NEW YORK You need to go back a full decade to find the last time bankruptcy attorneys have had it so good.
Ailing appliance maker Sunbeam became the latest corporate casualty of a rapidly slowing economy, filing for Chapter 11 bankruptcy protection from creditors yesterday. CEO Jerry Levin hopes Sunbeam, with brands such as Mr. Coffee and Coleman outdoor gear, will emerge from the bankruptcy proceedings in six to nine months as a "stronger, more competitive company." But Sunbeams news comes atop a growing heap of boardroom disasters.
More than 50 publicly traded companies have sought Chapter 11 protection since December, including Trans World Airlines, Imperial Sugar and Vlasic Foods. Privately held companies are also hardly immune with Bridge Information Systems and Wehrenberg Theatres recently going the same route.
According to BankruptcyData.com, 176 publicly traded companies with assets totaling almost $95 billion filed for Chapter 11 last year, up more than a third from 1999.
The staggering failure rate, which by all accounts is picking up speed, has not been seen since 123 companies with assets worth $94 billion sought bankruptcy protection in the last major downturn in 1991.
"We are paying the price for the fabulous run-up in the stock market over the past nine years," says Harvard Law School professor Elizabeth Warren, a bankruptcy law expert. "Companies raced to cut costs and become the lean and mean darlings of Wall Street."
But Warren said there is no cushion for these companies when times get tough because they are often leveraged with debt. "They are like giant elephants trying to box in high-heel shoes," she said.
Analysts expect other cash-strapped companies to opt for bankruptcy in coming weeks, including movie chain Loews Cineplex Entertainment and chemicals maker W.R. Grace.
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