The composition of the Top 10 List of public bankruptcy filings for 2014 indicates that the U.S. has largely left behind the fraud, excess, abuse, and improvidence that dominated the bankruptcy landscape during the 2007–08 financial crisis and the ensuing Great Recession. Continuing a trend that began in 2012, only a single representative from the banking and financial services industry made the cut. The remainder reflect more recent market-driven developments, including a drop in cargo shipping rates worldwide (two companies) and plunging fossil fuel, electricity, and nuclear power prices (four companies). Other debtors on the Top 10 List for 2014 were undone by product/infrastructure obsolescence, slowing economic growth abroad, and faulty product design. Each company gracing the Top 10 List for 2014 entered bankruptcy with assets valued at more than $1 billion. Five of the 10 both filed for and emerged from bankruptcy in 2014—all but one as a reorganized entity (owned, with a single exception, by creditors). Half of the companies on the Top 10 List filed prenegotiated or prepackaged chapter 11 cases.
Dallas, Texas-based Energy Future Holdings Corp. (“Energy Future”) surged into the No. 1 spot on the Top 10 List for 2014 when it filed for chapter 1 1 on April 29, 2014, in the District of Delaware with $41 billion in assets and $49 billion in debt. Following months of speculation over when it would file, the private equity-backed electricity provider filed for bankruptcy to implement a restructuring that would split the company between groups of creditors and eliminate more than $26 billion in debt. Formerly known as TXU Corp., Energy Future in 2007 was the subject of what was then the largest leveraged buyout ever. It was undone by a staggering debt load and plunging electricity rates caused by a free fall in natural gas prices, as hydraulic fracturing of shale rock unleashed a glut. Energy Future’s chapter 11 case is the eighth-largest public chapter 11 case ever filed by asset value.
NII Holdings, Inc. (“NII”), a Reston, Virginia-based telecommunications company with 13,600 employees, grabbed spot No. 2 on the Top 10 List for 2014 when it filed for chapter 11 protection in the Southern District of New York on September 15, 2014, with $8.7 billion in assets and $3.5 billion in debt. Through its subsidiaries, NII provides wireless communication services under the Nextel name in Brazil, Mexico, Argentina, and Chile. Formerly known as Nextel International, Inc., NII changed its name in December 2001 and emerged from bankruptcy in November 2002 following an earlier chapter 11 filing. Jones Day is representing NII and its affiliates in connection with their chapter 11 cases.
Genco Shipping & Trading Limited (“Genco”) steamed into the No. 3 berth on the Top 10 List for 2014 when it filed for chapter 11 protection on April 21, 2014, in the Southern District of New York with nearly $3 billion in assets and $1.5 billion in debt. A New York, New York-based company with 1,518 employees, Genco is engaged in the worldwide ocean transportation of dry-bulk cargoes, including iron ore, coal, grain, and steel products, with a fleet of 53 vessels. Weakness in charter rates made it difficult for the company to pay its creditors. The shipping industry has suffered from a glut of vessels after buying too many before the 2008 global recession, driving down rates and saddling companies like Genco with too much debt. Genco emerged from bankruptcy on July 9, 2014, after the court confirmed a prepackaged chapter 11 plan that slashed the dry-bulk shipper’s debt load by $1.2 billion. Under the plan, lenders swapped $1.06 billion in debt for 81.1 percent of the equity in the reorganized company.
Waterford, New York-based producer of silicone, quartz, and specialty ceramic products Momentive Performance Materials Inc. (“Momentive”) sealed up the No. 4 spot on the Top 10 List for 2014 when it filed for chapter 11 protection on April 13, 2014, in the Southern District of New York with $2.7 billion in assets and $4.2 billion in debt. Private equity-controlled Momentive sells its products in the Americas, Europe, and Asia. The overleveraged company blamed its financial condition on the continued slowdown of economic growth abroad and on overcapacity in the industry, which has negatively impacted both its silicone and quartz businesses. Momentive filed for bankruptcy with a prenegotiated plan to cut its debt by $3 billion. The court confirmed the plan on September 11, 2014, and Momentive emerged from bankruptcy on October 24, 2014.
Nuclear fuel provider USEC, Inc. (“USEC”) powered into the No. 5 position on the Top 10 List for 2014 when it filed for chapter 11 protection on March 5, 2014, in the District of Delaware with $2.3 billion in assets and more than $1 billion in debt. Marylandbased USEC provides low-enrichment uranium to nuclear power plants. It has been working to implement a new enrichment method to replace the outdated and expensive process it used previously, but it has been stymied by debt and liquidity issues as well as a slump in prices. Apart from its looming debt, USEC had been hurt by falling prices and demand in the wake of the 2011 Japanese tsunami, which saw Japanese nuclear plants go offline, and Germany’s pledge to phase out nuclear power by 2022. The bankruptcy court confirmed a prenegotiated chapter 11 plan for USEC on September 5, 2014. Under the plan, noteholders and preferred stockholders swapped their securities for new notes and 95 percent of the new common stock in the reorganized company.
New York, New York-based Eagle Bulk Shipping Inc. (“Eagle Bulk”) slipped into the No. 6 berth on the Top 10 List for 2014 when it filed for chapter 11 protection on August 6, 2014, in the Southern District of New York with $1.7 billion in assets and $1.2 billion in debt. Eagle Bulk is engaged in the ocean transportation of various bulk cargoes worldwide, including iron ore, coal, grain, cement, and fertilizers, with a fleet of 45 oceangoing vessels. Like many other shipping companies, Eagle Bulk struggled due to an overleveraged balance sheet and a drop in shipping rates since the financial crisis of 2007–08. The company emerged from bankruptcy on October 15, 2014, after obtaining confirmation of a prenegotiated chapter 11 plan that awarded 99.5 percent of the equity in the reorganized company to creditors.
Houston-based Endeavour International Corporation (“Endeavour”) drilled its way into the No. 7 spot on the Top 10 List for 2014 when it filed for chapter 11 protection in the District of Delaware on October 10, 2014, with $1.5 billion in assets and $1.2 billion in debt. Endeavour is an independent oil and gas company that acquires, explores, and develops energy reserves and resources in the United Kingdom North Sea and onshore in the United States. The company suffered from overleveraging and “unfavorable changes” in the economic and political climate for the industry, as well as natural disasters, volatile commodity prices, and unexpected delays in new oil and gas production due to operating difficulties in the North Sea. It filed for bankruptcy with a prenegotiated chapter 1 1 plan that will slash approximately $568 million in debt as part of a restructuring that involves the issuance of new notes to bondholders and a debt-for-equity swap.
First Mariner Bancorp (“FMB”), the holding company for 1st Mariner Bank, Baltimore’s largest independent bank, with $925 million in deposits and 16 branches, crashed into the No. 8 position on the Top 10 List for 2014 when it filed for chapter 11 protection on February 10, 2014, in the District of Maryland for the purpose of selling its bank subsidiary. FMB, which was undercapitalized and out of compliance with federal and state banking regulations, auctioned off 1st Mariner Bank in bankruptcy in June 2014 to an investor group that agreed to recapitalize the bank with approximately $100 million, thereby avoiding a takeover by the Federal Deposit Insurance Corporation. FMB had $1.4 billion in assets at the time of the chapter 11 filing. The bankruptcy court confirmed a liquidating chapter 11 plan for FMB on December 9, 2014.
The No. 9 spot on the Top 10 List for 2014 was excavated by James River Coal Company (“James River”), a Richmond, Virginia-based mine operator in the U.S. Midwest and Appalachia. James River filed for chapter 11 protection for the second time on April 7, 2014, in the Eastern District of Virginia, with $1.2 billion in assets and $819 million in debt. The company struggled with a steep drop in prices and demand for both thermal and steelmaking coal. U.S. power companies have switched to cheaper natural gas, and excess supplies of metallurgical coal, which is used in steelmaking, have created a global surplus and depressed prices. James River is one of two major coal producers—the other is Patriot Coal Corp.—to have been pushed into bankruptcy in recent years by weak market conditions both in the U.S. and abroad, and more may be heading that way.
The final spot on the Top 10 List for 2014 belongs to GT Advanced Technologies Inc. (“GT”), a Manchester, New Hampshire-based company that provides materials and equipment for the solar, light-emitting diode (LED), and electronics industries worldwide. Formerly known as GT Solar International, Inc., GT operated the world’s largest artificialsapphire factory, located in Mesa, Arizona, until shortly after the plant’s investor—Apple Inc.—decided not to use synthetic sapphire in its newest iPhones because it proved to be too brittle and tended to crack on impact. After Apple withheld a final $139 million prepayment on its supply contract with GT, the company shut down the sapphire factory. GT filed for chapter 11 protection on October 6, 2014, in the District of New Hampshire, with $1.2 billion in assets. The bankruptcy court approved a modified $439 million settlement between GT and Apple on December 15, 2014.
Other notable debtors (public, private, and foreign) in 2014 included the following:
Revel AC, Inc., owner and operator of the Revel Casino Resort (“Revel”), a Las Vegas-style, beachfront entertainment resort and casino located on the boardwalk in the South Inlet of Atlantic City, New Jersey, with 1,399 rooms and 3,500 gaming positions. Listing assets of $1.15 billion, the resort filed for chapter 11 protection in the District of New Jersey on June 19, 2014, for the second time in just over two years, with the goal of selling its assets (yet again). After the proposed sale of Revel for $110 million to the highest bidder at a bankruptcy auction fell through in early December, the bankruptcy court awarded the company to back-up bidder and real estate developer Glenn Straub for $95.4 million on January 5, 2015.
Ontario, Canada-based Essar Steel Algoma Inc. (“Algoma”), Canada’s second-largest integrated steel producer, with $1.7 billion in assets and $2.1 billion in debt. Algoma’s foreign representative filed a petition on July 17, 2014, in the District of Delaware seeking recognition under chapter 15 of the company’s Canadian restructuring proceeding. The bankruptcy court entered an order recognizing Algoma’s Canadian restructuring case on August 20, 2014, to give the company an opportunity to implement a restructuring agreement that will include an equity infusion of as much as $300 million from Algoma’s ultimate corporate parent, Mumbai, Indiabased Essar Global Fund Ltd.
Privately held ITR Concession Company (“ITR”), operator of the 157-mile Indiana Toll Road, with more than $1 billion in assets and $6 billion in debt. ITR filed for chapter 11 protection on September 22, 2014, in the Northern District of Illinois to implement a prepackaged chapter 11 plan. Under the plan, which was confirmed by the bankruptcy court on October 28, 2014, a 10-month sale process for the company’s assets—primarily a lease agreement for the toll road through 2081—is being overseen by a special committee of independent directors. Should ITR fail to secure a buyer, the plan includes a back-up option whereby the company will restructure its balance sheet by means of a debt-for-equity swap and $2.75 billion in new loans.
Cayman Islands-based Suntech Power Holdings Co. (“Suntech”), the Chinese solar panel maker that was formerly the world’s largest maker of photovoltaic cells for solar energy production. Suntech’s provisional liquidators filed a chapter 15 petition on February 21, 2014, in the Southern District of New York, seeking recognition of Suntech’s Cayman Islands provisional liquidation proceeding. The bankruptcy court entered an order recognizing Suntech’s Cayman Islands liquidation on November 17, 2014, despite objections from rival solar panel manufacturer Solyndra LLC that Suntech had unlawfully migrated its center of main interests to the Cayman Islands. Suntech’s chapter 15 petition listed total assets exceeding $1 billion.
Bumi Investment Pte Ltd and two affiliates (“Bumi”), entities formed under Singapore law to raise funds for, and act as guarantors for the debts of, their corporate parent, Jakarta, Indonesia-based PT Bumi Resources, one of the world’s largest thermal coal exporters. Bumi’s foreign representative filed a chapter 15 petition on December 1, 2014, in the Southern District of New York, seeking recognition of Bumi’s Singapore restructuring proceedings. The financial condition of PT Bumi Resources has deteriorated in recent years due to the decrease in the global demand for coal. Bumi listed more than $1 billion in assets and liabilities in its chapter 15 petition.
U.K.-based Yellow Pages company Hibu PLC (“Hibu”), whose foreign representative filed a chapter 15 petition on January 28, 2014, in the Eastern District of New York, seeking recognition of Hibu’s U.K. restructuring proceedings. Hibu and its affiliates print Yellowbook in the U.S., Yellow Pages in the U.K., and Paginas Amarillas in Spain, as well as White Pages directories in Argentina and Chile. The internet has been unkind to traditional Yellow Pages companies, sending many into bankruptcy in recent years as customers migrated to digital devices. Hibu received U.K. court and Pensions Regulator approval in March 2014 of a scheme of arrangement that transferred ownership of the company to creditors. Hibu listed more than $1 billion in assets and liabilities in its chapter 15 petition.
Privately held MACH Gen LLC (“MACH Gen”), which owns and manages three natural gas-fired power plants in Arizona, Massachusetts, and New York. MACH Gen filed a prepackaged chapter 11 case on March 3, 2014, in the District of Delaware that listed $750 million in assets and $1.6 billion in debt. On April 11, 2014, the bankruptcy court confirmed the plan, which features a debt-for-equity swap for second-lien lenders that slashed $1 billion in debt. When it filed for bankruptcy, the Athens, New York-based company blamed a decline in power demand stemming from the economic downturn, as well as lower gas prices and greater supply of renewable energy projects.
Novelty gadgets and consumer products retailer Brookstone, Inc. (“Brookstone”), which filed for chapter 1 1 protection on April 2, 2014, in the District of Delaware. Brookstone proposed to sell its operations for $146 million to New Jersey-based stalking-horse bidder Spencer Spirit Holdings, Inc. (“Spencer”), a distributor of gag gifts, entertainment products, and Halloween items. Spencer, however, was outbid at auction by a consortium of Chinese investors, which offered $174 million for Brookstone with a pledge to keep open most of the company’s 240 stores and to expand the retailer’s brand into the U.K. and China. Brookstone, which cited the recession for its financial woes, obtained confirmation of its chapter 11 plan on June 24, 2014, and emerged from bankruptcy on July 8, 2014.
Sandpoint, Idaho-based specialty women’s apparel, jewelry, and accessories retailer Coldwater Creek Inc. (“Coldwater Creek”), which filed for chapter 11 protection in the District of Delaware on April 1 1, 2014, with $346 million in assets, seeking to liquidate its business. After a July 2014 auction of Coldwater Creek’s remaining leases, the bankruptcy court confirmed a liquidating chapter 11 plan for the company on September 17, 2014.
Privately held 800-restaurant pizza chain Sbarro LLC (“Sbarro”), which filed for chapter 11 protection for the second time in less than three years on March 10, 2014, in the Southern District of New York, listing $100 million to $500 million in assets and debt. Melville, New York-based Sbarro has struggled in recent years as customer traffic slowed in the shopping-mall food courts where many of its stores do business. Sbarro emerged from bankruptcy on June 2, 2014, after obtaining confirmation of a chapter 1 1 plan under which lenders swapped $148 million in debt for control of the reorganized company.