Insight: New bankruptcy ripples may emerge

Tue Oct 11, 2011 12:38pm EDT
 
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By Tom Hals, Sue Zeidler and Caroline Humer

(Reuters) - Three years after the collapse of Lehman Brothers touched off a tidal wave of bankruptcy filings, corporate failures may be about to pick up again, with some big-name companies among those struggling for survival.

Companies in a range of businesses, including hair salons, restaurants, renewable energy, and the paper industry, have tumbled into Chapter 11 in the past few months.

The weak economy, lackluster consumer spending, a shaky junk-bond market and increasingly tight lending practices are also threatening struggling companies in industries as diverse as shipping, tourism, media, energy and real estate.

AMR Corp's American Airlines may need to go to court to restructure its labor contracts, though a spokesman for the airline reiterated on Monday that bankruptcy is not the company's goal or preference.

Kodak confirmed that a law firm known for taking companies through bankruptcy has been advising on strategy as attempts to overcome the loss of its traditional photography business falter. It has denied any intention of filing for bankruptcy.

Some bankruptcy and restructuring experts warn a fresh U.S. recession could trigger a string of failures to rival the one that followed Lehman Brothers, which in 2008 filed the biggest bankruptcy in U.S. history.

"It's getting busier for everyone I know," said Jay Goffman, global head of the Corporate Restructuring Group at law firm Skadden Arps, Slate, Meagher & Flom. "I think 2012 will be a busy year and 2013 and 2014 will be extraordinarily busy years in restructuring."

No one is currently predicting a second Lehman-type collapse. Its $639 billion bankruptcy came after a loss of confidence in the investment bank as asset values plummeted, leading to the drying up of credit lines.   Continued...

 
<p>American Airlines flight attendant Karen Stewart walks down from the rear exit of an American Airlines Boeing 737 at DFW International Airport as officials of AMR, American Airlines, Boeing and Airbus announce a major airplane manufacturing deal during a news conference at the airport in Dallas, Texas July 20, 2011. REUTERS/Darrell Byers</p>