💥Chapter 11 Bankruptcies are up ...💥
Plus: Some RX-related observations from 2026's first quarter.
… or at least that’s what the headlines say:
But doesn’t it just feel like things should be much busier out there for restructuring professionals?
Q1’26 closed with a bang. Like, literal bangs. All over Iran. And Lebanon, Ukraine, and Russia. Toss in some dreadful weather, tariff wars, AI doom-and-gloom and the resultant “SaaSpocalypse” that’s tripped up stocks and loans. It’s all enough to make one want to hop on a plane and f*ck off to somewhere isolated. Of course, then you cue the US political dysfunction and the limited government shut down and you get hours-long lines at TSA, 🙄. It’s a modern miracle more people haven’t channeled their inner Michael Douglas and copycatted Falling Down (not recommended, to be clear).
Indeed, the quarter featured a pretty savage pivot from the bipolar mix of “soft landing” optimism and “vibecession” to collective vibedepression. Heightened geostrategic considerations and geopolitical risk have ushered in inflationary pressures that Jerome POW-ell and his Fed compatriots had hoped to have well under control by now. Gas prices are soaring at the pump. Will the economy remain resilient in the face of it all? Is “resilient” under-indexing the extent of the K-shaped economy, i.e., the plight of small businesses and the angst of the lower income consumer (see subchapter V statistics 👆)? What will prolonged energy prices mean for the economy? For the Fed? Will the Fed funds rate end up higher for longer, 🤔👇?
Investors in the S&P500 Index would certainly like to know: it was down ~4.6% in Q1’26.
Yet it’s already recovered a lot of that back.
The market is looking for reasons to be bullish — well, maybe not the market that’s invested in private credit, 🤷♀️. Despite all of the noise ☝️, US GDP flashes growth, the labor market remains firm, and Q1 corporate earnings reflected a lot of optimism. Carlyle, viewing “…the economy through the lens of [its] global portfolio…” says all is well.
Query what the tonal shift will look like if the issues surrounding the Strait of Hormuz persist deep into Q2.
On the flip side, query what happens if President Donald “TACO” Trump cuts a deal with whoever still has a pulse within the Iranian regime at some point soon? The prospect of a respite in hostilities has the market salivating. At the time of this writing, the market is ripping at the mere mention of cessation:
But we digress.
What did all of the geopolitical drama mean for credit markets? Here’s Pitchbook with some good charts on the state of the leveraged loan market — which is where most of the action has been lately — at the end of Q1:
They note, “…the default rate of the Morningstar LSTA US Leveraged Loan Index increased to 1.44% in March (thanks to three borrowers who had already undergone restructurings before entering into default proper). While that 1.44% number remains below historical norms, the market’s distress ratio — the share of outstanding loans trading at less than 80 cents on the dollar — has jumped to 7.23%. That’s the highest it’s been since December 2022, and is up sharply from 4.43% at year-end….”
Let’s give credit where credit is due: the increased default rate is due to (i) New Fortress Energy (UK restructuring), (ii) Carestream Health Inc. (downgraded by S&P Global Ratings with a negative outlook, citing term loan repurchases and exchange), and (iii) Trinseo Plc (heading towards a bankruptcy court near you (an amendment waiver with senior secured creditors expires on April 30).
Note, though, the dual-track default rate’s decline. Q1’26 witnessed a drop in LME activity YOY.
Based on recent client flows from Kirkland & Ellis LLP (“Kirkland”) to Simpson Thacher & Bartlett LLP (“Simpson”)(e.g., Alight Solutions, Allen Media, Leslie’s, SonicWall, Xerox), however, that trend may not continue! It appears that corporates don’t want to be ushered straight into bankruptcy; they, public or private, prefer to explore their out-of-court options. Who knew, 🤷♀️? (PETITION Note: David Nemecek knew, 😉, and Kirkland didn’t care).
We have no predictions for Q2’26. We went back and reviewed the predictions our panel of pros made back in December …
… and some of them were spot on: AI has been impactful, private credit has been a hot mess, LMEs have declined, fraud continues to be a thing, and there’s definitely been more movement of key restructuring professionals (see below). How Q2 will play out is anybody’s guess.
🔥Some Q1’26 Observations🔥
In no particular order of importance:
💰Dealflow. Measured by cases that are large enough to have retained a claims agent to help with administration, Q1’26 filings came in at 43 versus 44 in Q1’25, a meaningless difference. Note, however, that these cases include several Subchapter Vs, a number of prepacks, a bunch of sale cases sans stalking horses, and liquidations. In other words, generally speaking, Q1’26’s case filings were pretty f*cking sh*tty.
😷Industry Action. Healthcare, manufacturing, retail and crypto led Q1’26 filing activity.
🌎Filing Venue. Due to recent decisions coming out of Texas, Q1’26 reintroduced bankruptcy professionals to the District of New Jersey — for better or for worse judging by the drama surrounding the Multi-Color Corporation (“MCC”) cases. That said, the Southern District of Texas and the District of Delaware remain busy venues.
🥇Reigning Champion. On the basis of company-side filing activity alone, Kirkland, despite all of the drama surrounding the aforementioned Mr. Nemecek, remained in a league of its own in Q1’26, filing STG Logistics Inc. (“STG”), Pretium Packaging LLC (“Pretium”), Nine Energy Service Inc. (“Nine Energy”), Eddie Bauer LLC (“Eddie Bauer”), and the aforementioned MCC. This ties directly to the venue point 👆, as Kirkland has increasingly steered hairier cases involving once-LME transactions to New Jersey. A beneficiary of this? Cole Schotz PC, which often serves as Kirkland’s local counsel in NJ.
Note, however, that there hasn’t been a Kirkland filing since this tweet in early February 👆. Perhaps QVC Group will soon fix that?
💰Financial Advisor Mandates as Commentary. Among the cases we track, financial advisors focused more on the low-to-middle market captured as many company-side mandates as the big shops. SierraConstellation Partners LLC, Harney Partners, and Getzler Henrich & Associates LLC popped up in nearly as many deals as Alvarez & Marsal LLC (“A&M”), FTI Consulting Inc. ($FCN)(“FTI”), Berkeley Research Group LLC (“BRG”) and AlixPartners LLP (“Alix). This demonstrates where much of the action has been thus far in ‘26. That said and as you would expect, A&M, FTI, BRG and Alix have done a solid job of nailing down the dearth of larger mandates out there. We were initially inclined to give Alix the win by the very nature of the two company-side deals they’re staffing (e.g., STG and MCC) but FTI continues to show their versatility, locking down three company-side filings (Pretium, Nine Energy, The LYCRA Company LLC) and another three UCC gigs (Sailormen Inc., North Star Health Alliance Inc., Avenger Flight Group LLC).
💰Investment Banking Mandates. On Sunday, we’ll recap recent earnings commentary — to the extent it even applies in a $110/barrel world. The TL;DR: most of the RX-oriented banks reported solid quarters. Q1, however, wasn’t, as far as in-court activity is concerned, what we would call particularly robust. PJT Partners ($PJT), Evercore Group ($EVR), and Moelis & Co. ($MC) each logged two company-side filings each.
🥳 Hat tips. A few firms deserve salutes for a strong quarter:
Pachulski Stang Ziehl & Jones LLP demonstrated versatility over the course of the quarter with a pair of debtor-side filings (e.g., Carbon Health Technologies Inc., Avenger Flight Group LLC) and several UCC wins (e.g., MCC, Eddie Bauer, Axip Energy Services LP). In the parlance of an annoying equity analyst, “great quarter guys.”
McDermott Will & Schulte LLP continues to establish itself as a dominant franchise in the cryptocurrency space, adding a company-side filing (BlockFills) and a UCC gig (Archblock LLC) to its already impressive roster of in-court crypto clients. Moreover, the firm serves as UCC counsel in STG and lead company-side counsel in Inspired Healthcare Capital Holdings LLC. Similarly, “great quarter guys.”
Milbank LLP squeezed a company-side filing in Indiana Jones-style at the end of Q4’25 (United Site Services) and hasn’t filed one since but boy oh boy did the fine folks there still manage to have a busy Q1. They’ve got ad hoc groups in Pretium, MCC, Nine Energy and The LYCRA Company LLC.
Province LLC. The firm continues to steal more than its share of UCC financial advisor mandates adding STG, Carbon Health Technologies Inc., Vanderbilt Minerals LLC and Hawthorn Race Course Inc. to its qual sheet.
💩Demerits. This 👇is from the first week of February and, for the most part, it still stands today:
Latham & Watkins LLP (“Latham”) has only filed a single case in ‘26 thus far and it’s a sh*tshow (FAT Brands). Weil Gotshal & Manges LLP (“Weil”) graced dockets with just The Cannabist Co., a CCAA paired with a chapter 15, lol.
Like we said … it just feels like everyone should be a lot busier.
*****
No Q1’26 summary is complete without memorializing the barrage of personnel moves that have transpired — all signs that, while things aren’t super busy right now, firms are staffing up for whenever the next big wave comes, and paying outrageous sums of money to do so. Indeed, it’s like dominoes up in this b*tch — and the pieces started falling back in late ‘24, continuing throughout Q1.
Ray Schrock joins Latham.
Sunny Singh leaves Simpson and returns to a Weil group desperate to reassure the market that it’s still a power player, becoming one of four(!) co-heads and leaving Simpson without the manpower to tap its massive potential.
Ryan Preston Dahl re-joins his old Kirkland & Weil colleague, Mr. Schrock, at Latham, opening up a slot at Ropes & Gray LLP (“Ropes”). He brings over a pair of partners.
Willkie Farr & Gallagher LLP (“Willkie”) imports Ryan Bennett from Kirkland (right as Kirkland purportedly de-emphasizes its Chicago office in a post-Sprayregen world) in what effectively amounts to a delayed reaction to Rachel Strickland’s departure to Fried Frank. Mr. Bennett brings over several former Kirkland colleagues.
Ms. Strickland and her team then replace Mr. Dahl’s team at Ropes, ending Fried Frank’s dalliance with restructuring.
Simpson hires Mr. Nemecek. He brings over several Kirkland partners with him. He spurns Weil in the process.
With Ms. Strickland now in the fold, Gregg Galardi leaves Ropes for McDermott Will & Schulte LLP.
It’s all enough to make Johnny’s head spin.
The bottom line is this: none of these firms were terribly active in Q1 in terms of filing cases. But these moves should affect filings going forward. Will that be Q2 or deeper into the year?
Again, we’re not making predictions (but we suspect later into the year, 😉).
📚Resources📚
We have compiled a list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. 💥You can find it here💥.
📤 Notice📤
Alice Nofzinger (Counsel) joined WilmerHale from Paul Weiss Rifkind Wharton & Garrison LLP.
Andy Goldman (Partner and Co-Chair of Financial Restructuring) joined Goodwin Procter LLP from WilmerHale.
Armando Nozzolillo (Partner) joined Womble Bond Dickinson LLP from Burr & Forman.
Benjamin Loveland (Partner) joined Goodwin Procter LLP from WilmerHale.
Gregg Galardi (Partner and Global Co-Head of Business Restructuring) joined McDermott Will & Schulte from Ropes & Gray LLP.
Michael Sellinger (Partner) joined Solomon Partners from GLC Advisors & Co. LLC.
Michael Waskiewicz (Partner) joined Womble Bond Dickinson LLP from Burr & Forman.
Morgan Patterson (Partner) joined FBT Gibbons from Womble Bond Dickinson LLP.
Robert Neilson (Counsel) joined Womble Bond Dickinson LLP from Burr & Forman.
🍾Congratulations to…🍾
Adrienne Walker on her promotion to Vice-Chair of Foley & Lardner LLP’s Bankruptcy & Business Reorganizations Practice.
Brian Osborne and Marc Beilinson on the sale of Omni Agent Solutions to Fortress Investment Group.
Buchalter LLP (Matthew Yarbrough, Jason Blackstone, Jeffrey Garfinkle) for securing the legal mandate on behalf of the official committee of unsecured creditors in the NFN8 Group Inc. chapter 11 bankruptcy cases.
Chris Dressel on his promotion to Partner at Skadden Arps Slate Meagher & Flom LLP.
Darren Azman on his promotion to Global Co-Head of Business Restructuring at McDermott Will & Schulte.
Fox Rothschild LLP (Michael Sweet, Brian Anderson, Gordon Gouveria, Stephanie Slater Ward) for securing the legal mandate on behalf of the official committee of unsecured creditors in the BRD Land & Investment chapter 11 bankruptcy cases.
FTI Consulting, Inc. ($FCN) (Conor Tully) for securing the financial advisor mandate on behalf of the official committee of unsecured creditors in the Avenger Flight Group, LLC chapter 11 bankruptcy cases.
G2 Capital Advisors for getting acquired by Great American Holdings, which is majority-owned by Oaktree Capital Management.
Morris James LLP (Eric Monzo, Tara Pakrouh, Siena Cerra) for securing the legal mandate on behalf of the official committee of unsecured creditors in the BlockFills chapter 11 bankruptcy cases.
Province LLC (Paul Navid) for securing the financial advisor mandate on behalf of the official committee of unsecured creditors in the Hawthorne Race Course, Inc. chapter 11 bankruptcy cases.
Raines Feldman Littrell LLP (Robert Marticello, Stephen Mott, Mark Melickian) for securing the legal mandate on behalf of the official committee of unsecured creditors in the Hronis, Inc. chapter 11 bankruptcy cases.
Ryan Bouley and Sean Clements on their promotions to Co-Leaders of the Business Advisory team at Huron Consulting.
Susan Poll Klaessy on her promotion to Chair of Foley & Lardner LLP’s Bankruptcy & Business Reorganizations Practice.
Turnaround & Workouts’ “People to Watch — 2026” which included Mark Buschmann and Richard Shinder of Ensis Partners, Geoffrey Frankel of Capstone Partners, David Groshoff of Corporate Repair and Growth Strategies Inc., Scott Johnson of NexPoint Advisors LP, E.A. Kratzman III of The Algon Group, Jamie Lisac of Tiger Capital Group LLC, Jessica Lauria of JL Special Situations, Suleman Lunat of Marblegate Asset Management LLC, Kevin Madden of Saothair Capital Partners LLC, Andrew Shore of Strategic Value Partners LLC, Chad Simon of Gordon Brothers, and Jeffrey Varsalone of Iron Eagle Capital LLC and VRS Restructuring Services LLC.