2017 Bankruptcies: The Biggest Names and Trends

From financial risk analysis via our proprietary FRISK® score, CreditRiskMonitor watched and learned lessons from the fates of 59 public companies that filed for bankruptcy in 2017. These corporations spanned industry spheres from retail to healthcare, restaurants, communications and oil. As we start a new year, it's worth a look back to recognize what happened on the bankruptcy front using the many tools provided by the CreditRiskMonitor service. These include our regular Bankruptcy Case Studies and High Risk Reports – the latter introduced in 2017 to give subscribers and prospects alike a heads up on companies in financial peril – and the aforementioned FRISK® score, which has proven 96% accurate in predicting U.S. public company bankruptcy in a 12-month window. The end goal is to help you mitigate risks to make 2018 a safer year for your portfolio. 

Related to Bankruptcy Case Studies, each report is presented in an easily digestible format. The FRISK® score, a tool that provides each company a ranking on a “10-to-1” scale (lowest-to-highest) to predict bankruptcy risk potential, indicated heightened bankruptcy risk months in advance of the actual filing for Chapter 11 in nearly every public company bankruptcy in the U.S. during 2017. 

Here’s a look back at the nine most costly bankruptcies of 2017, as determined by total liabilities. A link is provided to a High Risk Report or Bankruptcy Case Study in the last column if one is available.

Company Name Bankruptcy Filing Date Total Liabilities (quarter preceding bankruptcy; in thousands of dollars) Industry Reports Issued
Walter Investment Management Corp. 11/30/2017 $15,215,869 Real Estate Operations  
Avaya Holdings Corp. 1/19/2017 $10,144,000 Communications Equipment  
Toys "R" Us, Inc. 9/19/2017 $7,891,000 Retail (Specialty) Bankruptcy Case Study
The J.G. Wentworth Company 12/12/2017 $5,139,828 Financial Services  
GenOn Energy, Inc. 6/14/2017 $4,512,000 Electric Utilities Bankruptcy Case Study
First NBC Bank Holding Company 5/11/2017 $4,446,303 Regional Banks  
Cobalt International Energy, Inc. 12/14/2017 $3,162,828 Oil and Gas Operations  
Cumulus Media Inc. 11/29/2017 $2,832,565 Broadcasting and Cable Television High Risk Report / Bankruptcy Case Study
Tidewater Inc. 5/17/2017 $2,575,893 Oil Well Services and Equipment  

 

Breaking Down the Big Names

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Toys-r-us

Toys “R” Us, Inc.
One of the highest profile names on the bankruptcy list of 2017, Toys “R” Us, Inc., a specialty toy retailer, fell victim to the same fate as many big box stores in recent years. The retail industry has been turned on its head thanks to the rise of global eCommerce, and the bankruptcy of this major toy store is the perfect example. Trade creditors played a large role in the company’s downward spiral as they started restricting credit and as a result, caused a serious liquidity issue within the organization. The company was laden with debt, and the further restriction of cash flow made it impossible to stay afloat in such a competitive marketplace. The FRISK® score had been warning of the risks at Toys “R” Us for at least a year before the bankruptcy filing despite the retailer's seemingly robust payment history.

Walter Investment Management Corp.
With more than $15 billion in total liabilities, Walter Investment Management Corp. topped this year’s list as the largest bankruptcy. In the midst of an industry uptick, the real estate operations company failed at an interesting time. The mortgage banking firm focused on both residential loans and reverse mortgages. The company’s FRISK® score held at a “1” for more than a year, warning subscribers that bankruptcy could hit many months before the actual filing. 

Cumulus Media Inc.
Broadcasting and cable television company Cumulus Media filed for bankruptcy late in 2017. Their fall was a result of several factors, including a weak balance sheet and an inflated cost structure. These demerits, coupled with competition in the market and changing consumer trends, made it difficult for Cumulus to stay afloat. CreditRiskMonitor published a High Risk Report in May, and the company filed for bankruptcy in November

Trends to Watch in 2018

Two sectors in particular felt the brunt of the bankruptcy hit in 2017: retail and energy. That the former struggled as shopping centers and anchor stores shut down at a record pace was hardly a shock to credit managers worldwide; the latter sector’s struggles, meanwhile, caught many by surprise.

The energy marketplace has changed drastically, with U.S. onshore oil and gas drilling having a material impact on the global supply and demand balance. Companies are having a hard time keeping up with the altered landscape despite the fact that energy prices have begun to stabilize. There were 10 energy related names which filed for bankruptcy in 2017. A targeted search by total liability figures, however, shows that the top five energy companies that filed bankruptcy in 2017 accounted for a staggering $11.2 billion in liabilities. Here’s a look at those companies:

Company Name Bankruptcy Filing Date Total Liabilities (quarter preceding bankruptcy) Industry
Cobalit International Energy, Inc. 12/14/2017 $3,162,828 Oil and Gas Operations
Tidewater Inc. 5/17/2017 $2,575,893 Oil Well Services and Equipment
Vanguard Natural Resources, Inc. 2/1/2017 $2,289,698 Oil and Gas Operations
Amplify Energy Corp. 1/16/2017 $2,053,215 Oil and Gas Operations
Bonanza Creek Energy, Inc. 1/4/2017 $1,139,641 Oil and Gas Operations

 

Oil and gas companies often make aggressive use of leverage, which can make it difficult to weather volatile commodity price environments. Note that public energy companies commonly continue to make payments on time because of their access to capital markets, potentially hiding the building bankruptcy risk from counterparties focusing exclusively on payment history.

The Takeaway

All of these companies held a FRISK® score within the “red zone” for months before they declared bankruptcy, indicating heightened risk a long time in advance of the ultimate filing. CreditRiskMonitor’s proprietary FRISK® score incorporates a number of critical risk indicators including: (1) crowdsourced click patterns of credit managers and other subscribers, (2) stock market capitalization and volatility, (3) financial ratios, including those used in the Altman Z”-Score model and (4) S&P, Moody’s and Fitch bond ratings.

Bankruptcy isn’t going away, and in 2018, CreditRiskMonitor will continue to provide the many tools financial professionals need to protect themselves.

About CreditRiskMonitor

CreditRiskMonitor is a financial news and analysis service designed to help professionals stay ahead of public company risk quickly, accurately and cost-effectively. More than 35% of the Fortune 1000, plus thousands more worldwide, rely on our commercial credit reporting and predictive risk analytics for assessing the financial stability of more than 57,000 global public companies.

At the core of CreditRiskMonitor’s service is its 96%-accurate FRISK® score, which is formulated to predict public company bankruptcy risk. One of four key components calculated in the FRISK® score is crowdsourced subscriber activity. This unique system tracks subscribers' patterns of research activity, capturing and aggregating the real-time concerns of what are essentially the key gatekeepers of corporate credit. Other features of CreditRiskMonitor’s service include timely news alerts, the Altman Z”-Score, agency ratings, financial ratios and trends. CreditRiskMonitor’s network of trade contributors provides more than $2 trillion on their counterparties every year, giving them visibility into their biggest dollar risks.