CD: To what extent are you seeing an increase in financially distressed businesses in today’s market? What sectors seem to be suffering from structural weaknesses or external pressures?

Mason: Given the overall health of the US economy and historically low interest rates, the level of distress in the US business community is fairly moderate. Nevertheless, several sectors are experiencing difficulty. Over the past year, many energy exploration and services companies have gone through restructurings, due to low oil and gas prices. Low energy prices have also contributed to a wave of bankruptcies in the US coal industry. The current uncertainty over the status of President Obama’s Affordable Care Act has contributed to financial stress in the US healthcare system. Also, the ongoing fiscal problems in Puerto Rico continue to attract attention, although the Congress has now established a legal framework within which they can be resolved. Lastly, the interplay between the US Bankruptcy Code and foreign insolvency laws has received renewed focus, with the filing of several large Chapter 15 cases this year.

Tecce: There was an increase in Chapter 11 filings in 2016, most prevalently among financially distressed businesses in the energy sector. This includes not just oil & gas companies, such as Paragon Offshore Drilling LLC, Chaparral Energy LLC., Energy XII, Ltd and LinnCo LLC, and coal firms, including Arch Coal, Inc and Peabody Energy Corp, but also renewable energy companies such as SunEdison, Inc. A number of factors are at play, including the diminishing growth of worldwide energy demand, changes to the economies of foreign countries and fluctuations in commodities prices. There also are structural changes, including newly unlocked forms of shale oil & gas that are entering the market, social and regulatory pressures, increased resistance to the use of fossil fuels and demands for innovations in renewable energy technology and energy efficiency. These macro-level trends are being felt in all sectors of the energy industry.

Jan-Mar 2017 issue

Clifford Chance LLP

Quinn Emanuel Urquhart & Sullivan LLP

Skadden, Arps, Slate, Meagher & Flom LLP

Wachtell, Lipton, Rosen & Katz