Chapter 11 filings have picked up slightly in recent weeks, but remain down around 40% year-over-year as measured by First Day by Reorg. The drop appears to be due to what has become a perfect storm for distressed investors: government stimulus, the expectation of even more government stimulus and frothy capital markets. It’s hard to envision a marked pickup of in-court activity with high-yield offerings still booming and no end in sight from investors chasing yield (down to 3%?! for some “high-yield” issuers). One resulting wildcard, of course, is inflation and that could end up being a major narrative for 2021. We are also watching a number of REITs that could end up in chapter 11 this year and tracking how the change in administration in Washington D.C. may affect other industries, particularly energy.
Even though new case filings are slowing, bankruptcy lawyers have managed to stay busy with a series of lengthy trials: disputes over Wells Fargo’s prepetition enforcement actions against CBL and confirmation battles in Chesapeake, Speedcast and Highland Capital Management. We’re also watching the dueling plans in Garrett Motion and Hertz’s creative use of chapter 15 and European restructuring processes. And, if you are interested in a more thematic approach to bankruptcy news, be sure to check out our regular Court Opinion Review.
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