Oil and gas companies, as well as the retail industry, are the worst hit sectors in the COVID-19 pandemic that swept through businesses in Texas, bankruptcy and restructuring lawyers say.
According to data provided exclusively to The Texas Lawbook by Androvett Legal Media research, more than 545 companies of all sectors in Texas filed for Chapter 11 protection from creditors between January 1 and May 5, 2020. This is a surge of 133 percent compared to the same period of 2019, Mark Curriden at The Texas Lawbook writes in Houston Chronicle.
Within Texas, Houston is the center of the wave of bankruptcies, which include many names in the retail and oil industries, according to the data and to bankruptcy partners at law firms.
In April, companies such as Diamond Offshore Drilling and Whiting Petroleum filed for Chapter 11 bankruptcy protection. U.S. shale gas pioneer Chesapeake Energy said in May it was evaluating a Chapter 11 bankruptcy protection reorganization—along with other options—as the low oil and gas prices weigh heavily on its finances and substantial outstanding debt.
The list is set to grow in coming weeks, according to legal experts.
“Oil and gas and the retail sector had a whole lot of stress even before COVID-19. The only surprising thing is that we haven’t seen the explosion of bankruptcy filings already. But they are still coming,” Lou Strubeck, head of the bankruptcy and restructuring practice at Norton Rose Fulbright, told The Texas Lawbook’s Mark Curriden.
According to Strubeck, creditors are not rushing for court reorganizations of energy companies because “they don’t know what they would do with the assets and they don’t want to run these companies.”
With less capital to invest in bankruptcy restructuring of oil firms than in the 2015-2016 downturn, private equity could sit on the sidelines, and we may see more “free fall” bankruptcies and fewer prepackaged bankruptcies, Matthew Cavanaugh, a bankruptcy partner with Jackson Walker in Houston, told The Texas Lawbook.