With one exception, the Top 10 List of "public company" (defined as a company with publicly traded stock or debt) bankruptcies of 2016 consisted entirely of energy companies—solar, coal, and oil and gas producers—reflecting, as in 2015, the dire straits of those sectors caused by weakened worldwide demand and, until their December turnaround, plummeting oil prices. The exception came from the airline industry. Each company gracing the Top 10 List for 2016 entered bankruptcy with assets valued at more than $3 billion. Half of the companies on the Top 10 List filed prepackaged or prenegotiated chapter 11 cases.
Saint Louis, Missouri-based solar-energy company SunEdison Inc. ("SunEdison") flared into the No. 1 spot on the Top 10 List for 2016 when it filed for chapter 11 protection on April 21, 2016, in the Southern District of New York with $11.5 billion in assets and more than $8 billion in debt. Bankruptcy had been a near-certainty for one of the nation’s biggest and fastest-growing developers of renewable-power plants for some time. SunEdison borrowed heavily in recent years to acquire wind and solar developers but faced disappointing earnings from its yield company subsidiaries, TerraForm Global Inc. and TerraForm Power Inc., which did not file for bankruptcy. SunEdison also failed to close several deals, including the $2.2 billion takeover of Vivint Solar Inc. and the $700 million buyout of Latin America Power, and faced allegations of financial reporting improprieties as well as investigations by the U.S. Securities and Exchange Commission and the Department of Justice.
The No. 2 position on the Top 10 List for 2016 was excavated by the largest U.S. coal mining company, St. Louis, Missouri-based Peabody Energy Corporation ("Peabody"), which filed for chapter 11 protection on April 13, 2016, in the Eastern District of Missouri with $11 billion in assets and $10.1 billion in debt. Peabody’s chapter 11 filing was part of a wave of bankruptcies that have ricocheted through the U.S. coal mining industry, following filings by Arch Coal Inc.; Alpha Natural Resources, Inc.; Patriot Coal Corp.; and Walter Energy, Inc. Even though just under one-third of the U.S. grid is still powered by coal, and hundreds of mines are still profitable and operating, coal mining companies have struggled with a host of challenges. These include high leverage, low energy prices, stringent new environmental regulations, the decline of steel production, and power plants that have replaced coal with natural gas made abundant and cheap by shale drilling. The industry has also been troubled by slower demand from China. Jones Day is representing Peabody in connection with its chapter 11 filing.
Houston, Texas-based oil and gas producer LINN Energy, LLC ("Linn Energy") trickled into the No. 3 spot on the Top 10 List for 2016 when it filed for chapter 11 protection on May 11, 2016, in the Southern District of Texas after reaching the broad terms of a deal with the majority of its lenders to restructure $8.3 billion in debt and obtain $2.2 billion in fresh financing. Linn Energy focuses its exploration and production efforts on the Colorado Rockies, California, the Hugoton Basin, the Mid-Continent, the Permian Basin, Texas, Louisiana, Michigan, and Illinois. It listed $10 billion in assets at the time of the chapter 11 filing. Yet another victim of the commodities rout, Linn Energy was once the largest energy producer operating as a partnership. Such partnerships were bankrolled by the U.S. shale boom, but many took on heavy debt loads to fund their acquisitions.
St. Louis, Missouri-based Arch Coal, Inc. ("Arch Coal") collapsed into the No. 4 position on the Top 10 List of 2016. The second-largest coal miner in the U.S., Arch Coal filed for chapter 11 protection on January 11, 2016, in the Eastern District of Missouri to implement a restructuring to eliminate more than $4.5 billion in debt from the company’s balance sheet. Arch Coal produces and sells thermal and metallurgical coal from 16 surface and underground mines located in the U.S. It also sells coal to power plants, steel mills, and industrial facilities. Arch Coal ran into debt trouble after purchasing International Coal Group Inc. for $3.4 billion during a coal price peak in 2011. The company listed $8.4 billion in assets and $6.5 billion in debt at the time of the bankruptcy filing. The bankruptcy court confirmed a chapter 11 plan for Arch Coal on September 13, 2016. The plan provides for a debt-for-equity swap that cut Arch Coal’s debt load by 93 percent.
Los Angeles, California-based Breitburn Energy Partners LP ("Breitburn") drilled into the No. 5 spot on the Top 10 List for 2016 when it filed for chapter 11 protection in the Southern District of New York on May 15, 2016, with $4.8 billion in assets and $3.4 billion in debt. Breitburn, once the largest U.S. oil producer organized as a master limited partnership, acquires, exploits, and develops oil, natural gas liquids (NGLs), and natural gas properties in the Midwestern U.S., Ark-La-Tex, the Permian Basin, the Mid-Continent, the Rockies, the Southeastern U.S., and California. Another victim of plunging oil prices and an unsustainable debt load, the company joined a crowd of oil and gas firms in bankruptcy.
Hamilton, Bermuda-based oil and natural gas producer Energy XXI Ltd. ("Energy XXI") trickled into the No. 6 spot on the Top 10 List when it filed for chapter 11 protection on April 14, 2016, in the Southern District of Texas with $4.7 billion in assets and $3.6 billion in debt. Energy XXI engages in the acquisition, exploration, development, and operation of oil and natural gas properties onshore in Louisiana and Texas and offshore on the Gulf of Mexico. Energy XXI filed for bankruptcy to implement a prenegotiated chapter 11 plan that would eliminate substantially all of its debt by means of a debt-for-equity swap. The bankruptcy court confirmed Energy XXI’s chapter 11 plan on December 13, 2016.
Indianapolis, Indiana-based short-haul carrier Republic Airways Holdings Inc. ("Republic") taxied into the No. 7 position on the Top 10 List for 2016, when it filed for chapter 11 protection in the Southern District of New York on February 25, 2016, with $3.5 billion in assets and $3.6 billion in debt. Republic operates a fleet of smaller planes that provide flights for larger airlines, including American Airlines Group Inc. ("American"), Delta Air Lines Inc., and United Continental Holdings Inc. Republic’s bankruptcy filing is the first by a major airline since American filed for chapter 11 in 2011. Republic blamed its failure to succeed on a pilot shortage and the grounding of planes during its negotiation of labor contracts and agreements with larger carriers. Key features of a proposed chapter 11 plan filed by Republic on November 16, 2016, include reinstatement of its secured debt, distributions of cash and stock to unsecured creditors, and the extinguishment of old equity. Republic also intends to standardize its operating fleet to a single line of jets, return "out of favor" leased aircraft, and modify codeshare agreements with other airlines.
Houston, Texas-based oil and gas exploration company Halcón Resources Corporation ("Halcón") drilled its way into the No. 8 position on the Top 10 List for 2016 when it filed for chapter 11 protection on July 27, 2016, in the District of Delaware to implement a prenegotiated restructuring agreement that would eliminate $1.8 billion in debt and $222 million in preferred stock by means of a debt-for-equity swap. Founded in 2011 by legendary wildcatter Floyd C. Wilson, Halcón was a pioneer of the shale oil and gas boom, with operations in the Bakken Shale in North Dakota and the El Halcón in central Texas. The company listed $3.5 billion in assets and $3.1 billion in debt at the time of the filing. The bankruptcy court confirmed Halcón’s prenegotiated chapter 11 plan on September 8, 2016.
The No. 9 spot on the Top 10 List for 2016 belonged to Houston, Texas-based offshore drilling rig operator Paragon Offshore PLC ("Paragon"). Paragon filed for chapter 11 protection on February 14, 2016, in the District of Delaware to implement a prenegotiated restructuring plan that would reduce its debt by approximately $1.1 billion. Paragon listed $3.3 billion in assets and $2.6 billion in debt at the time of the filing. Sinking oil prices slowed Paragon’s drilling and production activities. In addition, Paragon’s big customers, including Petróleos Mexicanos and Petrobras, cut back their contracts significantly. Paragon proposed a chapter 11 plan that offered bondholders cash and equity in the reorganized company and allowed existing equity holders to retain a 65 percent stake in the company. The bankruptcy court denied confirmation of Paragon’s plan on October 28, 2016, ruling that the plan was not feasible because it drained too much cash from the company to allow it to survive the current downturn in the oil and gas industry.
Oklahoma City, Oklahoma-based oil and gas producer SandRidge Energy, Inc. ("SandRidge") trickled into the final spot on the Top 10 List for 2016 when it filed for chapter 11 protection on May 16, 2016, in the Southern District of Texas to implement a prenegotiated $3.7 billion debt-for-equity swap. SandRidge listed $3 billion in assets and $4.4 billion in debt at the time of the filing; the company engages in the exploration, development, and production of crude oil, natural gas, and NGLs in Oklahoma and Kansas. The bankruptcy court confirmed SandRidge’s chapter 11 plan on September 9, 2016.
Other notable debtors (public, private, and foreign) in 2016 included the following:
Hanjin Shipping Co., Ltd. ("Hanjin"), the world’s ninth-largest container shipping company worldwide and No. 1 in South Korea, with a fleet of 100 container vessels. The foreign representative of Hanjin, a victim of global overcapacity and high debt, filed a petition on September 2, 2016, in the District of New Jersey, seeking recognition under chapter 15 of the company’s South Korean reorganization proceedings. The filing was part of a worldwide effort (which also included legal proceedings in Canada, the U.K., Germany, Japan, Spain, Singapore, Belgium, Italy, Australia, and France, among other countries) to stop creditors from seizing Hanjin’s vessels. The petition listed $5.9 billion in assets and $5.4 billion in debt. After the filings, Hanjin drastically reduced its fleet in an effort to streamline the company. The bankruptcy court entered an order on December 14, 2016, recognizing Hanjin’s South Korean reorganization proceedings under chapter 15.
Singapore-based China Fishery Group Limited ("China Fishery"), which through its subsidiaries sources, harvests, onboard-processes, and delivers fish worldwide. China Fishery filed for chapter 11 protection in the Southern District of New York on June 30, 2016, with $2.6 billion in assets and $2.5 billion in debt, to prevent creditors from selling off the company’s assets at fire-sale prices. China Fishery and its subsidiaries are part of the Pacific Andes Group, the world’s 12th-largest seafood company and one of the world’s largest producers of fish meal and fish oil. On October 28, 2016, the bankruptcy court appointed a chapter 11 trustee for China Fishery, concluding that creditors had justifiably lost confidence in its management and that the debtors’ prospects for rehabilitation under existing management were "problematic, if not dim."
Oilfield helicopter services company CHC Group Ltd. ("CHC"), the parent company of Vancouver, British Columbia-based CHC Helicopter, which filed for chapter 11 protection on May 5, 2016, in the Northern District of Texas with $2.3 billion in assets and $2 billion in debt. Yet another company reeling from the downturn in oil prices and reduced demand for its logistic services, CHC filed for bankruptcy shortly after the company grounded much of its fleet following a crash of one of its helicopters in Norway that killed two pilots and 11 oil workers returning to the Norwegian mainland.
Dallas, Texas-based Yellow Pages publisher Dex Media, Inc. ("Dex"), which filed for chapter 11 protection for the third time in seven years on May 16, 2016, in the District of Delaware to implement a prepackaged chapter 11 plan. Tracing its roots to 1917 and R.H. Donnelly Co., publisher of the first Yellow Pages business directory, Dex (then known as Dex One Corp.) exited its first bankruptcy in 2009. It later merged with its rival SuperMedia Inc. in dual-track chapter 11 cases filed in 2013. The combined companies, with 3,100 employees and assets valued at $1.3 billion, struggled due to falling print revenues and the burdens of high-cost, legacy information technologies. Dex emerged from bankruptcy as a private company on July 29, 2016, after the bankruptcy court confirmed a chapter 11 plan that eliminated $1.8 billion in debt by means of a debt-for-equity swap.
Spanish alternative energy producer Abengoa SA ("Abengoa"), a Seville-based clean energy and environmental sustainability engineering company with 35,000 employees in 50 countries. The foreign representatives of Abengoa and 24 Spanish affiliates filed petitions on March 28, 2016, in the District of Delaware, seeking recognition under chapter 15 of a Spanish insolvency proceeding in which Abengoa is attempting to restructure $16.5 billion in debt and thereby avoid the largest Spanish bankruptcy ever. The bankruptcy court entered an order recognizing the proceeding on April 27, 2016. The threat of involuntary bankruptcy prompted other U.S. affiliates of Abengoa to file chapter 11 petitions. These included Chesterfield, Missouri-based ethanol plant operator Abengoa Bioenergy US Holding, LLC, which filed for chapter 11 protection in the Eastern District of Missouri, and construction and engineering firm Abeinsa Holding Inc. ("Abeinsa"). Abeinsa and nearly 20 affiliates filed chapter 11 cases in the District of Delaware on March 29, 2016. The bankruptcy court confirmed the companies’ joint plans of reorganization and liquidation on December 14, 2016.
Privately held, Englewood, Colorado-based sporting goods retailer Sports Authority, Inc. ("Sports Authority"), which filed for chapter 11 protection on March 2, 2016, in the District of Delaware with $1.1 billion in debt and intentions to find a buyer after closing 140 of its 463 stores. Leonard Green & Partners L.P. bought Sports Authority, once the largest sporting goods chain in the U.S., in a $1.3 billion leveraged buyout in 2006. Since the buyout, rival Dick’s Sporting Goods Inc. ("Dick’s") added hundreds of locations, but Sports Authority’s debt load hampered its ability to expand or innovate. The big-box chain also struggled with a shift to online shopping. Sports Authority ultimately was forced to sell its retail assets to liquidators, which conducted going-out-of-business sales beginning in May 2016. Dick’s acquired Sports Authority’s intellectual property, including its brand name, as well as more than 30 stores at a bankruptcy auction in June 2016.
Brazilian telecommunications company Oi SA ("Oi"), which filed the largest bankruptcy case in Brazil’s history on June 20, 2016, after a $19 billion out-of-court restructuring proposal collapsed. The foreign representatives of Oi and several affiliates filed petitions seeking chapter 15 recognition of the Brazilian restructuring proceeding on June 21, 2016, in the Southern District of New York. The bankruptcy court entered an order recognizing the restructuring on July 22, 2016. Oi, Brazil’s fourth-largest telecom, with more than 74 million customers and 142,000 employees, ascribed its financial woes to Brazil’s deep recession and corruption scandals that have hurt foreign investment and crippled the Brazilian capital markets. The company was also caught off guard by a rapid shift in demand from fixed-line telephone service to more profitable mobile service.
Privately owned Modular Space Corp. ("ModSpace"), a Berwyn, Pennsylvania-based manufacturer of office and construction trailers, portable storage solutions, classrooms, and other temporary structures. ModSpace filed a restructuring proceeding in Toronto and a chapter 11 case in the District of Delaware on December 21, 2016, to restructure more than $1 billion in long-term debt by means of a prepackaged chapter 11 plan providing for a debt-for-equity swap. ModSpace was hurt by the slowdown in the oil and gas and mining sectors, as well as the diminished volume of nonresidential construction. ModSpace listed $1.3 billion in assets and more than $1 billion in debt at the time of the filings.
Performance Sports Group Ltd. ("Performance"), maker of the Bauer hockey and Easton baseball equipment brands, which filed for chapter 11 protection in the District of Delaware on October 31, 2016, with plans to auction its assets. New Hampshire-based Performance, which also filed a bankruptcy case in Canada, stated that the filing was due to high-profile bankruptcies of its retail customers, weakness in the baseball and softball equipment market, and the relative strength of the U.S. dollar, which reduced profitability in overseas markets. The bankruptcy filings came just months after Performance revealed that it was under investigation by securities regulators in Canada and the U.S. for accounting irregularities.
Carmel, Indiana-based for-profit college operator ITT Educational Services Inc. ("ITT"). ITT filed a chapter 7 case on September 16, 2016, in the Southern District of Indiana after closing 136 technical schools and leaving more than 35,000 students stranded in one of the largest college shutdowns in U.S. history. The 50-year-old company, which had campuses in 38 states, was forced to close its doors after the U.S. Department of Education demanded a steep increase in the security the company was required to post to guarantee federal student aid. More than 8,000 employees were also affected by the shutdown, with the majority losing their jobs. The U.S. Securities and Exchange Commission brought fraud claims against ITT in 2015 for allegedly concealing major losses in two student loan programs. In addition, the Consumer Financial Protection Bureau sued the company in 2014, accusing it of overstating students’ job prospects and potential salaries and then pushing them into high-cost private loans that were likely to end in default.