Easy-money policies and pandemic-driven government spending have created an “artificially inflated” economy that could lead to a “massive boom in restructurings,” according to Tom Lauria, global head of restructuring at law firm White & Case.
“We continue to see significant restructuring activity, particularly in the energy industry, travel-related services, pharmaceuticals and in other sectors that are exposed to potential mass tort liability,” Lauria said in an interview. “But, more importantly, the current economic climate is artificially inflated.”
Three companies with at least $50 million in liabilities filed for bankruptcy in the U.S. last week, according to data compiled by Bloomberg. That marks the fourth straight week of at least three large filings per week.
Three More
U.S. sees fourth straight week with at least three large bankruptcies
Source: Bloomberg
Note: Filings are companies with $50m+ in liabilities
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Despite the recent pickup in bankruptcies, activity is still muted compared to last year: 75 large companies had filed for bankruptcy in the U.S. as of June 28, compared to 126 in the same period last year.
“Money is being forced into equity and debt terms” at cheap rates, “but I feel that it is all artificial and there will come a point-in-time when the music stops and there will be a bunch of businesses out there without a seat,” Lauria said. White & Case is building out its restructuring group in anticipation for the ramp-up, he said.
Danger may also lurk in businesses banking on a strong recovery from the pandemic, according to Sandy Qusba, head of restructuring at law firm Simpson Thacher & Bartlett.
Businesses are relying on metrics “that may not always materialize” which could result in future restructurings, Qusba said. “People are projecting a return to pre-pandemic revenue levels. I’m not convinced that’s going to happen for some companies, certainly not across the board,” he said.
Meanwhile, the total amount of traded distressed bonds and loans rose 6.7% week-over-week to $64.6 billion as of June 25, data compiled by Bloomberg show. The amount of traded distressed bonds rose 9.5% week-on-week, while distressed loans climbed 1%.
Click here for a worksheet of distressed bonds and loans
There were 177 distressed bonds from 105 issuers trading as of Monday, up from 169 and 100, respectively, one week earlier, according to Trace data.
Diamond Sports Group LLC had the most distressed debt of issuers that hadn’t filed for bankruptcy as of June 25, data compiled by Bloomberg show. Its parent company, Sinclair Broadcast Group Inc., said in a March filing that it expects Diamond to have enough cash for the next 12 months if the pandemic doesn’t get worse.
Top 5 Distressed Issuers
Debt ($B)
Diamond Sports Group LLC
8.0
Transocean Inc
2.8
GTT Communications
2.3
Odebrecht Offshore Drilling Finance
1.9
Lightstone Holdco
1.8
Click here for more news on distressed debt and bankruptcy. First Word is curated by Bloomberg editors to give you actionable news from Bloomberg and select sources, including Dow Jones and Twitter. First Word can be customized to your Worksheet, sectors, geography or other criteria by clicking into Actions on the toolbar or hitting the HELP key for assistance.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
