Bankruptcies continue to surge even as the economy improves

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Thursday, July 4, 2002

By JEFF ST. ONGE
BLOOMBERG NEWS

WASHINGTON -- U.S. corporate bankruptcies are headed for a second straight record year after filings by Adelphia Communications Corp., Global Crossing Ltd. and Kmart Corp.

Last year, 255 publicly traded companies, led by Enron Corp., put $260 billion of assets under court protection, almost triple the record that stood for a decade. So far this year, 113 companies with $149 billion in assets have filed, according to BankruptcyData.com. WorldCom Inc., which listed $103.8 billion in assets in a May Securities and Exchange Commission filing, may seek Chapter 11 protection after hiding costs to boost profits.

The recovering economy hasn't stemmed a bankruptcy trend fueled by corporate scandals and the collapse of last decade's speculative bubble.

Reckless optimism created excess capacity in industries such as telecommunications, bankers and lawyers say.

"The worst isn't over by any means," said Ken Buckfire, a restructuring specialist with investment banking firm Miller, Buckfire Lewis & Co. "I don't see any decrease in the volume of bankruptcies for the next year-and-a-half to two years."

"I've never seen the magnitude and the concentration of financial failures in such a short period of time," said corporate lawyer David Heiman of Jones, Day, Reavis & Pogue, who has handled some of the biggest Chapter 11 restructurings.

"There are some huge companies where the value has simply evaporated."

Five of the eight largest Chapter 11 cases in history have been filed since December. Besides Enron, they are telecommunications company Global Crossing, with $25.5 billion in assets; Adelphia, with $24.4 billion; retailer Kmart, with $17 billion; and NTL Inc., the United Kingdom's biggest cable-TV operator, with $16.8 billion.

Seattle P-I

-- Anonymous, July 04, 2002


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