Where Are The Tidal Wave of Chapter 11 Bankruptcies?

Three years after the collapse of Lehman Brothers started a tidal wave of bankruptcies, corporate filings have been down.  But, there is reason to believe that corporate bankruptcies may pick up again, with some big name companies struggling or having recently filed.

We have recently heard rumblings from some big names.  What we have heard is that American Airlines might need to go to banruptcy court to restructure its labor contracts, and Kodak has confirmed that it is seeking advice from a well-known law firm, with  restructuring counsel, on a strategy to overcome the loss of its traditional photograph business.

Companies that have tumbled into bankruptcy as of late include restaurant chains (Friendly’s) , renewable energy companies (Evergreen Solar and Solyndra), the paper industry (New Page Corp.), and even sports teams (LA Dodgers and Dallas Stars).  Indeed, in September and October 2011, 15 companies with at least $100 million in assets filed bankruptcy, thus far. 

The weak economy is limping along due to factors such as a lack of consumer spending, a shaky junk-bond market and increasing tight lending practices.  These factors significantly impact diverse industries such as shipping, tourism, media, energy and real estate.

Some bankruptcy and restructuring experts warn that a fresh U.S. recession could trigger a string of failures similar to the ones following the collapse of Lehman Brothers, which in 2008, was the largest bankruptcy in history (with $640 million in assets).

But predicting a bankruptcy tidal wave is hard.  It could depend on several factors such as how much money lending institutions are willing to lend troubled companies, whether the economy lands a double-dip recession and what results from the European debt crisis.  The last factor alone could be the most important determinant, as the eurozone’s problems could trigger defaults in the United States when U.S. companies face tightening credit markets.

We will need to stay tuned.



Categories: Trends

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  1. Business Bankruptcy Filings Are Down Substantially – Corporate Restructuring Review

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