Number Of US Corporate Bankruptcies Fell In First Half Of 2010

According to an online bankruptcy authority, U.S. corporate bankruptcies have declined by over 50% this year thanks to lenient credit markets and an improving economy. Fifty publicly traded companies filed for Chapter 7 or Chapter 11 bankruptcy in the first half of this year, in contrast to the 118 that filed for bankruptcy in the same time period in 2009.

Mark Jacobs, a partner at Pryor Cashman LLP who specializes in corporate bankruptcy, was quoted as saying, "We're on the backside of the implosion of 2008, when financial markets cratered. The cases that were going to file in the wake of the Great Recession have pretty much filed."

This respite in bankruptcy filings comes at a time when the economy seems to be picking up. The U.S. gross domestic product, a measure of economic strength, expanded at a 3.2 percent rate in the first quarter of 2010. Furthermore, companies that survived the recession profit from the demise of less potent rivals, and hedge funds are more vigilant about keeping their investments out of bankruptcy courts. An out-of-court corporate restructuring can cost half as much as a court-supervised restructuring and can save companies millions of dollars. In addition, an out-of-court restructuring allows the companies and the funds to control the process, rather than surrendering control to the bankruptcy court.

The same online bankruptcy authority also reported that the size of this year's bankruptcies has dropped dramatically. This year's corporate bankruptcies involved combined assets of 45 billion, compared to last year's $367. In 2009, automaker General Motors with an estimated $91,05 billion worth of assets, and lender CIT Group with $80.45 billion, were among the massive U.S. companies that filed bankruptcy. This year, the largest public company to file bankruptcy so far has been Corus Bankshares Inc., with assets of $8.35 billion.

 

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