Bankruptcy boom seen in 2009, no sector spared

By Caroline Humer and Chelsea Emery - Analysis

NEW YORK (Reuters) - A rush of bankruptcies and restructurings is in store for Corporate America this year, as dwindling revenues and tight lending markets force companies ranging from retailers to casinos and home builders to make tough changes or shut their doors.

"I think there's going to be a tsunami of restructurings," said Bryan Marsal, co-chief executive officer of turnaround advisory firm Alvarez & Marsal.

Companies that are closely tied to economic growth may suffer first, but a ripple effect could spread throughout the economy in the largest restructuring wave in nearly 20 years.

"This is the first time since the early 1990s that we've seen a broad economic downturn that is going to affect industries across the economy," said Mark Cohen, global head of restructuring and workout at Deutsche Bank.

Since the subprime mortgage market collapsed last year, financing has tightened, making loans for businesses and homeowners more difficult to obtain. Joblessness has risen and consumers worried about bad times are pinching pennies.

Companies piled on cheap debt during the last 20 months but as revenues decline, they can no longer afford debt payments.

"The whole issue here is that in the economic expansion, everybody built their capital structure for a level of business that is not sustainable in an economic recession," said Barry Ridings, vice chairman of U.S. investment banking at Lazard.

That has created a high-pressure situation for companies seeking to refinance loans, as lenders have little capital to spare and fret about investing in companies doomed to fail.

"There's a level of uncertainty hanging over the entire capital markets and until that starts to change, it's going to be a difficult period for many companies, particularly those in industries that are more severely challenged, like retail and automotives," said David Resnick, co-head of investment banking at Rothschild, a specialist in turnaround situations.

Resnick said he would expect the first quarter of 2009 to be a particularly challenging time as companies that need to restructure may have little access to financing.

TROUBLE ALL AROUND

The current recession is being driven by consumer spending cutbacks and a widespread credit crunch, unlike some downturns that were sparked by the collapse of the Internet and telecom bubble in the early 2000s.

"I think the next three months will determine the fates of a lot of the major retailers," said Robert McMahon, managing director for restructuring at General Electric Co's (GE.N) GE Corporate Lending. "Casino and gaming will continue to feel stress, as will casual dining and newspapers," he added.

Home builders and developers are also restructuring now, which may lead to problems with home building suppliers and consumer durable companies, Lazard's Ridings said.

Even the once-buoyant raw materials sector has been hit hard, as energy trader SemGroup, chemical makers Lyondell Chemical Co ACCEIN.UL and others operate in bankruptcy.