While the stock market hovers around all-time highs and unemployment is at less than 4 percent, it’s easy to assume that these are the best of times when it comes to the U.S. economy. But for some industries, these are most certainly the worst of times as corporate bankruptcies are surging to levels we haven’t seen since the waning days of the Great Recession.
According to the American Bankruptcy Institute, there were more than 770 Chapter 11 bankruptcies in March 2018. This represented a more than 60 percent jump over the same period from the year prior. It was also the highest amount since April 2011. While the rate has slowed somewhat in the months since, we’re on pace for more than 5,200 Chapter 11 filings in 2018.
It should come as no surprise that with changes in government policy, technology and consumer behavior that some industries are disproportionately at risk of bankruptcy or a major restructuring. According to an August 2018 report from PwC that analyzed 2,000 companies in 62 industries, the following sectors are at the greatest risk:
- Textiles, apparel, luxury goods
- Diversified telecommunication services
- Healthcare providers and services
- Electric utilities
- Technology hardware, storage and peripherals
For firms in these, or other sectors, facing down these serious organizational issues and getting their financial house in order is the goal. This can be accomplished a number of ways, with the most prevalent being either a restructuring or Chapter 11 filing.
A restructuring is conducted outside of court. They are typically faster and less costly than Chapter 11 filings. Companies engaged in restructurings will conduct direct negotiations with creditors and change operations to help these companies obtain their goals. However, if they cannot, formal bankruptcy filing efforts remain an option. According to PwC, Chapter 11 filings enable companies to:
- Alleviate the burden of an over-leveraged balance sheet
- Reject unfavorable contracts and leases
- Sell non-essential assets
Whether it’s a restructuring, a Chapter 11 filing or even selling off a business unit to get a company’s financial issues straightened away, having the right tools and processes in place is critical to achieve a successful outcome. Companies like BMC Group, the leading global provider of information management solutions, offer technology and case management solutions that are designed to simplify and accelerates the restructuring process. By integrating SmartRoom, the company’s next-generation virtual data room, with BMC Group’s case management solutions, it provides the only end-to-end solution for restructuring. Businesses can seamlessly execute all restructuring administration and claims management with one central repository for:
- Petitions and pleadings
- Schedule and statement of financial affairs
- Claims data
- Asset sales
BMC Group provides additional services for restructuring including noticing, solicitation, public securities balloting (exchange offers), and distribution.