2015 Industry Projections: Who’s in Trouble?
Reuters recently conducted a survey of restructuring professionals for thoughts on looming economic distress in 2015. The results are not particularly surprising. The common theme is today’s “VUCA” world. It is imperative to react on a dime, and that is not easy to do when running day to day business.
Oil and gas leads off the list with the most votes. Energy companies raised and borrowed billions for cap ex and to open new fields and wells. The Texas and North Dakota economies are about to see what Kentucky has been experiencing for some time now with Central App coal pricing. Turnaround consultants are already seeing the domino-like fall out across the energy sector: drilling, transport, supports services and tech specialties. Kentucky’s oil and gas sector has been ramping up and time will tell how hard Kentucky drilling will be hit. These cases can be messy with numerous entities involved and commingling of funds across different companies.
Retail also is anticipated to continue to face struggles, not only with consumer spending down but also the shifts in online shopping. Already we have seen recent “teen” chain closings, including dELiA*s, Deb Shops and Wet Seal. RadioShack is another victim of shifting markets.
Hospitals, especially rural hospitals, are definitely in restructure mode across the entire country, not just in Kentucky. We are awaiting the soon-to-be released audit from the State Auditor’s Office regarding Kentucky’s rural hospitals. The obvious snags from the Affordable Care Act combined with technological and diagnostic equipment changes, reimbursement rate issues, and slow-pay combine in to a perfect storm.
Other areas include higher education (the flight of dollars to internet from brick and mortar; rising tuition and student loans, and the labor market); CMBS loan maturities in 2015-2017; global market fears; and the Fed interest rate questions. We have had a number of years of easy money and significantly lower rates of distress and bankruptcy. There is no good answer to when that may end, but those teetering on the edge are starting to show more exposure.