The upward trend in business bankruptcies that began in 2007 has apparently
continued through the first quarter of 2008 and looks to worsen as the nation’s
economy struggles through a recession, according to research and analysis from
accounts receivable insurer Euler Hermes ACI.
According to information from the U.S. Bankruptcy Courts, 29 public companies
sought either Chapter 7 or Chapter 11 bankruptcy protection between January 1
and March 31, an increase of 81.25% over the first quarter of 2007.
Additionally, the size of the bankruptcies has continued to increase as
evidenced by the total assets of the filings—in Q1 2007, the 16 public company
bankruptcies featured combined assets totaling just over $1 billion; the 29
bankruptcies for Q1 2008 feature combined assets of nearly $10 billion.
The bankruptcy up-tick appears to continue the trend from 2007, when Euler
Hermes ACI forecasted that the number of business bankruptcies would escalate by
more than 50%. While final Q4 business bankruptcy numbers from the U.S.
Bankruptcy Courts have yet to be released, the trend through the first three
quarters of the year gave credence to the forecast.
"The escalation in bankruptcies is a direct result of the deterioration in
the U.S. economy, which is now in recession," said Euler Hermes ACI Chief
Economist Dan North. "Businesses are now facing a serious combination of factors
which will almost certainly continue the trend of increased bankruptcies,
including skyrocketing energy and commodities prices, plummeting house prices,
job loss, a slowing consumer, record foreclosures and delinquencies and
tightening credit conditions. Bankruptcies are likely to continue rising for the
next year as the economy struggles through the recession."
Source: Euler Hermes ACI