Co-authored by Adam Strochak
Our 2012 Restructuring Outlook Survey garnered 150 responses from readers and the phrase that most selected to forecast the year just concluded was “Keep Calm and Carry On.”  It seems we’ve done just that.  The United States muddled through political gridlock and narrowly averted the fiscal cliff of automatic tax hikes and indiscriminate spending cuts at year end.  Europe and the Euro also managed to survive 2012, as predicted here.  Overall, our readers’ predictions for 2012 were close to spot on, and markedly more reliable than the Mesoamerican Long Count Calendar
Watch this spot for our 2013 Restructuring Outlook Survey, which will open on Thursday, January 24, 2013.  In the meantime, here’s the true up on the 2012 survey. 
Number of Jumbo Chapter 11 and Chapter 15 Cases
The majority of our survey responses predicted between one and ten jumbo chapter 11/chapter 15 cases (assets over $1 billion) for 2012.  As of mid-2012, nine jumbo chapter 11 cases had already filed.  So how did we do for the rest of the 2012?
Looks like folks weren’t far off: since our last update, five more jumbo chapter 11 and chapter 15 cases filed: Dynegy, Inc.; Patriot Coal Corporation; ATP Oil & Gas Corp.; Centrais Eletricas do Para S.A.; and Overseas Shipholding Group, Inc., bringing the grand total to 14 jumbo chapter 11 cases for 2012.  These largest cases were spread among several sectors, with most in the manufacturing and energy businesses.  The Dynegy, Inc. filing was a follow-on to subsidiary cases that first filed in late 2011, and the Eletrobras case was a chapter 15 filed after the restructuring was completed in Brazil to facilitate the mandatory exchange of $250 million in notes, so while the official number is 14 jumbo cases, it’s really more like 12. 
Here’s the breakdown of jumbo chapter 11 and chapter 15 cases in 2012, alphabetically:

Name

Assets

Sector

Arcapita Bank B.S.C.(c)

More than $1 billion

Financial Services

ATP Oil & Gas Corp.

$3,640,000,000

Energy

Catalyst Paper Corp.

More than $1 billion

Manufacturing

Centrais Eletricas do Para S.A.

More than $1 billion

Energy

Dynegy Inc.

$11,400,000,000

Energy

Eastman Kodak Company

$5,102,000,000

Manufacturing

Hawker Beechcraft, Inc.

$2,778,300,000

Manufacturing

Houghton Mifflin Harcourt Publishing Co.

More than $1 billion

Publishing

LightSquared Inc.

$4,480,000,000

Telecommunications

Overseas Shipholding Group, Inc.

$4,151,334,000

Transportation

Patriot Coal Corporation

$3.6 billion

Minerals/Mining

Pinnacle Airlines Corp.

$1,539,488, 000

Transportation

Residential Capital, LLC

$15,675,571,000

Financial Services

WP Steel Venture LLC

More than $1 billion

Manufacturing

Sector Analysis
The top five sectors that our readers anticipated would involve significant distress this year were (in order or probability): (1) Retail; (2) Media; (3) Restaurants; (4) Banking and Finance/Commercial Real Estate (dead heat); and (5) Energy. 
By the end of 2012, of the 72 major chapter 11 filings we reviewed, the top five sectors that involved significant distress were: (1) Manufacturing (17 filings); followed by a four way tie for second with nine filings apiece: (2) Media; Energy; Retail; and Transportation.

SectorNumber of Filings
Manufacturing17
Energy9
Retail9
Communications/Media/Telecommunications9
Transportation9
Banking and Finance6
Entertainment4
Medical/Pharmaceutical3
Commercial Real Estate2
Restaurant/Hospitality2
Agriculture1
Law Firm1

Other Economic Indicators and Indicators of Distress
The U.S. trailing 12-month speculative grade corporate default rate ended 2012 at 2.6% according to Moody’s and Standard & Poor’s, finishing the year up slightly from the 2011 when it finished 2.05%.  Over half of the respondents to our 2012 survey expected it to end in the 2-3% range. 
S&P lists the following corporate entities as the U.S. corporate speculative-grade defaults in 2012.  Of the 47 listed, only 18 were chapter 11/chapter 15 filers in 2012:

No.Filing DateNameSectorFiled for Chapter 11/Chapter 15
1.1/4/2012Coach America Holdings Inc.Transportation

Yes

2.1/6/2012Vertrue LLCLeisure time and media

Yes

3.1/10/2012Buffets Inc.Consumer and service sector

Yes

4.1/17/2012Hanley Wood LLCLeisure time and media

No

5.1/19/2012Eastman Kodak Co.Leisure time and media

Yes

6.1/25/2012ConfidentialRetail and restaurants

Unknown

7.1/26/2012Republic Mortgage Insurance Co. (Unsolicited Ratings)Insurance

No

8.2/2/2012Jobson Medical Information LLCLeisure time and media

Yes

9.2/6/2012Tensar Corp.Forest and building products and homebuilders

No

10.2/6/2012Global Aviation Holdings Inc.Transportation

Yes

11.2/13/2012DirectBuy Holdings Inc.Consumer and service sector

No

12.2/16/2012Reichhold Industries Inc.Health care and chemicals

No

13.3/2/2012Circus and Eldorado Joint VentureLeisure time and media

Yes

14.3/7/2012Mohegan Tribal Gaming AuthorityMedia and entertainment

No

15.3/23/2012Dex One Corp.Leisure time and media

No

16.4/2/2012Hawker Beechcraft Inc.Aerospace and automotive and capital goods and metal

Yes

17.4/12/2012Reddy Ice Holdings Inc.Consumer and service sector

Yes

18.4/18/2012Residential Capital LLCFinancial institutions

Yes

19.5/8/2012Barneys New York Inc.Consumer and service sector

No

20.5/11/2012Verso Paper Finance Holdings LLCForest and building products and homebuilders

No

21.5/21/2012ConfidentialLeisure time and media

Unknown

22.6/20/2012ATI Acquisition Co.Leisure time and media

No

23.6/22/2012Central European Media Enterprises Ltd.Leisure time and media

No

24.7/6/2012Dynegy Inc.Energy and natural resources

Yes

25.7/10/2012Patriot Coal Corp.Energy and natural resources

Yes

26.7/12/2012National Service Industries Inc.Consumer and service sector

No

27.7/23/2012Broadview Networks Holdings Inc.Telecommunications

Yes

28.7/30/2012Aventine Renewable Energy Holdings Inc.Energy and natural resources

No

29.8/21/2012ATP Oil & Gas Corp.Energy and natural resources

Yes

30.8/21/2012LifeCare Holdings Inc.Health care and chemicals

Yes

31.8/29/2012ConfidentialHigh technology and computers and office equipment

Unknown

32.9/11/2012Marsico Holdings LLCFinancial institutions

No

33.9/12/2012ConfidentialConsumer and service sector

Unknown

34.9/21/2012GMX Resources Inc.Energy and natural resources

No

35.10/1/2012ConfidentialTransportation

Unknown

36.10/25/2012AMF Bowling Worldwide Inc.Media and entertainment

Yes

37.10/29/2012LBI Media Inc.Media and entertainment

No

38.11/1/2012ConfidentialFinancial institutions

Unknown

39.11/7/2012James River Coal Co.Metals, mining, and steel

No

40.11/9/2012NewEnergy Inc.Utility

No

41.11/14/2012Overseas Shipholding Group Inc.Transportation

Yes

42.11/16/2012Edison Mission EnergyUtility

Yes

43.11/19/2012Allen Systems Group Inc.High technology and computers and office equipment

No

44.11/29/2012IAP Worldwide Services Inc.Capital goods

No

45.12/6/2012Energy Future Holdings Corp.Energy and natural resources

No

46.12/17/2012Edison Mission Marketing & Trading Inc.Utility

No

47.12/18/2012Geokinetics Holdings Inc.Energy and natural resources

No

 
Most of our 2012 survey respondents anticipated that the closing price of the Dow Jones Industrial Average on December 31, 2012 would be between 12,001 to 13,000.  The Dow opened the year at 12,221.19, and it ended the year at 13,104.14, just slightly ahead of the range predicted by the majority of our respondents.
Brent crude was widely expected to trade in the $100-$110 per barrel range by the end of the year.  As of December 31, ICE Brent Crude Futures with a February 2013 delivery date opened at $110.35 per barrel.  We’re rounding this one down to $110 and calling the prediction spot on. 
The price of gold was also expected to remain flat in 2012, with nearly half our respondents expecting it to trade between $1,501 and $1,750 a troy ounce during the course of the year.  As of December 31, 2012, gold was trading at $1662.90 per troy ounce, having started the year at $1,603.80.  Is there anything our readers got wrong this year?!
Most of our respondents predicted the yield on the 10-year U.S. Treasury note would end 2012 below 2%, though a substantial number of survey participants also expected it to end the year in the 2-2.5% range.  The yield on the 10-year U.S. Treasury note started the 2012 at 1.97%, and closed out the year at 1.78%.  Bullseye!   
Lastly, 70.9% of our readers forecast a consensual restructuring to resolve the Greek debt crisis.  As it so happens, they were right again, which is good news for the Greeks.
Best wishes to all for a successful 2013!