Corporate bankruptcies rise, more on way
NEW YORK (Reuters) - U.S. corporate bankruptcies have soared this year and more are on the way, highlighting a historic and pivotal year for those in the restructuring industry.
Virtually no segment of the U.S. economy has been safe from a rolling tide of job losses, stock market declines and home foreclosures that have knocked a range of industries to their knees.
"We are certainly seeing more companies, particularly among insurance and financial institutions, going through unprecedented times fighting for survival," said Randall Eisenberg, senior managing director for restructuring advisor FTI Consulting.
Companies in more industries than ever are finding themselves in distress, ranging from retailers, home builders and restaurants, to financial firms, transportation providers and energy companies.
But at the same time, the turmoil has created unprecedented opportunities for distressed or vulture investors, and those attorneys, consultants and other experts who help companies sort out their problems.
"There are all of these (private equity investors) getting into the business, by buying and rolling up these industries that are in trouble," said Sheila Smith, head of reorganization at Deloitte Financial Advisory Services DLTE.UL.
Top bankruptcy and restructuring experts and distressed investors will address the outlook for distressed companies and examine which industries might be next in line and what steps can be taken to shore up struggling firms at the Reuters Restructuring Summit in New York and London next week.
REWRITING THE RULES
Government bailouts and increasingly large bankruptcies are starting to rewrite the rules for overseeing corporate collapses.
Nothing serves to highlight the shift more than the rapid and unexpected downfall of some of the country's most powerful firms, including Lehman Brothers Holdings Inc's (LEHMQ.PK) $637 billion bankruptcy filing this week.
"The Lehman Brothers bankruptcy is taking the restructuring industry into uncharted waters," said David Pauker, a managing director with restructuring advisor Goldin Associates. "Much of the learning and experience that derives from earlier failures of large financial firms -- Drexel (Burnham Lambert), Refco, Enron -- will be revisited and revised."
The number of U.S. businesses filing for bankruptcy has soared 42 percent from a year ago, according to the Administrative Office for U.S. Courts.
Already this year, more public companies have filed for Chapter 11 and Chapter 7 bankruptcy than during all of 2007, according to BankruptcyData.com.
The credit crisis has also complicated things for struggling companies, by hurting their ability to refinance their debts or even gain financing to exit bankruptcy protection.
Auto parts maker Delphi Corp (DPHIQ.PK), for example, has been struggling to get financing to exit bankruptcy protection for most of the year. Continued...
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