoing strength in the labor markets supports the theory that the Fed will hold rates at their current level, the highest since 2001, for an extended period. A Labor Department report on Friday, Aug. 4, showed that the U.S. added 187,000 jobs in July, slightly less than consensus expectations, while the employment rate fell to 3.5%. The Fed meets again in September, with most expecting policymakers to stand pat.

Fitch Ratings downgraded the U.S. to AA+ from AAA on Tuesday, Aug. 1, citing “fiscal deterioration over the next three years, a high and growing general debt burden and the erosion of governance relative to AA and AAA rated peers.” Fitch is the second ratings agency to downgrade the U.S. In 2011, S&P Global Ratings downgraded the U.S. to AA+ from AAA. Moody’s and DBRS have maintained their AAA ratings on U.S. Treasury bills, or T-bills. The yield on the 10-year Treasury note rose to 4.18% on Thursday, Aug. 3, from 3.95% on Aug. 1.

In Europe, the second-quarter earnings season is revealing continued pressure on EBITDA margins across nations and industries. This was nowhere more evident than at French supermarket chain Casino, whose management revised its 2023 EBITDA guidance down by 51% from a forecast given just a month earlier. The heavily slimmed-down EBITDA budget was included in a July 27 presentation detailing Casino’s in-principle new-money and restructuring agreement with a consortium of investors led by EP Global Commerce and creditors holding more than two-thirds of its term loan B debt. Casino is now drafting lockup agreements and aims to implement the €8 billion debt restructuring under an accelerated safeguard proceeding by October 2023.

In Asia, while closely watched Dalian Wanda managed to transfer funds at the eleventh hour to redeem its $400 million offshore notes due July 23, the repayment failed to allay concerns around China’s real estate market. Turmoil has more recently spread to state-backed names such as Greenland Holdings and Sino-Ocean Group, and despite declarations of policy easing, the position of key developers remains precarious. Country Garden, or CoGard, recently announced an expected net loss for the first six months of 2023, compared with a net profit of 1.91 billion Chinese yuan ($268.5 million) for the year-earlier period. In the same announcement, CoGard declared it would actively seek guidance and support from the government and regulatory authorities.

To access the full story, as well as monthly access to Reorg’s Global Credit Highlights, request a trial.

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Reorg delivers critical data and analysis for leveraged finance and restructuring professionals.

In this paper, access a curated selection of data-driven insights into credit situations developing around the world right now.

March 31, 2023

Reorg’s expert global team research and publish thousands of analysis and intelligence articles every year to bring clarity to investors, bankers, lawyers and consultants. We’re obsessed with providing actionable insight on the sub-investment grade credit markets.

Here are some examples of coverage through the credit lifecycle from performing and primary markets to distressed, restructuring and post-reorg that you and your team could access through a subscription to Reorg. If you are interested in understanding how a Reorg subscription can benefit your business, request trial access here www.reorg.com/trial.

Americas

In the U.S., 19 debtors filed for chapter 11 protection over the past two weeks, according to Reorg’s First Day Database; seven of those names came to court with liabilities in excess of $100 million. Some of the fears surrounding contagion from SVB Financial’s collapse have begun to abate, as shown by a slight uptick in primary market activity, as two bond deals and several leveraged loan transactions came to market. Nevertheless, regional banks remain a focus, and Reorg’s analyst team commenced coverage of some of the most prominent among them. The possibility of an economic slowdown remains a focus, as investors wait for signs that the Fed’s tightening program is taking effect amid expectations that the central bank will hike rates again this year as inflation remains stubbornly high. Advisor mandates are also increasing, as the impact of higher rates on floating-rate debt saps cash flows.

Fundamentals by Reorg: Reorg’s Fundamentals and ESGx analyst teams launched their debut report on Zayo this week. Our report includes the following sections: Capital Structure, Forecasts and Leverage Trajectory, Comparables and Industry Dynamics, ESG, Financial Overview, Business Overview and M&A Strategy. Access is limited to Zayo lenders, bondholders or parties under an NDA.

Citrix Systems: Bookrunners for Citrix Systems’ $3.95 billion SOFR+700 bps second lien bridge loan began talking to a select group of funds late last year about a potential takeout of the software company’s bridge loan with new paper yielding about 14%. The structure and pricing have yet to be finalized, but the banks have some time, as the bridge does not expire until October. However, in light of risks associated with the company, the yield could widen to as much as 16%. Read more on Citrix Systems.

U.S. Regional Banks: The Americas credit analyst team has initiated coverage of nine regional banks that have come into focus since the collapse of Silicon Valley Bank: Zions Bancorp, KeyCorp, BankUnited, HomeStreet Capital, SVB Financial Group, Signature Bank, First Republic, PacWest Bancorp and Western Alliance. Read more.

Shoes For Crews: A group of lenders to Shoes For Crews’ $258 million L+500 bps first lien term loan B has organized with King & Spalding, according to sources. The Boca Raton, Fla.-based provider of slip-resistant footwear for various industries, including food service, retail and industrial workers, has struggled with high leverage and weak performance during the Covid-19 pandemic.

Western Global Airlines: an Estero, Fla.-based cargo carrier, has hired Weil Gotshal, Evercore and FTI Consulting as legal counsel and financial advisors, respectively, as the company contends with tightening liquidity, a pilot shortage and operational challenges amid the slowing air cargo market. The company’s bondholders are working with Ducera Partners as financial advisor, and an upcoming $21 million coupon payment in August is in focus.

Americas Municipals

Puerto Rico Electric Power Authority: The judge overseeing the Title III restructuring of the Puerto Rico Electric Power Authority, or PREPA, delivered a critical opinion on bondholder liens ahead of a confirmation trial scheduled for July. Judge Laura Taylor Swain’s decision noted that the bondholder’s lien was limited to a $16 million sinking fund, but that bondholders of PREPA debt had recourse through an unsecured net revenue claim. Uninsured bonds traded up on the news from the high 60s to low 70s, indicating a potential settlement ahead of confirmation. Parties to the dispute have filed a joint statement outlining their views on the next steps in PREPA’s restructuring. Read more.

American Rescue Plan Act: The state of Ohio filed a petition for writ of certiorari with the U.S. Supreme Court seeking review of a November 2022 opinion by the Sixth Circuit holding that Ohio’s challenge to the offset restriction provision, or tax mandate, of the American Rescue Plan Act, or ARPA, which prevents states from using ARPA funds to directly or indirectly offset net reductions in tax revenue resulting from changes in state law, was mooted by a clarifying regulation issued by the Treasury Department.

Ohio asks the Supreme Court to answer whether federal courts still have jurisdiction to adjudicate states’ challenges to the tax mandate in light of the clarifying regulation and whether the tax mandate is unconstitutional, arguing that the provision is unconstitutionally ambiguous and coercive. In January, the Supreme Court denied a similar petition by Missouri seeking review of an Eighth Circuit determination that the state lacked standing. Read more.

Europe

In Europe, additional tier 1 bond investors are still aching from a controversial decision announced on Sunday evening, March 19, by the Swiss financial regulators to wipe out $17 billion of Credit Suisse AT1 debt as part of a merger with domestic rival UBS. The move sent shockwaves through the markets because the regulators allowed Credit Suisse shareholders, junior to AT1 creditors, to walk away from the imploding bank with a small minority equity stake, valued at $3 billion, in the new, much larger UBS – thereby disregarding the absolute priority rule. Global litigation firms are now in full swing to prepare legal challenges.

Credit Suisse: Law firms are preparing multiple litigation strategies to push back on Switzerland’s March 19 decision to write CHF 16 billion of Credit Suisse additional tier 1 debt down to zero. Quinn Emanuel and Pallas Partners are both pitching disgruntled investors, trying to build a large enough group to lead the charge in Switzerland, which, according to Pallas’ Natasha Harrison, has “annihilated its reputation as a safe haven.” Reorg’s legal analysis shows that Credit Suisse’s AT1 bond documentation does allow for the regulator to write down the subordinated debt in a non-liquidation scenario. Read more.

Deutsche Bank’s additional tier 1 notes fell 8% to 10% on March 24, the most hit in Europe, as policymakers are struggling to calm waters after the 16 billion Swiss franc ($17.4 billion) vaporization of Credit Suisse AT1s. The German lender’s shares are down 10%, while its five-year credit default swap was indicated at 302 basis points last Friday, March 24, up 18% compared with the day before. The banking sector, as well as broader markets, have fallen because of the turmoil caused by the collapse of three U.S. regional banks and the last-minute merger between Credit Suisse and UBS, in which the former’s AT1 notes were wiped out completely and its equity took a big loss but were not fully written down. Read more.

Flint Group said more than 75% of first lien debt lenders by value and 90% of second lien debt lenders have acceded to a lockup agreement for its recapitalization deal. The Luxembourg-based printing and packaging company added that it expects this level of support to enable the group to implement the transaction by way of a U.K. scheme of arrangement. The transaction will cut debt by €740 million and reduce interest costs by €75 million in financial year 2023. Lenders will provide €72 million of new liquidity and extend maturities by up to four years. The transaction would cut operating group debt by more than 50% through a partial restatement of the first lien debt, with the rest of the first and second lien pushed up into new holdco debt. Read more.

Codere: Spanish gaming company Codere, which previously restructured its debt in 2020 and 2021, said it intends to raise €100 million of super senior new money, and defer interest due under its 2026 and 2027 PIK super senior notes and principal under its 2026 PIK super senior notes. The group is using a consent solicitation to implement the key terms of the deal, requiring the consent of just 50% of each note’s tranche and in addition launching an exchange offer. The company is dealing with a significant interest burden, which is eroding its liquidity. As of the nine months ended Sept. 30, 2022, the group’s total cash interest burden amounted to €68.4 million, of which €44.3 million related to bond net cash interest payments. Including PIK interest of €61.5 million, total interest amounted to €129.9 million. Read more on Codere.

Tricor/Vistra: Investors who considered the $1.66 billion-equivalent incremental term loan B being marketed to support the merger of corporate services companies Tricor and Vistra highlighted that the company’s scale will more than double as a result of the deal. Both businesses are based in Hong Kong and have activities in Asia, however Vistra’s activities in the EMEA region and in the Americas will enable Tricor to expand its focus beyond Asia. Relatively low capex also means that free cash flow generation is strong, investors said. The deal comes with significant execution risk and large integration costs. Additionally, the two companies may have overlapping activities and clients. The dollar portion of the deal priced at SOFR/Euribor+ 475bps with a 97.5 OID.

Quark: Arcano Partners has been appointed to run the sale of Spanish consulting and engineering company Quark, sources told Reorg. The founders of Quark are looking for a new partner to continue the company’s growth and international expansion.The process is at an early stage, sources noted.

Asia

In Asia, earnings were a focus for investors. CIFI Holdings started negotiating with holders of its over RMB 2B onshore bond to cancel a put option, and Reorg began coverage of Chindata Group.

Logan Group: We dialed into a conference call held by the company’s chief restructuring officer, who told investors that Logan aims to distribute a detailed restructuring proposal to all creditors in the next few weeks, and that the terms will feature amortization payments throughout the extended period. Read more.

China Evergrande: Reorg compares key terms of recent liability management and restructuring exercises launched by Chinese real estate developers against the proposed restructuring terms under China Evergrande Group’s restructuring term sheet. Among other details, we highlight the three schemes under the plan and benchmark various terms against historical and ongoing restructurings such as the restructuring consideration, debt/equity swap terms, money terms, asset sales undertaking and credit enhancements. Read more.

Editor’s Note: Below is the latest in Reorg’s Expert Views series: an article written by Martin J. Bienenstock and Vincent Indelicato of Proskauer Rose LLP.

Date originally published: Mon 03/13/2023 02:41 PM GMT

Over the last several days, alternative capital providers have raced to identify new money opportunities exacerbated by distress across the regional banking sector, from bidding on deposit claims to structuring rescue loans for portfolio companies with imminent payroll obligations.

This underwriting exercise inevitably brings into focus one very important question: What happens when a holding company of an FDIC-insured bank subsidiary files for chapter 11?

One answer lies in an obscure and underutilized provision of the Bankruptcy Code, albeit one with outsized powers, and highlights the potential obstacles bank holding company creditors must overcome in a chapter 11 case where the FDIC asserts its priority to holding company assets for the benefit of the bank subsidiary.[1]

Bankruptcy Code Section 365(o): An Exception to the Rule

As a general matter, Bankruptcy Code section 365 empowers a chapter 11 debtor with the sacred right to assume or reject executory contracts and unexpired leases. Bankruptcy Code section 365(o), however, creates an exception to the wide berth of discretion that otherwise facilitates the rejection of burdensome agreements, and instead requires the chapter 11 debtor to assume a capital maintenance commitment to a bank subsidiary.

Congress enacted section 365(o) to “prevent institution-affiliated parties from using bankruptcy to evade commitments to maintain capital reserve requirements of a federally insured depository institution.” Resolution Trust Corp. v. Firstcorp, Inc. (In re Firstcorp), 973 F.2d 243, 246 (4th Cir. 1992) (quoting H.R. Rep No. 681(I), 101st Cong., 2d Sess. 179 (1990), reprinted in 1990 U.S.C.C.A.N. 6472, 6585). Firstcorp remarks further that Congress promulgated Bankruptcy Code section 365(o) to ensure that a bank holding company which has committed to maintain the capital of its federally insured depository subsidiary could not use chapter 11 “to jettison the subsidiary in an effort to enhance its own financial position and that of its creditors, while leaving the federal deposit insurance system (and ultimately the taxpayers) to bail out the capital-deficient subsidiary.” Firstcorp, 973 F.2d at 248.

The text of Bankruptcy Code section 365(o) provides:

“In a case under chapter 11 of this title, the trustee shall be deemed to have assumed (consistent with the debtor’s other obligations under section 507), and shall immediately cure any deficit under, any commitment by the debtor to a Federal depository institutions regulatory agency (or predecessor to such agency) to maintain the capital of an insured depository institution, and any claim for a subsequent breach of the obligations thereunder shall be entitled to priority under section 507. This subsection shall not extend any commitment that would otherwise be terminated by any act of such an agency.”

11 U.S.C. § 365(o). The Bankruptcy Code also recognizes the FDIC as a “Federal depository institutions regulatory agency” for purposes of this statute when the FDIC has been appointed receiver of “an insured depository institution” 11 U.S.C. § 101 (21B)(D).

Importantly, section 365(o) applies only to enforceable commitments, and because the statute does not specify the form or nature of such commitments (i.e., written vs. oral, formal vs. informal), the issue often becomes ripe for litigation. See, e.g., In re Colonial Bancgroup, Inc., 436 B.R. 713 (Bankr. M.D. Ala. 2010) (holding that the debtor did not make a commitment to a “Federal depository institutions regulatory agency” to maintain the capital of Colonial Bank within the meaning of 11 U.S.C. § 365(o), particularly when the bank was no longer operating); Wolkowtiz v. FDIC (In re Imperial Credit Industries, Inc.), 527 F.3d 959 (9th Cir. 2008) (finding a holding company’s performance guaranty of a capital restoration plan gave rise to a maintenance obligation under 365(o)).

Nevertheless, when section 365(o) does apply, the bank holding company debtor must cure the deficit at the federally insured depository institution at 100 cents on the dollar, or convert its chapter 11 case to chapter 7:

“If the holding company is not financially able to satisfy its capital maintenance obligations, then § 365(o) denies it the opportunity to reorganize under Chapter 11, leaving liquidation under Chapter 7 as its only option. Through this mechanism, § 365(o) places the financial interest of the federal deposit insurance system ahead of that of the holding company and its creditors.”

Firstcorp, 973 F.2d at 248. Indeed, the application of section 365(o) would have the effect of subordinating other bank holding company creditors to the FDIC on account of the bank subsidiary. Should the case convert to chapter 7, section 507(a)(9) does not entitle the FDIC to an administrative priority claim, but, rather, to a ninth priority unsecured claim that still comes before general unsecured claims.

Key Takeaways for Distressed Investors

Distressed investors evaluating the potential acquisition of bank holding company securities must proceed with caution when the subsidiary bank remains in extremis. The appearance of a solvent entity today seemingly insulated from the contagion of a cash-deficient bank subsidiary may quickly dim tomorrow if the FDIC files a motion in the early days of a bank holding company chapter 11 case alleging a commitment to maintain the capital of the subsidiary bank as required by Bankruptcy Code section 365(o), or convert the case to a chapter 7 liquidation if the debtor cannot cure the deficiency. At a minimum, such a dispute would necessitate protracted litigation that will consume value and diminish certainty of outcome.

Similar to the question of capital commitment enforceability as required by section 365(o), the interpretation of sharing agreements that allocate tax payments and refunds between the bank holding company and the bank subsidiary also has the potential to impact value allocation and recovery scenarios, while inviting fact-intensive discovery and litigation, an adverse ruling of which, when combined with an allowed 365(o) claim, could take away bank holding company assets for the benefit of the FDIC.

[1] The FDIC also has powers under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, known as FIRREA. These powers include, in certain circumstances, the overriding of bank contracts insufficiently approved and documented, avoiding powers, and entitlements to a portion of the bank holding company’s pension plan surplus.

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After several turbulent days during which some $42 billion of deposits was yanked from Silicon Valley Bank, the bank’s holding company, SVB Financial Group, was placed into Federal Deposit Insurance Corp. receivership on Friday, March 10. The news sent shock waves across global markets, and the extent of repercussions from the financier’s collapse on startups and financial services in general remains unknown.

To help our subscribers stay on top of a rapidly evolving situation, Reorg’s editorial team published a series of articles, including a snapshot of the bank’s financial liabilities, counterparties that might suffer from its failure, an insight piece into the impact on credit markets and startups that highlighted the immense opportunity for private credit funds, and a municipals story on the ripple effects on the prepaid gas market. We also interviewed Chris Maloney from Bank of Oklahoma Capital Financial Markets about mortgage-backed securities and their significance in SVB’s collapse and banking.

Regards,
Adelene Lee

—
Our Americas teams are working tirelessly to bring subscribers the most in-depth data, analysis and reporting on more than 3,000 performing and distressed credits. A glimpse into our offering is shown below:

SVB Financial Group Collapse
After a turbulent few days during which investors and depositors initiated withdrawals of $42 billion from Silicon Valley Bank, the bank’s holding company, SVB Financial Group, was placed into FDIC receivership last Friday by California’s financial regulator, the Department of Financial Protection and Innovation. One immediate consequence of SVB’s collapse will be felt in the high-yield and leveraged loan primary markets. New issuance and refinancings, already muted after the record volumes of 2020 and 2021, are likely to largely vanish over the near term, especially among financial services and technology names. » Continue Reading

SVB Bond Trustee US Bank Taps Counsel
Unsecured creditors to SVB Financial Group are mobilizing and speaking with restructuring advisors in preparation for an expected chapter 11 filing, according to sources. Davis Polk advised the joint bookrunning managers on the SEC-registered offering by SVB Financial of $500 million aggregate principal amount of 3.125% senior notes due 2030, $350 million aggregate principal amount of 4.345% fixed-rate/floating-rate senior notes due 2028 and $450 million aggregate principal amount of 4.57% fixed-rate/floating-rate senior notes due 2033 by SVB. » Continue Reading

Americas Municipals Industry Update
Prepaid gas deals are feeling the pain from distress in the U.S. regional banking system following last week’s news that Silicon Valley Bank had been placed under FDIC receivership, according to market sources. Following the collapses of Silicon Valley Bank and Signature Bank, Black Belt Energy Gas District and Energy Southeast have dropped from the primary calendar, according to market sources. » Continue Reading

Legislative Coverage
The newly formed House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion held its first hearing examining recent federal regulatory actions related to the cryptocurrency industry on Thursday, March 9. During the hearing, lawmakers discussed Silvergate Bank’s voluntary liquidation this week and disagreed on whether crypto assets should be separated from the mainstream banking system. » Continue Reading

ESGx by Reorg
Simplify the process of ESG and sustainability reporting with ESGx by Reorg, which provides a resource for regulatory reporting, including SFDR, TCFD and upcoming sustainable finance disclosures as well as a standardized source of reportable ESG metrics for the market’s evolving requirements. Learn more.

Reorg League Tables
Using exclusive Credit Cloud data, Reorg’s Advisor League Tables synthesize advisor retentions and earned fees throughout 2022 to provide you with fresh perspectives on industry leaders. To access the full range of insights – including fee tables, retention tables, debtor and nondebtor engagements, and more – download Reorg’s Advisor League Tables today. Download here.

Podcast
At the center of Silicon Valley Bank’s stunning collapse was an investment portfolio stuffed with mortgage-backed securities, or MBS. In this special podcast with Reorg’s James Holloway, CJ Maloney, MBS strategist at Bank of Oklahoma Capital Financial Markets, explains the asset class, their outsized losses since the Fed commenced its rate-tightening program, and the Fed’s options as it seeks to simultaneously battle inflation and support the banking sector. Listen here.

First Day by Reorg publishes timely alerts and expert analysis of new chapter 11 cases. The team also publishes regular special reports including the First Day Weekly and twice-yearly reports; the Midyear Review and the Year in Review. Below is an excerpt of the 2022 Year in Review whitepaper which you can download here. To request trial access to Reorg, click here.

Major Industry Developments & Highlights

• In 2022 there was an 18% increase in filing frequency from the first half to the second half, with December being the busiest month of the year.
• Energy and consumer discretionary filings, which set record highs in 2020, fell steeply in 2021 and were down further to record lows in 2022.
• From 2021 to 2022, chapter 11 filing frequency dropped 4%; excluding the real estate sector, this decrease was just 1%.
• The financials sector took the largest share of the year’s billion-dollar filings, which have historically been led by energy and consumer discretionary filings.

Market Overview

• The sector with the biggest increase in cases with more than $100 million in liabilities was the financials sector, and the sector with the biggest increase in cases with more than $10 million in liabilities was the consumer staples sector.
• Crypto companies became a trend after the midyear, with FTX’s free-fall accounting for the largest case, along with smaller filings from Core Scientific, BlockFi, Celsius Network and Voyager Digital.
• Inflation and supply-chain issues were running themes for 2022’s chapter 11 filers.
• Noted pockets of increased bankruptcy activity were construction filings, especially in the first half of the year, and New York-based hotels filing toward the end of the year.
• The year had an increased prevalence of DIP facilities provided by third parties, as well as DIPs seeking interim approval of rollups.
  

Case Size
Turning to the size of 2022’s cases, the year had 21 billion-dollar chapter 11s, 15 of which filed in the second half. The financials sector – driven by crypto – led these cases, accounting for one third of the total. The year’s breakdown by liabilities for each month of the year is shown.

Download the Frist Day by Reorg 2022 Year in Review whitepaper here to read more trends and insights into U.S. bankruptcy filings throughout 2022.

Watch the replay.

The first half of 2022 set a First Day record for fewest chapter 11 filings over any calendar six-month period, but chapter 11s picked up in the second half of the year, with Q4 concluding as the year’s busiest quarter and December closing out as the year’s busiest month. Ignoring real estate cases, which peaked in 2021, the frequency of chapter 11 cases fell by only 1% in 2022. Despite the waning of COVID-19, companies continue to cite the pandemic as at least part of the reason for their bankruptcy filings. However, during 2022 the cause of many chapter 11 filings moved away from pandemic factors, such as work stoppages and lower demand, to supply-side macroeconomic factors, including supply chain issues, labor costs and inflation. Rising interest rates and the collapse of crypto are also becoming prominent reasons for bankruptcy filings.

Reorg’s expert team will be examining chapter 11 trends and filing data through 2022. Please join us on the webinar on Monday 13th February,

Watch the replay.
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