BlockbusterIn another bit of good news for the domestic economy, the list of U.S. business bankruptcies will likely get shorter, and probably less distinguished, in 2011 just as it did this year.

While companies such as movie-rental chain Blockbuster and grocery institution A&P (GAP) reflected the struggling economy by declaring bankruptcy during the past few months, U.S. business bankruptcies through the third quarter fell 5.5% from a year earlier, while third-quarter bankruptcies alone were down about 8%, according to U.S. Bankruptcy Courts statistics.

The third quarter marked the fifth consecutive period that business bankruptcies fell. During second-quarter 2009, bankruptcies totaled more than 16,000, up 64% from a year earlier and the highest in at least 15 years, according to the American Bankruptcy Institute (ABI).

Living on Lenient Lenders

Larger companies fared even better. The number of bankruptcies year-to-date for businesses with more than $100 million in annual revenue, plunged 60% this year from a year earlier, according to ABI President Melissa Kibler Knoll.

Whether that decline reflects a rebounding economy is a matter of debate. Improving financing conditions for larger companies, revised bankruptcy regulations and rising costs related to declaring Chapter 11 may have had as much to do with the fall-off as the underlying economic conditions, according to executives in the restructuring business who were on a recent ABI-hosted panel.

"There are more of the large companies that either are limping along because their lenders and financial institutions are being lenient on defaults and extending time frames, or are figuring out how to restructure debts without using the court system," said Michael P. Richman, bankruptcy partner with Patton Boggs, on the panel. "It just costs a lot of money to reorganize a company in Chapter 11."

The Poor Get Poorer

That means that there'll likely be fewer monster bankruptcies such as Lehman Brothers, Washington Mutual and General Motors (GM), than there were during the past couple of years.

"The high-yield market has really rescued companies that are in distress," added Deirdre A. Martini, managing director of Wells Fargo's Wachovia Capital Finance unit. Martini also noted that so-called term-loan financing, which is largely used by smaller companies, "has not come back with any real robust activity."

Thanks to the dichotomy in financing, bankruptcy numbers reflect a "poor-getting-poorer" scenario. As business bankruptcies fell, personal bankruptcies -- exacerbated by a U.S. unemployment rate stubbornly clinging near 10% -- have risen. Year-to-date nonbusiness bankruptcies increased 12% from a year earlier to 1.054 million, while third-quarter filings are up 6.7%.

With more financing options available for larger companies combined with difficult conditions for consumers, many companies in the hospitality, media and construction sectors will have a harder time staying solvent in the slow-growing economy compared with financial institutions, said J. Scott Victor, founding partner of SSG Capital Advisors, on the ABI panel.

Still, many smaller community banks are likely to go bankrupt in 2011 because they originated so many of the commercial real estate loans on properties that are now worth less than those loans, Knoll said.

The year that's now almost over saw some notable companies that couldn't make it without entering the restructuring process, including those in the following sectors:

Movie Rentals
While Americans haven't yet ditched the DVD as a primary home-entertainment media vehicle, many have ditched the DVD's two largest store chains. Weighed down by debt from its 2004 spin-off from former parent Viacom (VIA), Blockbuster was further hampered by customer dissatisfaction with its late fees and by the explosive growth of competitors Netflix (NFLX) and, more recentily, movie-kiosk leader Redbox (CSTR). Smaller rival Movie Gallery was also debt-ridden from its 2005 acquisition of Hollywood Video and shut its doors this year.

Media
National Enquirer parent American Media declared bankruptcy last month, though it's working on a plan to emerge. Affiliated Media, whose newspapers include the Denver Post and San Jose Mercury News, entered, then exited, bankruptcy this year. Both companies were crushed by large debt loads, declining advertising and competition with free content on the Internet.

Groceries
Great Atlantic & Pacific Tea, owner of A&P supermarkets and other brands, is among a group of old-line supermarket chains that have been beset by the combination of growing competition from higher-end groceries such as Whole Foods and general retailers like Walmart, which has expanded its food offerings. The 151-year-old company declared bankruptcy this month, though it continues to operate.

Financials
Bond insurer Ambac (ABK) declared 2010's largest U.S. bankruptcy last month after attempting to restructure for the past three years. Hit hard by the real estate and foreclosure crisis, Ambac is also suing the U.S. for attempting to seize $700 million in tax refunds.


Increase your money and finance knowledge from home

How Financial Planners go Grocery Shopping

Learn to shop smart and save.

View Course »

Understanding Credit Scores

Credit scores matter -- learn how to improve your score.

View Course »

Add a Comment

*0 / 3000 Character Maximum

29 Comments

Filter by:
chaza511

Lets just get it done. No more media propaganda, no more lobbiests, England only allows $100.00 to any canidate. We should look at that. The good old boy program just does not work, to much greed. Run the country as a business, cut the goverments expences. Move forward with proper tarrifs on any products made out of this country sold here, that has been outsouced by corporations from the US, and then sold here.

December 22 2010 at 8:07 AM Report abuse +1 rate up rate down Reply
gavsco

Wow - I guesss the Obama recovery really is working. Can't wait to read the headlines when every business in the US has finally gone under: "No new bankruptcies reported in 2011! Obama has saved the day." Thanks AOL for some fine reporting and "spinning the truth" extraordinaire!

December 21 2010 at 9:51 PM Report abuse +2 rate up rate down Reply
1 reply to gavsco's comment
chaza511

Nice positive thought pal, this country is in such a better place than the last administration, bottom line, how much do you make gavsco. The 2% is the problem.

December 22 2010 at 8:09 AM Report abuse +1 rate up rate down Reply
blueeyesolsen

Less bankruptcies? Hell, anybody that's even half-witted knows that there will be less bankruptcies when a big share of businesses are already there. In fact, when they are all bankrupt, there will be zero the next year! But, that does not mean that the economy improved, just that we're all broke! Dropping from the number of unemployed those who have given up looking for work because they have been everywhere there even might be employment over and over with no success does not improve the unemployment situation or the economy. It does make the statistic less ominous sounding. (and less truthful)

December 21 2010 at 5:18 PM Report abuse +3 rate up rate down Reply
srodbell

Three numbers of interest: 1343; 805; 1255. The first number is where the S&P stood the day W took office. The second number is where it stood when he left office. In eight years with W in charge the market tanked by 40%! The last number? That's what has happened since Obama (some would call him an enemy of capitalism) took office. It has gone up almost 56%! These are facts. There are apparently a whole lot of capitalists who are not upset about Obama - not a bit!!

December 21 2010 at 4:48 PM Report abuse -2 rate up rate down Reply
hemipwr54

Warren Buffett cartoons are STUPID , he looks like a gray haired more awn , grow up Buffett , must be entering his old age childhood stage , next dementia .

December 21 2010 at 3:40 PM Report abuse rate up rate down Reply
drbuckles

Republican Thom Coburn is blocking the First Responders from getting health care because attached to it is legislation to stop giving tax breaks to corporation to leave this country. This bill has been in the works for 7 years and they are still dragging their feet becasue they don't care about working men and women. Call your Congressman now to pass this bill. This would have been a win win for Americans.

December 21 2010 at 12:56 PM Report abuse -2 rate up rate down Reply
1 reply to drbuckles's comment
jcc4567

coburn was instrumental in the phoney republican revolution in the 1990s'...boy did I bite on that one too? ...please forgive me ! ...reality is, coburn SOLD US OUT to china & both parties did it. They will fight to maintain tax breaks to corps leaving america, they will fight to keep people reliant on credit cards, they will fight to keep foreign goods flooding america & going untaxed. DC has been taken over folks, by a system our ancestors fought like heck too DESTROY 150 & 225 years ago ... time to right the ship & throw the mercantilists OUT again

December 21 2010 at 1:59 PM Report abuse rate up rate down Reply
JARED

hey hope you all have a nice time this time of year and to all agood night

December 21 2010 at 12:10 PM Report abuse +1 rate up rate down Reply
bill griffis

the bam nsk always take cre of ther big accoounts. us peon get the scraps if any

December 21 2010 at 11:57 AM Report abuse rate up rate down Reply
tallonplumb

SMOKE SOME MORE CRACK

December 21 2010 at 11:51 AM Report abuse -1 rate up rate down Reply
gofsandp

My wife gave 20 dollars to a homeless man along side the Walmart store near where we live yesterday. This man who had all his worldly possessions in a shopping cart was shocked when she called to him to come over. he started crying after she gave him the 20. She told him she wished she could do more. She told me later that he was at least 65 and well spoken.
We do not have much either, an eleven year old car with a smashed up front end, still drives though. A house under water and pending bankruptcy.
But our problems are small compared to many in America. I was so proud of her after she told me this.
The country needs to do some serious soul searching in hope of a kinder gentler society, or the wealthy will set themselves up for a big fall.

December 21 2010 at 11:20 AM Report abuse +1 rate up rate down Reply
1 reply to gofsandp's comment
jcc4567

nice story & you are correct, MORALS are at the heart of everything...without them, no system works, period

December 21 2010 at 2:05 PM Report abuse rate up rate down Reply