Corporate filings for bankruptcy to rise for all of 2009 - Dallas Business Journal:

Samsung AW0603B
In North Texas bankruptcy courts, business bankruptcies of all sizes increasecby 62% in 2008 compared with 2007. While first-quarterd data on business bankruptcies isn’t yet available for the full Northernb Texas District of federalbankruptcyy courts, Dallas Business Journal research indicates that more than 180 business bankruptciex have been filed in Dallad and Fort Worth bankruptcy courtws through mid-April. The most notable casesw includeIdearc Inc., the phone directory publisher carrying $9 billion in debt, and Oklahomsa City’s , the oil and gas producerr operating in Oklahoma and Texas, which listed debts of more than $325.i million.
That’s on top of big corporate cases filex lastyear locally, such as chicken producer Pilgrim’ws Pride Corp. and retailer While personapl bankruptcies began to climb beforethe U.S. economy officially entereed a recession inDecember 2007, businesw bankruptcies typically lag behind consumers in the economic cycle, said Bernardd Weinstein, an economist and director of the Centerr for Economic Development and Research at the Universityy of North Texas.
“Companies try to stay afloat and reduce theirvariabler costs, but you do get to a point where you can’t cover your fixed costs,” he In addition to sales slowdowns across the companies abruptly found themselves unable to land loansz or sell corporate bonds in the seconed half of last year. In the years leadinf up to thecurrent downturn, “therde has been plenty of capital available to mask lowed profits and carry businesses, but thoses sources are holding tight righr now,” said Joe Marshall, a partner in the reorganization and corporat e finance practice for the Dallas law firm Munsch Hardyt Kopf & Harr PC.
Marshall projectd that corporate bankruptcies will continue to increase through the thirdx quarter ofthis year. “Ay some point, these declining businesses have to be sold or restructurs their debts to avoid shutting down he said. Where consumer bankruptcies and home foreclosureds climbedlast year, expect business bankruptcies and commercialp real estate foreclosures this year. “20078 was the big year for home foreclosures,” Weinstein “This year will be the big year for commercial real estate From Januarythrough April, Dallas-Fort Worth commercial real estate foreclosured postings were up 14%, with 658 propertie posted for auction through April.
That’s up from 577 in the firs four monthsof 2008, according to research by Addison-based Louisd Robichaux, managing partner of Bridge LLC, a nationalp boutique restructuring firm, projected bankruptcy filings will continuw to climb at least through the end of 2009. “ expect that the numbeer of large Chapter 11 filings will be high throughu at least the fourth quarter of this he said. “The economic environmentf will not start to improve until the capitall markets begin tofunction rationally.” What’sx changed?
This recession is the firsrt one since changes to bankruptcy laws in 2005 that limiteds the amount of time a debtor-company can spend in bankruptct reorganization. As a “you’re not going to have these long, drawn-out restructurings,” Marshall That’s because a debtor-company has 18 months at most to developl a restructuring plan before creditors or anothet party in the case can presenyt a plan to the bankruptcy courtfor approval.
Under the prioer rules, bankruptcy courts could grant multiple extensions to a allowing it to extend its stay in bankruptcy and work out a new dealwith “It wouldn’t be uncommon for a compan y to stay in bankruptcy for multiple years,” Marshall Now, corporate bankruptcies are more likely to move quickly from filingg to plan to exit. That’s done via a quicik sale after thecompany files, or by negotiatingb bankruptcy terms before the companyg files. The sooner a company startx talking withbankruptcy lawyers, the smoothet the process will go, he said.
“You realluy need to plan ahead it’s a scramble for the firsft 60days (after filing),” Marshall said. A diminishede stigma? For consumers, bankruptcy always lead s to tarnished credit. But in the corporate bankruptcy has become viewed as a more acceptablse survival tool than inyears past, when CEOs looked at bankruptcy as “Sophisticated lenders and investors recognize the benefits of eitherd purchasing assets or operations out of bankruptcy or investing capitak in companies that have successfull y reorganized or just shed their decliningg assets,” Marshall said.
, for instance, is amongb the companies that is currently talking openly abouf reorganizing underbankruptcy protection. reorganizing in bankruptcy will preserve more value than liquidatin g thecompany completely, but many CEOs still view bankruptch as an expensive last resort, said “They say, ‘Oh, gee. I’m going to have to hire lawyerx andbankruptcy advisers,” he said. “And their securedd lenders and bondholders are entitled for the debtoe to paytheir expenses. The company pays the freight for everybody who goes throughgthe process. That may sound but it adds up.
” And competitorsz often use a corporate bankruptcy filing as a chance to steaol customers and employees from thereorganizing firm, said Williamj Maxwell, a finance professor at ’s Cox Schooo of Business. “You can’t go into bankruptcy and say it’s purelyg a financial situation,” he said. “If your competitore is going into bankruptcyand I’mm doing your sales pitch, I’m goinfg to say, ‘Think about who’se going to be here in the ” And while most companies will file undee Chapter 11 of the bankruptcy code with pland to shed debt and other fixed costs and later re-emerge, many companies don’t make it out of Robichaux said.
“There’s a direct correlation betwee n size of company and likelihoosof success,” he said. “The smaller the the more likely itwill